In psychological terms, context is almost everything. Much as we like to think that we know how we will act and react in a given situation, without the richness of...
Perhaps some of the most interesting blog debate I’ve read recently has been on Rod’s Personal Investment Strategies blog.
It’s been a while since I did any consumer behaviour research with financial institutions, but in many ways my journey into consumer behaviour and away from traditional consumer research began during a consumer focus group about pension choice, back in the 1990s.
It was the fourth long and tedious group discussion with people who were considering investing in a pension scheme, during which they told me how they wanted independent advice, a range of funds and a provider with good financial security. At the end, after everyone was getting up to go, one of the group asked another, who had been a little more vociferous than the rest, where he was planning to get his pension. The reply led to several of the group soliciting the details of someone who I recognised was an ‘industrial’ insurance salesman (i.e. not independent). What’s more, they didn’t ask who he represented, how financially secure his company was or how many funds he offered.
I realised that I was going away to write my report on what they’d all said; meanwhile they were all about go and do something entirely different.
I’m aware of studies that have found people tend to like stocks that have readable names (as opposed to abstract or technical-sounding ones), and that people tend to select things in general that begin with the same first letter as their own name.
These reflect the way the unconscious mind works, by generating a feeling based on familiarity, which is then consciously de-coded (erroneously) as being a ‘good’ choice.
Last week another study shed light on the power of the unconscious mind’s influence in this apparently rational world: a study conducted by the University of Haifa found that the investment selections of a group of investment advisers and accountants was strongly influenced by what type of article they were given to read before making a selection.
Those who were given an article on someone who took big risks and was successful, rated a stock they were shown as being more attractive (more valuable for investment) than those who were shown the same stock after reading an article about someone who had been successful after avoiding a risky decision.
All the participants gave their assessment of the fund on the basis of the same financial report.
So it seems an investment advisers advice might have just as much to do with what he’s read that morning in the paper, or a story he has heard from someone else, as it does a ‘rational’ assessment of the data for that company.
Studies like these on the power of priming don’t make for particularly comfortable reading for anyone who likes to believe they’re balanced, rational and analytically-minded. However, understanding the way our brains work is critical to understanding our customers’ behaviour.
Source: University of Haifa (2009, April 28). Reading Reports Involving Risk-taking Affects Financial Decision Making. ScienceDaily.