The Problem with Buyers? They Have a Brain.

LAS VEGAS — Maybe there is no such thing as a “smart shopper.” No matter how hard consumers try to outsmart clever marketing ploys or to find the best bargains, there’s a force working against them: the brain. That's the message from the brain of Dan Ariely, a professor at the MIT Sloan School of Management and a professor of behavioral economics at Duke University, who delivered a sobering keynote presentation at the Teradata Partners conference here about the science behind decision-making.

Ariely, who happens to be a burn victim, began his presentation by recalling how his initial studies of human behavior looked at the correlation between time increments and pulling off a bandage. (Remember the old adage about tearing the Band-Aid off quickly? Time to retire that old chestnut: Through much dedicated research, Ariely found that removing a bandage slowly actually inflicts less pain.) The moral of the story, he told the crowd, is that human decision-making is shaped by behavioral patterns as well as by the environments in which information is presented.

“Our brain fools us in similar, repeatable ways, no matter how much information you have about something,” Ariely said, after demonstrating several visual illusions. When two boxes were projected onscreen, for example, one clearly seemed, at first glance, to be wider; when measured they were the same size.

Ariely pointed out that, in any given day, vision is the activity we engage in more than any other. We spend most of our time looking at things, processing the visualizations, and subsequently assigning them meanings. Our brains, however, are prone to tricking us in vision-related areas. Objects, it often turns out, really are closer than they appear. “If we make mistakes in vision, what’s the likelihood we make mistakes in other areas we don’t do as much during the day?” Ariely asked the crowd. “In the same way that we have visual illusion, we have all kinds of decision illusions.”

Consumers are a stubborn and cocky bunch, Ariely said. They think that any decision they've made in the past must have been a wise one, so they often repeat it. “You say, ‘My goodness! I have made this decision; it must be fantastic.’ You just assume -- because you've done it so many times -- it has to be reasonable." Even worse, he said, customer loyalty may be a figment of our imaginations. "We feel that we have very well-defined preferences. The fact is that we don’t,” he told the crowd, leaving open the possibility that clever marketers can simply swoop in and prey on indecisive customers.

But indecisive consumers can quickly become inactive ones, Ariely said, noting that, when people aren’t partial one way or another, they often opt for the default response. For example, when survey respondents are given an option to check a box, they're apt to leave the box unchecked unless they have a particularly strong feeling on the subject. And respondents are equally likely to check nothing regardless of whether they're being asked to opt in or out. The bottom line? Indecisive people tend to take the path of least resistance, making the decision that requires the least amount of effort.

Ariely provided attendees with surefire ways to stymie customers' purchasing abilities:

• Provide them with 10,000 options.
• Tell them, “This is the most important decision of your life."
• Make the default one that involves opting out of participation.

But all is not lost, Ariely said -- and that's where marketing expertise can win the day. The way choices are framed or presented has a large impact on the decision a brain will make, he said, but humans are often blissfully unaware of being swayed in any direction. “We have such a strange sense of urgency,” he told the crowd. “Despite the feeling that we know what we're doing, we are drastically influenced by external circumstances all the time.” So how can smart marketers take advantage of irrationality in the consumer brain? Ariely suggested that companies create environments that customers remember and find comfortable -- environments they'll want to return to. Companies should also recognize that customers are lazy, he said -- and sometimes need to be guided toward a decision.

“In fact, we're not that intelligent,” Ariely proposed, showing a slide of Homer Simpson’s peanut-sized brain in his giant head. “We are susceptible to a lot of mistakes. We are complete with all kinds of irrationalities.” There is, however a potential upside, he said: “If we understand the way we fail, and gain insight about [the] ways we make mistakes, we can offer a solution.”

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