The Intersection of Behavioural Economics and Marketing

Neoclassical economic theories assume that human beings are “homo economicus” or, as Aristotle defined it, “rational animals”. According to this view, people are perfectly rational decision-makers, self-interested, and consistent. They always make decisions that maximize their own utility. However, we often see people around us who smoke cigarettes, eat sugary foods, donate to charity, gamble, and do many other irrational things that do not benefit their self-interest or well-being. This easily proves that humans are not homo economicus, but simply hominins. Behavioural economics is the study of the psychological factors that influence our economic decisions. Marketing, on the other hand, is a set of activities aimed at creating value for customers. Marketing is about understanding what people need or want and offering products or services that meet those needs. This chapter explores the relationship between behavioural economics and marketing. It begins with an overview of the basics of behavioural economics, including the various cognitive biases and heuristics that influence our decision-making. It then discusses how behavioural economics can be applied to marketing, with specific examples of how marketers can use behavioural economics insights to create more effective marketing practices. The chapter also provides case studies of how behavioural economics has been used to improve marketing results. Finally, it explores the future of behavioural economics in marketing and how marketers can stay ahead of the curve.