Rational and irrational decision-making

 From what I can see, there are two very good ways of getting lost in the maze of psychology and human decision making. The first is to accept, at some level or other, the insane delusions of ‘rationality’ as invented by the economics profession. I say ‘at some level or other’ because many people dismiss the economists’ ravings at one level only to find themselves trapped by their assumptions at a later stage in the argument.

The second is to accept the equally delusional assumptions of ‘stimulus-response’ as invented by the behaviourist school of psychology in the 20th century. Unfortunately, stimulus-response assumptions form the bedrock of most modern theories of marketing.

In this post, I’ll concentrate on ‘rationality’: that is, the assumption that all human beings always ‘maximise utility’ (or try to, anyway) and that the cost of researching and making these decisions is zero. You could write books about why this assumption is wrong (there are few already), but for our purposes we can sum the ‘rationality’ assumption up in a word. It’s bollocks.

It’s probably much safer to say that all human decisions are emotionally driven (i.e. motivated by a goal that is emotional in some way), and emotionally judged (i.e. we judge success versus failure not by some finely calculated balance sheet or profit and loss account, but what we feel about our experience overall). Reason and logic and calculation have a different function: to help us achieve emotional goals.

Four things follow from this.

1. Most emotional goals are reasonable. It’s a testimony to the power of the ideology of ‘rationality’ that we tend to assume that any decision that is emotional has to be wrong or dangerous in some way – ‘irrational’. The opposite is probably true. We evolved emotions to help us survive. Emotions usually point us in the right direction. We evolved reason a) because ‘usually right’ is not the same as ‘always right’, and in terms of survival being ‘usually right’ is still risky, and b) because thinking things through (i.e. using ‘what if’ models of cause and effect) can help us achieve emotionally driven goals better.

 
2. To see emotion as the enemy of reason in decision-making is therefore misleading. This is important, because the rationality assumption has bred dangerous delusions about the powers of marketing – both amongst marketers and their critics. If your starting assumption is that human decision-making is pink-elephantly rational, and if you assume that marketers ‘divert’ or ‘manipulate’ human beings away from the perfectly rational decisions that they should be making, then that makes marketing look supremely powerful (because so many people make supposedly ‘irrational’ decisions).

In fact, what’s going on is quite the opposite. People pay attention to marketing that recognises, addresses and appeals to the emotions they already have, and ignore it when it fails to do this. The marketer is not really influencing or changing the consumer; the consumer is influencing what the marketer does.

Exaggerated belief in the powers of marketing has two negative effects. First, it breeds delusions of grandeur among marketers, who begin to believe and claim that they can influence peoples’ decisions far more than they can. Disappointment follows as night follows day. Unrealistic expectations about what marketing and advertising can do lie behind many a debate about declining marketing and advertising ‘effectiveness’.

On the other side of the coin, there are also many people who accept the same basic premise (that marketers are diverting or influencing people away from the rational decisions that they should be making), but think this is wrong and should not be allowed. This is the starting point for many pressure groups, media commentators and regulators.

Both sides of this argument are actually sharing the same basic assumption but drawing opposite conclusions from it. This is a recipe for perpetual motion (or conflict). The arguments will last as long as the assumption remains unchallenged.  If I’m right on this, we won’t get past these adversarial relationships until we build a better understanding of what’s going on.

3. Every human decision has a strong emotional element. In fact, people with damage to parts of the brain which process emotions find it almost impossible to make the slightest of decisions: shall I make a cup of tea or not?

 

This is important because marketers tend to lump consumer decisions into two different baskets: there are ‘rational’ decisions and ‘emotional’ decisions.

For example, marketers might say that a decision to buy own label is driven by ‘rational’ considerations while a decision to buy the branded version is driven by ‘emotional’ considerations. This is rubbish. Both decisions are highly emotional – they just involve different emotions. For example, buying own label might be driven by emotions relating to thrift or smartness (‘those brands can’t fool me’) or by different emotional priorities (‘I would rather spend the money on giving the kids a treat’). Buying the brand might be driven by other emotions. But the emotions are there, either way. An individual’s decision to focus on the ‘rational’ aspects of a decision is, in itself, emotionally driven.

Following on from this, marketers also tend to dump some aspects of value (such as money) into one basket called ‘rational’ and other aspects of value (such as a sense of status) into another basket called ‘emotional’. When they do this, they are still trapped by economists’ pink elephant rationality assumptions. In reality of course, money is one of the most emotional things around, arousing all manner of strong feelings about control, status, conflicting priorities, pride, giving, feelings of success vs failure and so on.

4. If all the above are correct, the widespread marketing theory that ‘the product’ offers the consumer functional/rational benefits while its marketing and advertising add ‘extra’ emotional benefits, is wrong and misleading. For a start, you cannot simply equate ‘functional’ with ‘rational’ because ‘functional’ is as emotional as money. More importantly, these categories of analysis are, in fact, meaningless. Doing marketing using them is a bit like doing chemistry without any notion of the periodic table and relying instead on the inherently confusing assumption that the fundamental building blocks of matter are earth, air, fire and water (We did this for thousands of years).

There’s lots more we could say about the damage down by the rationality assumption. But the bottom line is this. Taken superficially, you might think that marketers should be praised for emphasising the importance of emotion, and for looking past the economists’ mistakes. Dig a little deeper, however, and it turns out that marketing is still trapped by inbuilt intellectual confusion about ‘rationality’. To successfully reinvent marketing, we have to go back to the drawing board.

 

Alan Mitchell     www.ctrl-shift.co.uk

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