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Risk aversion – in advertising like in lunch

Design-thinking, Marketing, Psychology

Image by Flickr user Tash Bandicoot; used under Creative Commons Attribution licence

Humans are risk averse. This makes sense from an evolutionary point of view, it allows us to protect ourselves from harm. It’s this risk aversion that stops us diving in to a tank of great whites or standing too close to the edge of a cliff. It keeps us safe.

This need for safety has rippled in to every aspect of our lives.  It’s the thing which drives us to take out health insurance, frequent the same restaurants and buy the same brand of wash powder each week. It’s also impacted the way businesses operate, implementing limits and regulations on trades, rigorous taste tests for food products, codes of practise for journalists etc.

These precautions and processes do protect against failure, they allow us to satisfy our own personal or business needs.

By going to Pret and choosing the same sandwich every day, it removes the risk of a sub-standard culinary experience. It ticks the boxes, always fine, always satisfying our hunger. It protects us from disasters.

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But, by playing it safe every day and never going anywhere else we prevent the discovery of superior options. Some of the best lunches I (and I do not believe I am the only one) have ever had, have been when I have taken a risk, over ridden my self-protective mechanisms and gone with my gut. The sushi places that look a little unkempt, the rather ‘rustic’ looking Italian deli, or whatever no. 24 on the Vietnamese’s menu is.

Playing it safe satisfies – but it doesn’t optimise.

And the same is true in advertising.

Ads are tested and tweaked to within an inch of their lives before going live. Such market research exists to ensure an advert satisfies it’s objectives (usually but not always to drive sales). Thus, it ‘checks’ that the consumer understands the benefits of the product, feels positively about the brand, enjoys viewing the ad, and of course reports that they will now purchase the product. It acts as an insurance policy minimising risk for advertisers, clients and agencies.

But, if advertisers and marketers always played it safe, listened and adhered to the outcomes of market research some of the greatest and most successful adverts of all time would not have been produced. The Cadbury Gorilla, Guinness White Horses and 3’s Dancing Pony all famously performed terribly through market research. But someone, not content with satisfactory, acknowledged the chance to optimise. Took a risk and overrode logic, rational and process.

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Daniel Kahneman, the Nobel Prize winning Economist has brought understanding of the conflict between rational and impulsive thought to the fore in recent years, noteably through ‘Thinking Fast, Thinking Slow’. This explains that, metaphorically speaking, two systems exist in the brain, System 1 the automatic, effortless system which informs us without the need to actively think that 1+1=2, drive or recognise familiar voices. It operates quickly, often below the level of conscious awareness and is the soruce of gut reactions, feeling or knowing without necessarily knowing why. It’s the system which will drive us to take a risk.

Conversely, system 2 is slow and deliberative. It allows rational and logical assessment of situations and options, such as calculating 17×34 or mastering a new card game. It requires effort and allows introspections. So, unlike system 1, it is possible to report and therefore measure and operationalise. It creates knowing which can be rationalised and explained, often to override system 1.

 

System 1

System 2

Subconscious, beyond introspection

Conscious, can reflect upon

Fast, automatic, effortless

Slow, effortful

Drives the majority of behaviour including 95% of consumer decisions

It drives a minority of behaviour

Operates according to biases &  heuristics

Rational processing, critical examination

Influenced by mental & physical context

Influenced by fact, logic, evidence

 

System 1 drives the majority of human behaviour, over 90%. It’s not faultless but it does usually work for us and prevents us wasting valuable energy deliberating every little decision. It can prove effective to override it’s impulses in favour of logic and rational. Sometimes. But, the rustic deli or the singing lama (we’ve had mere-cats, gorillas and ponies), are likely to perform poorly on these traditional methods of analysis. I fear, as in the above examples, deploying rational safety nets, Pret or traditional research, only allowing for system 2 thinking, will subject ourselves all to a life of satisfaction.

I’m not suggesting we should try every single grimy looking cafe on the street or the ad industry should scrap market research completely. However, I am suggesting sometimes, just sometimes – we should go with our gut! Not be ashamed to say ‘I just know’. Listen to system 1 guiding us into the un-pronounceable Korean deli, or through an alternative method of market research. Yes we may fail and suffer some disasters but if we don’t we’ll never maximise. If we’re not prepared to take a risk and experience some lows we’ll never experience the highs.

Take a risk.


Emma Rose Hurst is a communications and marketing specialist with expertise in the application of behavioural science and psychology in the real world. She tweets @EmmaRoseHurst.

© 2015 Warwick Business School and the Design Council