The Buying Brain

Deep inside human brain (and not the heart) there are many a latent and unfulfilled needs, wants and desires embedded. Psychologists had done a great job by distinguishing the needs as Innate (biogenic) and acquired needs. The moment any need is recognized by human id the brain moves into a state of tension. Psychologists say this tension creates a motive, now this motive is the driving force that impels human being into action. Interestingly Praxeology gives a slightly different explanation. The first axiom of praxeology says “human behaviour is a purposeful action”. Hence, the recognition of need immediately leads to creation of motive. This motive is the driving force (i.e. it is directional) towards the goal. And tension is created subsequently to choose the means to reach the end. Now the methodology of recognition of Innate and acquired needs are different. Innate needs are recognised more through internal environment whereas acquired needs are recognised more through external environment. The implication is that our own judgement about our acquired needs become highly relative. We compare with others as our reference point. A beautiful experiment was done in this regard with two capuchin monkeys. Two capuchins were placed in adjacent transparent cages. The first monkey was given a cucumber slice as reward for a small task and it ate it happily. The second monkey was given a grape for the same task, while the first one was watching it. Now when the first monkey was again offered a cucumber for the same task, it refused the reward. In fact it became so angry that it threw the cucumber slice away. Again as the motive is directional, it could be positive or negative. We may feel driving force towards an object or away from an object. Marketers design their product/service offerings based on “towards object” and “away from object” approaches. The question is which approach to choose and when. The marketers make the consumer aware of their needs by creating a psychological imbalance between existing and desired state (need recognised state). Now they must use the “away from object” approach by pulling down the existing state when consumer is seeking problem avoidance and use the “towards object” approach by pushing up the desired state when consumer is seeking satisfaction maximization. So toothpaste which promises white teeth uses “towards object” approach whereas toothpaste which prevents sensitivity uses “away from object” approach or avoidance approach.

Now, motivation impels humans into an action which is information search. The reason for information search is importance of buying decision. Consumer believe by a wrong buying decision consumers could create an inferior state for themselves. And consumer is highly loss averse. So the process of information search is an uncertainty reduction mechanism. Now, the next question is how much effort the consumer will put into information search. The best to understand this is to think of decision maker as a problem solver as proposed by John dewey. As per Dewey problem solving refers to undertaking thoughtful reasoned action to bring about most satisfying result (though in some situation the objective of consumer is not to bring about most rational and utility maximization result; Think about the last time you went shopping and bought that expensive dress which you actually didn't needed then). Consumers differ in terms of the energy they devote while solving a buying problem. The analysis of the purchase situation and the calculation of the probable risk determine the nature of decision making effort and its rigor. The nature of decision making effort is called involvement (Concept of involvement was proposed by Krugman as intensity of interest). So the degree of involvement is the extent of mobilization of behavioral resources (physical, mental and energy resources). These behavioral resources are used to judge the importance of four factors – Ego relationship, Perceived risk, Social sanction and significance.

The next step is evaluation of alternatives. Economics assumes that humans are rational agents with perfect information. Had that been true, marketing would not have existed. But in our real world humans are not rational and have limited information at their disposal. So how do the consumers make decision? As it turn out they over value the information they have and undervalue or ignore the information they don’t have. Also consumer’s rationality is bounded by the fact that she/he has limited cognitive ability and limited time to make that decision. Interestingly while evaluating alternatives human brain only compares the things it can compare and don’t compare the things it can’t. For example while evaluating two different models of mobile phone, a consumer can compare their camera pixels or their screen size, but she/he can’t comprehend how much reduction in screen size will compensate for unit increase in camera pixel. 

This is the reason behind irrational decision making. So, each of consumer’s decisions comprise of several considerations which are assigned importance (weight), but we do not assign these weights in most efficient way because of our inability. These considerations are shown below in the buying space analysis of human brain. 

An important point about alternative evaluation is that it follows less of economic module and more of game theoretic module. Had it used economic module more, consumers would have preferred a carbon or lava phone to an iphone every time. But consumer evaluation module is game theoretic, so she/he immediately becomes suspicious of so many features being available at so less price. Another important point is that consumer uses price as a proxy variable to determine quality. Consider the case of a mobile phone. There are close to 25-30 features of a phone described on any shopping website. Consumer’s brain doesn’t processes all of them rather apart from 4-5 features which she/he considers important, rest are compressed into a zip variable whose evaluation is done thorough brand fame. So, the consumer uses psychology of simplification.

The purchase step is the ultimate moment of truth for products or services, where consumer accepts or rejects them. The critical fact of this step is that though all consumers think they use some evaluation criteria objectively to choose one product over other using rationality, but actually most consumers in most of purchase occasions use reason based evaluation only ostensibly and actually it is an emotion driven subjective decision. Consider the case of choosing among two similar salt brands. With around 50 bits per second of processing speed it will take years to bring out the most rational decision. But the consumer makes the decision in a few minutes only. This is possible because human brain has two systems rational and emotional (Kahenman calls them slow and fast systems respectively). When the rational brain is engaged into making a complex decision and moves to a decision conflict, the emotional brain takes over and makes an emotional decision (which could be irrational). So the key to action is not thoughtful deliberations but emotions. The emotional brain not only helps in resolving decision conflict but also impacts the way rational brain analyse the decision made. Hence our rational brain is not good at being rational but it is good at rationalizing our emotional decision.