A few weeks ago, I went to a super shop called Daily Shopping with my wife to buy a special imported shampoo and went out with more than 10 different items. Most of the items were unplanned purchases and had consumer offers. I know it’s not only my wife’s issue; it’s common for almost all. We can’t predict or rationalise customers’ minds and their buying behaviours.
In the competitive world of Fast-Moving Consumer Goods (FMCG), understanding consumer behaviour is very pivotal. It is often perceived that consumers’ mind is very much rational & logical. But the fact is that consumers’ minds are such complex landscapes where cognitive biases and emotions also play very important roles in purchase decisions. But at the end of the day, most marketers and strategists don’t come out from the logical aspects. Behavioural Economics, which merges insights from Psychology and Economics, challenges the traditional assumption of consumer rationality in purchase decisions. Behavioural Economics has lightened up the multifaceted landscape. It has confronted the traditional economic models, which assume perfectly rational decision-making.
In this article, I will embark on a journey of consumer mind, which will explore the logic, theories and real-world examples that demonstrate the fascinating interplay between psychology and economics.
The Irrational Mind at a Glance:
As I indicated earlier, classical economics posits that consumers make decisions based on rational calculations, weighing costs & benefits to maximise utility. In contrast, Behavioural Economics recognises that human decision-making is fraught with emotions, biases, & cognitive errors.
Daniel Kahneman, psychologist & economist, Nobel prize winner and one of the key figures in this field, dedicated his life to researching how people think and ultimately make decisions. According to his dual process theory of thinking, there are two distinct modes: fast, automatic thinking (intuitive System-1) and slow, deliberate thinking (deliberate System-2). Here, I will be describing some theories or models and real-life examples with rational or irrational minds of consumers:
- The Allure of Discounts:
One of the predominant aspects of the irrational consumer mind is the allure of discounts. Consumers often strongly prefer discounted products, even when the economic benefit may be marginal. Let’s consider the scenario of a consumer facing two similar products—Product-A at the regular price and Product B offering a modest discount. Studies have shown that consumers are more likely to choose the discounted option, driven by the psychological satisfaction of feeling like they’ve secured a deal.
Example: Buy One, Get One Free (BOGO) Promotions. FMCG brands frequently leverage BOGO promotions to tap into consumers’ love for discounts. Even when the actual savings may not be significant, the perception of getting something for free triggers a positive response, ultimately influencing consumers’ purchasing decisions. Let’s take a scenario of discounts. Say, Lifebuoy 170 ml liquid handwash refill pack per price is 75 taka and Dettol 170 ml liquid handwash refill pack per price is also 75 taka. If there is any offer, buy 3 Dettol 170 ml liquid handwash refill pack and get it at 215 takas instead of 225 takas. There is a huge chance that consumers may pick Dettol.
- Anchoring Bias in Pricing:
One of the pervasive cognitive biases affecting consumer choice is the anchoring bias. This anchoring bias is obvious when individuals place excessive reliance on the initial piece of information they encounter while making decisions. In the context of FMCG, pricing strategies provide an excellent illustration of anchoring bias.
Example: Let’s consider the Colgate toothpaste brand that introduces a new premium variant, Colgate Max-Fresh, which is priced significantly higher than its existing Colgate toothpaste. Despite the original product’s unchanged quality, consumers may perceive the existing options as more affordable in comparison, leading to increased sales of the standard variants due to the anchoring effect.
- Loss Aversion & Brand Loyalty:
Many consumers continue to purchase premium brands even when discounted alternatives offer identical benefits, driven by the fear of losing the perceived quality and efficacy of the familiar brand.
Example: Let’s consider the classic scenario of a consumer standing in the aisle of a superstore Agora (A local superstore chain), faced with a choice between two similar brands of aerosol, ACI aerosol and HIT aerosol. ACI 800 ml aerosol, the usual choice, is priced slightly higher than the equally effective Brand HIT aerosol on sale (ACI aerosol-620 taka, HIT aerosol- 590 taka). Despite the minimal price difference, the fear of losing the perceived benefits associated with Brand ACI often leads consumers to stick with the familiar, showcasing the powerful influence of loss aversion on brand loyalty.
- Emotional Branding:
As a consumer, I can think rationally but act most of the time emotionally. Brands that successfully tap into the emotional aspect of consumer decision-making often enjoy greater loyalty. Emotional connections can transcend rational considerations, making consumers more forgiving of price premiums. It’s more likely to choose a familiar brand over a less-known alternative.
Example: we all must be mindful of Coca-Cola’s Share a Coke Campaign. The iconic Coca-Cola’s “Share a Coke” campaign personalised its product by featuring its names on the packaging. This simple yet emotionally resonant strategy made consumers feel a personal connection with the Coca-Cola brand.
- Packaging Psychology:
The irrational consumer mind is highly susceptible to the influence of a product’s packaging. Bright & vibrant colours, appealing visuals, and strategic shelf placement can significantly impact consumers’ product choices. Consumers may be drawn to aesthetically pleasing packaging, even if the actual product inside is comparable to alternatives.
For example, if you look at the packaging of Pringles and Kazi tea, you will find that they are very creative and premium. Some brands, like- Coca-Cola, Mr. Noodles, and Ispahani tea, have very vibrant and attractive packaging. Premium packaging often creates a perception of higher quality. FMCG brands may invest in sophisticated packaging to elevate the perceived value of their products, encouraging consumers to choose them over competitors based on aesthetics rather than objective product attributes
- Limited-Time Offers & Scarcity:
The term “Fear Of Missing Out” (FOMO) is a powerful driver of consumer behaviour. What happens here? Limited-time offers & scarcity tactics capitalise on this irrational fear, compelling consumers to make impulsive purchasing decisions to avoid the perceived loss of a valuable opportunity.
Example: Seasonal & Limited-Edition Products. If you notice, you will find a lot of such offers, like- year-end sales of Aarong, winter offer of Transcom Electronics, Daily Shopping’s weekend offer, and Bata’s back to school. FMCG brands often release seasonal or limited-edition products, creating a sense of urgency and exclusivity. Consumers, fearing they might miss out on a unique experience, are more likely to make unplanned purchases during these periods.
- Social Proof & Influencer Marketing:
I noticed that consumers frequently make choices based on social influences, seeking validation from peers and influencers. The reality is that the power of social proof in FMCG is evident in the rise of influencer marketing, where individuals make purchasing decisions based on the recommendations of influencers rather than rational assessments of product attributes in detail.
Example: In 2022, Dove broadened its network of influencers, aiming to promote the brand’s commitment to inclusivity and body confidence. The personal care company achieved recognition with a Shorty Award in the micro-influencer strategy category, acknowledging its success in various campaigns such as #PassTheCrown, #DetoxYourFeed, #ReusableIsBeautiful, and Baby Dove #OneRealPressure. Influencers promoting FMCG products on social media platforms can significantly impact consumer behaviour, as individuals trust the recommendations of people they perceive as relatable and trustworthy.
- Default Choices & Convenience:
I found this default choices issue very interesting. The default option often plays a crucial role in FMCG decision-making, especially regarding convenience products. Consumers may stick to default choices simply because they require minimal effort or cognitive load in decision-making.
Real Example: one question for you. When was the last time you changed the newspaper at home? Probably, it’s long back! This symptom showcases the power of default choices. It is simplifying the consumer decision-making process.
I tried to show some logic and examples above regarding the irrational minds of consumers’ decision-making. The FMCG sector provides a fertile ground for observing the quirks and intricacies of the irrational consumer mind. In fact, from brand loyalty driven by loss aversion to the impact of packaging and the allure of discounts on emotional triggers, real-world examples within the FMCG industry illustrate that consumer decisions are often far from rational. I want to mention that recognising and adapting to the nuances of the irrational consumer mind is not merely a marketing strategy; it’s a fundamental understanding that empowers brands to connect with consumers on a deeper and emotional level.
The most important thing is that it influences consumer behaviour in a landscape where rational choice is just one factor among many. I would strongly say that as the FMCG industry continues to evolve, embracing the irrationality of consumer choices becomes a key factor in driving successful marketing strategies.
Author :
A.K.M. Moinul Islam (Moin)
A Passionate Marketer and Corporate Leader
(Executive Director, PRAN-RFL Group)
