The best marketers know when to make and not to make decisions. This is why understanding Behavioural Economics as a science of decision-making and looking into the human behaviour is a must for CMOs. Here are 6 Step Change-recommended books on Behavioural Economics that CMOs should be reading.
1. Predictably Irrational by Dan Ariely
Summary: After recovering as a burn patient, Dan Ariely wrote Predictably Irrational to highlight how we systematically make the same mistakes and how we can avoid repeating them.
In the book, Ariely points out a series of experiments that proves how we tend to behave irrationally with emotions, social norms, and other illogical forces distorting our reasoning faculties.
According to Ariely, “We are pawns in a game whose forces we largely fail to comprehend. Although we may think we are in control of how we make market calculations and economic decisions, we are actually driven by perceptual reactions, ingrained habits, and decision illusions.”
Why Marketers Should Read This: In this thought-provoking book, Ariely points out how we can make better decisions by understanding our irrational quirks. He shared a series of experiments to showcase how little control we have over our irrational behaviours. Each chapter on the book talks about irrational and predictable ways we make decisions.
2. You Are Not So Smart by David McRaney
Summary: Bringing to focus the crazy beliefs that make us feel wise and rational, You Are Not So Smart is a book on self-awareness.
It takes a closer look at logical fallacies and dissects our common cognitive biases in every chapter.
WIth a hint of McRaney’s dry sarcasm, the book reveals how humans tend to celebrate our self-delusion thinking we are rational and logical beings and that we understand the way the world works when we really don’t.
Each chapter talks about our common cognitive biases and provides some helpful insight into the psychology of human behaviour. By understanding your cognitive biases, you can recognise them as they happen so you can effectively address your incorrect conclusions.
Why Marketers Should Read This: You Are Not So Smart takes a closer look at the human behaviour and allows readers to realise that although we think of ourselves as highly rational beings, every decision we make and how we think actually comes from a story we repeatedly tell ourselves to justify these decisions.
For the most part, these stories don’t even exist to begin with, and we are so often misled by our own biased thoughts and feelings.
As a marketer, reading this book will help you uncover the logical fallacies and biases your mind is embedded with so you can achieve a more balanced way of thinking and a more human-centred perspective that allows you to make better and wiser decisions.
When you’re thinking about the next online purchase or deciding on the next marketing trend to follow, You Are Not So Smart will help you get past your own biases for better decision-making.
3. Behavioural Economics: When Psychology and Economics Collide by Scott Huettel, PhD
Summary: Behavioural Economics: When Psychology and Economics Collide makes use of 24 lectures to explore key principles in behavioural economics to assess information and look into factors that impact how we make decisions.
It makes use of real-life case studies and examples.
Why Marketers Should Read This: This book is a good introduction to the main concepts behind behavioural economics such as decision-making biases, heuristics, framing, etc. and helps you understand how easily the human perception can be manipulated.
This unique book helps you manage risk and walks you through how to use probability in managing difficult, high-stake, and time-related decisions. It also points out practical tools you can use to better understand decision-making patterns and how you can use this knowledge to make better decisions.
4. Thinking, Fast and Slow by Daniel Kahneman
System 1 thinking is more instantaneous, emotional, and intuitive. System 2, on the other hand, is more conscious, slower, and logical and makes full use of reasoning and logic.
In the book, Daniel Kahneman further talks about the benefits of System 2 thinking in making sound decisions in business and our personal life.
This book is the fundamental guide to understanding system 1 and 2 thinking — to analyse what drives important decisions and how it is impacted by cognitive biases.
Why Marketers Should Read This: This book is a must-read for marketers who would like to understand how consumers’ biggest choices and decisions are influenced by human behaviour and how understanding cognitive psychology gets you one step closer to understanding risks and achieving happiness.
For marketers looking for a means to understand and justify complex decisions, this book will help you make the right decisions according to what can give you the most value.
5. Influence: The Psychology of Persuasion by Robert B. Cialdini, PhD
Summary: Influence: The Psychology of Persuasion talks about understanding the psychology behind why people say yes.
With 35 years of experience in the field of influence and persuasion, Dr Robert Cialdini makes use of evidence based on a three-year study program and extensive research on behaviour changes in people.
This highly talked-about book explores the six universal principles of persuasion — reciprocity, scarcity, authority, consistency, liking, consensus — and how you can use them to persuade people as well as be aware of when this is being used against you.
Why Marketers Should Read This: Influence will jumpstart your quest for change within yourself and will help pave the road towards success. According to the Journal of Marketing Research, this book is among the most important books written in the last ten years for marketers interested in the science of persuasion and sales psychology.
6. Nudge by Richard H. Thaler and Cass R. Sunstein
Why Marketers Should Read This: Nudge is a manifesto in its own right that pushes not only marketers but people from all walks of life to improve their decisions for the best chance of health, wealth, and happiness.
It presents a powerful argument while making use of funny examples that can help marketers, financial executives, Wall Street sharks, and everyday people work towards a better health, practical investments, and a better world environment.