What Is Decision Theory and How Can It Help Your Marketing Strategy?
March 14, 2018 | Kirsten Lyons
Decision theory is a multi-disciplinary area of research founded in economics and philosophy that seeks to explain how humans exercise freedom, and therefore make decisions.
From breaking down the mental process that results in human decision making to explaining why we find compromises so appealing, decision theory covers a lot of ground. And most of that territory falls squarely in the wheelhouse of marketers.
When we really think about it, our job as marketers is to efficiently move our prospects to make the right decisions – to invest in us and buy what we’re selling. Instead of blindly following best practices or throwing various content types at prospects and hoping something sticks, savvy marketers put themselves into their buyer’s shoes and imagine what they need to help them make a choice.
And that’s where decision theory comes in. Knowing what’s going on in your buyer’s head while they are deciding to choose you or your competition will help you develop a marketing strategy that works for your specific audience.
So How Do People Actually Make Decisions?
Because humans make decisions in a rational way (at least, for the most part) according to their personal goals and priorities, decision theory researchers have identified a general process we all use to make decisions.
Orville G. Brim proposed the following steps for how people arrive at a decision, be it personal or professional:
Identification of the problem
Obtaining necessary information
Production of possible solutions
Evaluation of such solutions
Selection of a strategy for performance
Let’s break that down into how non-social scientists talk.
Feel the pain point, and recognizing that there is an issue
Research how to tackle this problem. Considering how have other people solved this problem before.
Personalize the problem and solutions: Bring the thought process from 10,000 feet level to your actual daily life. What possible solutions make the most sense for you?
Evaluate personalized solutions: break out the mental yellow legal pad and run a pro/con list
Consider and plan for how will you implement the most logical solution identified.
My dormant database full of leads
My conversion rate isn’t great
Can you give me more hours in my day?
My content is stale
Leads qualifying themselves
Tying multiple pieces of content in a nurture stream
Making old content more exciting without tapping in the content team
Stop sending sales hundreds of names that may or may not be ready to buy. Instead, save your sales team time by letting your leads qualify themselves with opportunities to engage on their terms, like event follow-up that allows event leads to tell you right away that they want a demo, just some interesting content, or to be left alone.
Make your content work overtime as a demand gen engine by layering in qualifying questions give it new life and powerful ROI. Even layering in an interactive element like this embedded SnapApp allows you to connect with your audience in a more exciting way.
Beyond this actual process, various researchers have also expanded on decision theory to highlight a few other important tenets of the way we make decisions.
Theory of Reasoned Action
The Theory of Reasoned Action, pioneered by Martin Fishbein and Icek Ajzen in the late 1960s, works to predict behavioral intent by examining your attitudes and norms (or the expectations of other people.)
If this whole attitudes and norms thing sounds a little bit unnecessarily academic, think of it this way:
John loves wizards and wants to read Harry Potter: these are his attitudes. But John’s friends think the series is childish: these are the norms influencing the situation. The Theory of Reasoned Action works to predict and explain whether John’s attitudes (desire to read the book) or the norms his friends impose (not read the book) will win out.
The Theory of Reasoned Action also explains factors at work in the decision-making process in terms of the space between a decision maker’s initial intention and the completion of the action (accepting an invitation, choosing a book to read, or even buying software.)
It explains that people’s preconceived notions about the process – their attitudes – fill the space between the impetus to solve the problem, and when they ultimately make a decision and take action.
Because of our tendency to default to previous attitudes between interactions in the decision making process, this theory is often used to highlight the importance of moving prospects through the marketing and sales pipeline quickly.
The Compromise Effect
This aspect of decision theory illustrates that when making a choice, people are driven to avoid extremes, and will most often opt for a compromising middle option when presented with three choices.
Famous decision theory researcher Itamar Simonson explains this phenomenon in the following way:
“Items can gain market share when new options are added to the market when they become the compromise or middle option in the choice set.”
In the context of the hamburger example above, the double cheeseburger becomes a more attractive choice in the second picture, not because the product gets better (same burger), but because it was positioned optimally – think Goldilocks here, not too small, not too big, just right.
Simonson also argues that not only is the compromise effect present in nearly all decisions made, but is more prevalent when people expect to justify their decisions to others and is associated with more elaborate and complex decisions, like the ones in B2B buying processes.
Belief Can Be Momentarily Constructed
Most of us, if asked, would say that our beliefs about ourselves and the world around us are grounded in observation and our own sense of morality. But decision theory researchers beg to differ.
In reality, our beliefs are less steadfast tenets based in our observation of the world, and much more contextually malleable opinions. Decision theory researchers explain this by showing how our beliefs can be momentarily constructed by setting up conditions that force us to evaluate them in other contexts.
Check out this example from Econsultancy:
If you ask people the following two questions:
People answer these questions very differently based on the order they are presented in.
According to Econsultancy, when you ask the dating question first, responses to the two questions are strongly correlated (i.e. many dates, very happy, or few dates, very unhappy.)
While you may in most other contexts report that your life is very happy, your beliefs about your relative happiness can be quickly shifted when we subtleley set up the conditions you should use to make your decision – in this case by first asking you how many dates you have been on. The respondent then instinctively evaluates their broader happiness with an assessment of their romantic life top of mind.
What if marketers applied this logic to qualifying questions? Thinking critically about how to first tap into the pain point your solution solves – teeing it up as a problem – and then asking an evaluative question about broader marketing goals, much like in the dating question, could be a primer for how one should evaluate their broader marketing goals.
Not So Far From Marketing After All
At the end of the day marketers are all working towards getting people to make the decision we want them to: take a demo with our sales teams, buy our product, or even just download a white paper.
As we all spend our days paying lip service to the idea of a customer-driven buyer journey, centering the needs of your buyer in the context of how they are making decisions sets innovative, modern marketers apart from the crowd.
One of the most salient areas to apply this framework to is your broader marketing strategy is in the context of your funnel. We can apply the steps of the decision-making process, as well as the other aspects of decision theory we talked about above, directly to the framework of a marketing funnel like this:
This model for decision making can be expanded to inform your content strategy, qualifying questions, your demand gen programming cadences and sales processes.
Keeping Decision Theory in the back of your mind can help marketers refocus on what we are actually working to do – put our buyers in the driver’s seat and guide them to making a purchase decision. Because at the end of the day, we want our prospects to decide to download, to opt in, and to choose us over our competition.