Earlier this fall, Richard Thaler won the 2017 Nobel Memorial Prize in Economic Sciences. For his contributions he’ll get a lovely medal, attend a ceremony in Sweden, receive countless accolades, and take home a prize of about $1.1 million.
He should also get a monument in his name from the PR field.
Thaler is a giant in behavioral economics, and no, that term is not an oxymoron. It’s the study of how human behavior impacts economic decision-making, and it’s one of the main reasons PR is an essential part of a company or brand’s long-term success.
I say this as a guy who got C’s in micro and macroeconomics.
Through Thaler’s work, which builds on the theories of Daniel Kahneman and Vernon Smith (two other Nobel laureates), he establishes that people are “predictably irrational” in their decision-making – something we in PR have known for a while, but haven’t had the research chops to prove.
According to Thaler, people consistently behave in ways that don’t line up with economic theory – which explains in part why we’re not all driving 1985 Chevrolet Cavaliers and buying our clothes from Walmart. It also explains why PR professionals need to read up on Thaler’s work and apply it to our field. It affects message framing, the importance of gaining audience insights, and the concept of reputational value.
From a messaging standpoint, Thaler lays plain the importance of using different framing approaches to convey the same point. Taking a page from Greek philosophy, we need to use ethos, pathos, and logos when formulating our persuasive arguments (such as getting someone to buy a product, work for a company, invest in a stock, or grant us social license to operate).
- Ethos is messaging framed around experience – implying “you should listen to me because I’ve seen this and done this before.”
- Pathos is messaging framed around passion and emotion – saying, “You should listen to me because there’s nothing more important at this given moment.”
- Logos is messaging framed around logic, suggesting, “You should listen to me because this makes sense.”
Thaler is essentially saying that messaging framed purely around logic doesn’t appeal to the irrational behavior of your average human being.Thaler is essentially saying that messaging framed purely around logic doesn’t appeal to the irrational behavior of your average human being.Click To Tweet
And it goes beyond messaging. Thaler’s research explores the concept of “nudges” – those little things that are required to compel us to act, even when we know we should without the nudge. Some are simple, such as the photo of the car that accompanies the message about renewing your license tabs, or Italian-themed background music playing in the FIAT dealership. Others are more substantial, such as recognizing the value of first-time buyer incentives on major purchases, even though they may not make complete sense from a cost-saving standpoint. What this points to is the importance of gaining deep insights into the buyer and truly understanding the motivators that cause someone to purchase. In short, not everybody thinks like you – and your irrationality may not match their irrationality.
Where Thaler’s research might have the most benefit to PR is resetting the agenda with regards to value of investments in reputation. Thaler’s point that few economic decisions are purely rational allows us to push back on those executives that suggest price and feature matching are the only way to win sales and market share. A company’s reputation and how a person feels about it probably have more to do with the final decision than cost or any specific feature.
And now we’ve got a Nobel Prize winner in our corner who can prove it.
This post was originally published by PRWeek.