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Hot State Decision Making White Paper
 

Hot State Decision Making White Paper

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This paper provides compelling information about how emotional arousal acts as a measurable predictor of consumer decisions and behavior.

This paper provides compelling information about how emotional arousal acts as a measurable predictor of consumer decisions and behavior.

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    Hot State Decision Making White Paper Hot State Decision Making White Paper Document Transcript

    • UNDERSTANDING CONSUMER EMOTION AND RATIONALITY. HOT STATE DECISION MAKING THE SENTIENT DECISION SCIENCE WHITE PAPER SERIES / FALL 2010 SENTIENT DECISION SCIENCE, INC. Aaron Reid, Ph.D. areid@sentientdecisionscience.com Maria Aroxie Perille mperille@sentientdecisionscience.com One Harbour Place Portsmouth, NH 03801 T 603.570.4819 F 603. 570.4817 www.sentientdecisionscience.comSENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 1 A
    • TABLE OF CONTENTS It’s Getting Hot In Here: The Impact Of Hot-States 3 On Decision Making Contradictions In Predictions: Underestimating The 5 Influence Of Past And Future Hot-States Following Your Gut: Emotion As A Driver Of 6 Decision Making It’s Not Rocket Science: Neuroscientific Evidence Of 6 Emotion In Decision Making 8 Quantifying Emotion: Do Sweat It Predicting The “Unpredictable:” Modeling Hot- 9 States In Marketing Effective Techniques For Measuring Emotion:10 Balancing Depth With Simplicity Two Human Truths That Maximize Pleasure And11 Minimize Pain12 For Consumers13 In Conclusion14 References14 About the Authors SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 2 A
    • ou are in the cookie aisle at the grocery store. Like any responsible health-conscious individual, you are watching your weight and nutrition. You are only in the cookie aisle anyway because you are on your way to the produce section! Suddenly, your eyes lock on that big blue bag of Oreo® cookies. You realize you are starving. Against yourbetter judgment, you impulsively grab the cookies and add them to the otherwise healthyfoods in your cart. Later that day, after you have eaten half the bag, you cannot quitecomprehend what induced you to buy the Oreos®. You are not alone…IT’S GETTING HOT IN HERE: THE IMPACT can in turn lead to reduced customer loyalty and satisfaction.OF HOT-STATES ON DECISION MAKING This is the key question for marketers and product managers. How do we capitalize on real consumer visceral response in theWhen consumers encounter promotions while shopping, they short-term while simultaneously building long-term consumerare compelled to act on their visceral impulses. At Sentient satisfaction? Understanding how hot-state consumer decision-Decision Science, we call this compulsion hot-state decision making works is critical to maximize pleasure and minimizemaking. Hot-states lead to a reduction in immediate pain in your customer base. This paper enumeratesself-control (Loewenstein, 2000), and the why’s behind consumer hot-state decisionmany marketing campaigns emphasize making, and in doing so, better armsimmediate action with hot phrases In essence. managers with insight that will lead tolike “One day only!” and “Call now!” more effective short-term marketing “How do we capitalize on realCatchy slogans, such as “Hungry? without sacrificing the long-termGrab a Snickers®,” Nike®’s consumer visceral response in the short- customer relationship.“Just Do It,” and Sprite ’s ® term while simultaneously building long-term“Obey Your Thirst,” to tap consumer satisfaction? Understanding how hot- Hot-states are a universalinto these visceral states phenomenon. They are state consumer decision making works is critical inand motivate immediate formally defined as visceralconsumer behavior. As a order to maximize pleasure and minimize pain in your states that markedlyresult, consumers often fail to customer base. This paper enumerates the why’s behind deviate from an equilibriumreturn to a cold-state, where consumer hot-state decision making, and in doing point, such as satiationthe rational mind might be so, better arms managers with insight that will (Loewenstein, 1996). Theseable carry greater weight on moments of heightened lead to more effective marketing and product emotion are propelled bythe decision. development without sacrificing the long- physical need-based drives,From a marketing perspective, term customer relationship.” such as hunger, pain, and sexualencouraging hot-state decision arousal, and have a profound effectmaking has the potential to boost short- on behavior (Loewenstein, 1996). Hot-term sales since consumers will buy products states often have a negative connotationduring hot-states through simple reminders of because they motivate people to behave intheir visceral depletions (e.g. “I am really thirsty!” or “I forgot impulsive ways. As a result, most traditional economistshow hungry I was!”). However, this may not always be the best have not studied them seriously (Elster, 1998). However, oncestrategy for long-term growth since consumers will often regret we understand and are able to quantify emotion’s impact ontheir decision later. Research continues to show that people decision making, we can model consumer hot-states in waysare unable to fully comprehend why they acted so impulsively even traditional economists can appreciate.in past hot-states (Loewenstein, 1996), and decision regret SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 3 A
    • The function of visceral factors is rooted in evolutionary shifted and intensified on a particular object. In the moment,adaptations that act as survival mechanisms to regulate you have a greater emotional reaction that motivates you tobehavior and focus motivation on what is immediately essential alleviate your hunger and give into your gut, quite literally,to sustain life (Loewenstein, 1996). When in a hot-state, an rather than abide by your long-term values ofindividual narrows his focus on the immediate goal of health and nutrition. Your values havealleviating or relieving the visceral deprivation. For not necessarily changed. Instead,example, when someone is in pain, visceral factors the quantity and intensity of thedrive him to alleviate or reduce the pain, which emotion that is elicited by thebecomes his most salient goal. As a result, visceral different stimuli has increased,factors cause individuals to neglect other long- thereby making some valuesterm goals in favor of alleviating the negative more prominent than others invisceral state (Loewenstein, 1996). the short-term context.The heightened arousal resulting Since hot-states often resultfrom hot-states also causes a in people acting impulsivelydevaluation of other short- to get their drive states back toterm alternatives by equilibrium, they seem to cause aincreasing the value of disconnect between long-term self-the option most strongly interest and behavior; something thatrelated to the source is preposterous to the traditional economistof arousal (Brendl, (Loewenstein, 1996). This is where irrationality enters theMarkman, & Messner, picture. Irrational is often defined as “not endowed with2003). An interesting reason,” so by definition, if someone makesillustration of this comes a decision based on emotion alone, he isfrom a study in which some labeled as irrational. We can betterparticipants initially tasted a understand perceived irrationalitysmall amount of popcorn, which when we know why peopleserved to heighten their emotions In short. make impulsive decisions thatand value for food, while others did not taste may be self-destructive in the “Hot-states essentially shift theany popcorn (Brendl et al, 2003). All of the long-term.participants then rated the attractiveness momentary weight of specific goalsof various consumer products including and thereby significantly influence It is natural to have ansome food and non-food items. The people short-term decision making.” emotional reaction to stimuli.who had tasted the popcorn rated non-food In fact, emotion is our mostproducts lower than those who had yet to taste fundamental cue to what we value.the popcorn (Brendl et al, 2003). This occurred This draws into question whetherbecause the popcorn tasters were in a hot-state and emotion should be stigmatized asthus valued only products that would alleviate their irrational. Hot-states seem irrational onhunger at the expense of devaluing unrelated products. the surface, and while they are much moreHot-states essentially shift the momentary weight of specific complex, they are also predictable. Though hot-states leadgoals and thereby significantly influence short-term decision people to value their short-term, immediate goals over long-making. term goals, they do not necessarily cause people to violate their self-interest. Instead, values simply shift and immediate goalsLet’s return to our Oreo® example. Assume your long-term become more salient in the individual’s self-interest. Are hot-goals are maintaining a healthy weight and eating nutritiously. states irrational if they are survival instincts that help focusHowever, when you walk into the grocery store your visceral our behavior on what is most important in our immediatestate of hunger is not at an equilibrium point because you haven’t environment? And if not, should we redefine irrationality?eaten in eight hours. When you see the Oreos®, the drivingforce of your hunger leads you to seemingly act irrationally by Before tackling that grand debate, let’s take a closer lookbehaving in contradiction to your long-term goals. You are in a at human’s awareness of the influence of hot-states onhot-state, so you buy and eat the Oreos®. All that has happened their behavior.is that your emotions, which dictate your preferences, have SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 4 A
    • CONTRADICTIONS IN PREDICTIONS:UNDERESTIMATING THE INFLUENCEOF PAST AND FUTURE HOT-STATESInterestingly, people are notoriously inaccurate whenpredicting how hot-states will impact them in thefuture. As a result, individuals often underestimate theimportance of hot-states and do not have adequateguardrails in place to ensure they act according to their Irrationalitylong-term self-interest. at workA fascinating study by Dan Ariely and GeorgeLoewenstein (2005) examined this phenomenon by By understanding hot-stateslooking at sexual arousal and its impact on decision and not automatically discountingmaking (Ariely & Loewenstein, 2005). When in a cold- them as irrational, we can betterstate, and asked to predict how they would act in a hot- predict and make sense of humanstate, participants indicated that they would practicesafe sexual behaviors, such as “us[ing] a condom if behavior. There are many great[they] didn’t know the sexual history of a new sexual examples of behavior that would seempartner.” However, once sexually aroused, participants’ irrational, but once they are furtherwillingness to engage in unprotected and unsafe sex examined with what we now knowincreased dramatically (Ariely & Loewenstein, 2005). about hot-states, they make sense.In other words, people were unable to predict how they For example, it is not unusual for firmswould act in a hot-state when they were not currently to downsize to increase profitability.in that hot-state. Arousal focused the individual’s However, sometimes the oppositemotivation on satisfying the primary immediate goal actually happens the firms suffer becauseof sexual satisfaction while discounting other previous downsizing reduces profitability. Thisconsiderations like behaving in safe ways. Similarly, in may be because downsizing inducesour Oreo® example, the shopper may go to the storethinking that she will only buy what is on her shopping fear in the workers who become lesslist even if she is hungry, but she is unable to fully productive as a result (Kaufman,understand how she will act when in that hot-state. 1999). Fear is a hot-state, and it drives people to act in their self-interest byIn addition to underestimating the impact of future avoiding the stimulus, but it also has ahot-states, people tend to discount the influence of past negative hedonic impact of causingvisceral states on their behavior. In one study, womenwho had previously gone through the pain of childbirth distress. In this case, it also leadswere asked if they would choose to use anesthesia during to a decrease in productivity sincetheir next childbirth (Christensen-Szalanski, 1984). The the workers fear for their jobs. Bymajority said no. However, when they were in the hot- understanding how fear impactsstate of labor for their next child, they overwhelmingly decision making and behavior,favored an epidural (Christensen-Szalanski, 1984).This phenomenon is called temporal discounting we can better predict how(discounting the pleasure or pain of a stimulus as it is the workers will react tofurther from your immediate environment). the downsizing news.Temporal discounting helps to explain the relapse inbehavior of many drug addicts because in a cold-statethey cannot imagine how they will act in a hot-stateeven though they have experienced many of them before(Loewenstein, 1996). In fact, past behavior resultingfrom hot-states often seems inexplicable to individuals SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 5 A
    • since they can remember what they did without emotion, we have no values In a consumer decision making context,at a cognitive level but have difficulty and preferences upon which to make people develop preferences for productsrecreating the level of emotional arousal, decisions (Bechara & Damasio, 2005). based on how the choice optionswhich is what is at the heart of the hot- Contrary to being a cue to irrationality elicit emotional responses. In essence,state (Loewenstein, 1996). emotion is a mechanism that is critical emotional reactions inform individuals for good-decision making. of what they value, and the degree ofSince hot-state decision making is so emotion experienced is an indicationhard for consumers to understand and of the degree of preference. Forpredict themselves, one might suspect example, if exposure to the Banana PAST EMOTIONALthat it is not possible to measure Republic® brand evokes a rush of EXPERIENCESand predict hot-state influences on excitement in a consumer, thisconsumer behavior. This may be indicates that the Banana Republic®the case for traditional economists brand is highly valued. Once brandbut it is not a limitation for today’s preferences are developed throughbehavioral scientists. In order to do our emotional value mechanismsso, though, we must first appreciate they can become cognitive constructs VALUEShow emotion, and its intensity, drive that we can reference readily to makethe decision making process. quick, consistent choices across the plethora of brands we encounter daily.FOLLOWING YOUR GUT: These developed preferences informEMOTION AS A DRIVER the decision between a shirt fromOF DECISION MAKING STIMULUS EVOKED OR Banana Republic® and a comparable ANTICIPATED EMOTIONS shirt from Express®. The emotionalThe central influence of hot-state value of the Banana Republic® brandemotions on consumer decision will likely lead to a choice of themaking has traditionally been Banana Republic® shirt as long as theoverlooked and not adequately emotion for the brand outweighs themeasured quantitatively in market emotional reaction to the difference PREFERENCES in price between the two brands. Inresearch. Historically, economictheories, such as subjective expected other words, since emotions signalutility, have focused only on a rational, the relative importance of a stimulusdeliberate decision making processes to the individual, then emotion leadsin which individuals essentially weigh to values, which lead to preferences,their options through cost-benefit CONSCIOUS AND which lead to the decision to buyanalysis (Savage, 1954; Fishburn, 1968). the shirt, and then the subsequent UNCONSCIOUS DECISIONSThese economic models posit that behavior of actually purchasing thepeople should always make decisions shirt. This process is illustrated inthat are in their self-interest. If figure 1 Figure 1.individuals do not maximize theirlong-term expected utility, they are In this way, decisions stem from emotions. Emotions are adaptive for the individuallabeled irrational. Emotions form the foundation of our and motivate behavior by signaling values from our experiences in the past, factors in our environment that areTraditional economic theories tend to and emotions are invoked in the present most important to us (Frijda, 1994). Indisregard emotion as a key force in the and act as a visceral representation of essence, emotions enable us to navigatedecision making process and discount the what we value. our complex daily environments, whichfact that people often consciously and are filled with thousands of marketingsubconsciously rely on their emotions In the absence of an emotional response messages, by directing our attentionto drive their decisions and behavior to a stimulus (e.g. a Banana Republic® toward and away from stimuli that are(Elster, 1998). In fact, most recent shirt), individuals would have to rely on a relevant or irrelevant to our goals andresearch suggests that we need emotion tedious and exhaustive reasoning process values. Emotions are thus able to signalto function and make decisions that to determine their preferences (Bechara what is important to the individualare in our best interest. Our strongest & Damasio, 2005). The absurdity of this (Frijda, 1994).neuroscientific evidence argues that notion is well illustrated in the advice SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 6 A
    • Benjamin Franklin once gave his nephew. As the story goes, had VMPC damage. As told by Damasio (1994), he partneredFranklin’s nephew was distraught because he could not decide with disreputable businessmen, made unwise investments,between two potential girlfriends. To mitigate his nephew’s experienced a divorce and had several subsequent brief,internal struggle, Franklin advised him to do “moral algebra,” miserable marriages, and even unwisely denied social securityweighing the benefits against the costs (Gigerenzer, disability payments.2007). Franklin first instructed his nephew tocreate a pro-con list for dating each woman Bechara and Damasio explain Elliot’s poorby tabulating the two women’s qualities decision processes with the somaticand shortcomings. He then told his The irony. marker hypothesis, which suggestsnephew to systematically cross out “The patients with damage to that individuals can eliminate orequivalent qualities until there their VMPC lacked this essential reinforce alternatives based onwas a clear winner who had more emotional marker mechanism and their initial emotional reaction topros left than the other woman. could not filter possible alternatives and them. According to the somaticImagine if you had to conduct marker hypothesis, we eitherthis kind of mental arithmetic for subsequently acted irrationally. The great feel an immediate sense of alarmevery choice you made throughout irony here for economic theory is that they or experience positive affect inyour day. Exhaustive reasoning? were not perceived as irrational because response to different choices thatTry exhausting reasoning! they relied on emotion, but rather they guide our decisions, almost like gut feelings (Bechara & Damasio, were considered irrational becauseConsider a consumer deciding which 2005). These gut feelings informhouse to purchase by precisely listing they did not use emotion.” us of the potential consequences ofall the possible attributes of multiple certain decisions and allow us to consideroptions and then determining which house the future and our own wellbeing.has the most logical reasons in its favor. Onehouse may have hardwood floors whereas another The patients with damage to their VMPC lacked thisdoes not, but that house is not necessarily better suited for essential emotional marker mechanism and could not filterthe consumer and may not make him happier in the long-run. possible alternatives and subsequently acted irrationally. TheEven after listing all of the pros and cons, in the absence of great irony here for economic theory is that they were notemotion the poor consumer still would not be able to decide perceived as irrational because they relied on emotion, but(Bechara & Damasio, 2005). He needs to take his emotional rather they were considered irrational because they did not useresponses to the attributes of each house into account to arrive emotion. In contrast to standard economic theory, the VMPCat a meaningful preference. patient research provided alarming evidence of emotion’s critical role in functional decision making.IT’S NOT ROCKET SCIENCE:NEUROSCIENTIFIC EVIDENCE OF The somatic marker hypothesis goes a long way in emphasizingEMOTION IN DECISION MAKING the importance of emotion in decision making. Yet, at the same time, by only taking valence into account and not the degreeEvidence for the critical role of emotion in decision making of that emotional reaction, the somatic marker hypothesis iscomes from the neuropsychological literature. Bechara and limited in its quantitative explanatory power. This limitationDamasio determined that emotions are an integral factor in spurred new quantitative research on the impact of emotion indecision making by studying patients with damage to a specific decision making.part of the brain, the ventromedial prefrontal cortex (VMPC).The VMPC is implicated in planning as well as risk and fear A standout emotion-based model that advances beyond theprocessing (Bechara & Damasio, 2005), and patients with simple valance flagging nature of the somatic marker hypothesisVMPC damage have serious deficits in decision making. The is the predictor-valuation model from Montague and Bernspatients with VMPC damage take an abnormally long period of (2002). The predictor-valuation model finds its footing intime to make decisions, and their ultimate decisions are often neuroeconomics, which seeks to evaluate how individuals makenot in their best interest. decisions by examining brain regions. The model suggests that there is identifiable neural activity that can explain theA VMPC patient named Elliot provides a startling example. valuation of objects by regulating economic appraisals ofBefore damage to his frontal lobes, Elliot was a smart, successful stimuli. A neuroimaging study on the consumptive behaviors ofbusinessman. Life as he knew it began to deteriorate when he monkeys revealed how common activity in the orbitofrontal-could no longer make decisions in his best interest because he striatal (OFS) circuit allows for the valuation of objects that are SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 7 A
    • otherwise not easily comparable (Montague One such model that quantifies the weight& Berns, 2002). By using a common currency of emotion is the proportion of emotionof reward expectancy, the model explains model (Reid & González-Vallejo, 2009).the valuation of objects with very different This model is a better predictor of behaviorattributes (Montague & Berns, 2002). than a simple additive emotional models (e.g. Montague & Berns, 2002), becauseTo draw a comparison to consumer decision it combines consumer emotions andmaking, traditional models have difficulty rational assessments into a single predictivefinding a common denominator to compare algorithm. The model further explores thethe relative value of drinking six ounces of complexities of decision making that otherwater to eating six ounces of broccoli, yet winner-take-all models, such as the somaticthese two different alternatives can easily marker hypothesis, either ignore or take forbe compared with the predictor-valuation granted. Whereas Bechara and Damasio’smodel by analyzing activity in the OFS. (2005) somatic marker hypothesis and “By quantifying its extensions posit that the strongestSince values are derived from emotion, the valence signal “wins” and determines emotion, we can bettermodel provides even greater physiological subsequent action, the proportion understand the complexities ofevidence for the importance of emotion in of emotion model finds its unique emotional intensity and how emotiondecision making. Yet, the predictor-valuation contribution in the way rational interacts with our rational mindsmodel is silent on the higher order cognitive cognitive trade-offs combine withprocesses at play in decision-making. With emotional weights in a single to inform our decisions. The abilityits “winner-take-all” emotion algorithm predictive choice formula. to accurately quantify emotion isthe model does not clearly distinguish the critical to predicting consumerdifference between cognitive assessments In a series of studies that evaluated the hot-state decision making.”of symbolic information and emotional model, participants’ emotional reactionsresponses in the valuation that are observed to different stimuli, such as consumerin the OFS (Reid & Gonzalez-Vallejo, choices between diamond rings, financial2009). This cognitive hole in the model gambles, and mate selection, were measuredbegs for a more robust perspective that by skin conductance response (SCR). SCRcan simultaneously incorporate the impact uses electrodes to measure the microseimenof hot-state emotions and cold cognitive units of sweat produced in one’s palms,deliberation that defines so many consumer which is a measure of visceral arousal. Sincedecisions. SCR only measures the quantity of emotion and not whether it is positive or negative,QUANTIFYING EMOTION: a valence measure was also employed toDO SWEAT IT determine whether the arousal was approach or avoidance emotion (Reid & González-Emotion’s role in decision making is more Vallejo, 2009).complex than just identifying what types ofemotion are triggered by certain products. The studies demonstrated that emotionAnd while the valence of emotion plays a can serve as a tradeable common currencyvital role in decision making, the weight and in decision making, like reward expectancyintensity of that emotion is equally important in Montague & Berns’ (2002) study, suchfrom a market research perspective. In that emotional arousal is a measure of howorder to enhance the accuracy in predicting much a consumer values a particular choicebehavior, it is necessary to quantify emotion. attribute (Reid & González-Vallejo, 2009).By quantifying emotion, we can better At the same time, the proportion of emotionunderstand the complexities of emotional model goes beyond the common currencyintensity and how emotion interacts with described by the predictor-valuationour rational minds to inform our decisions. model because it combines both symbolicThe ability to accurately quantify emotion information and affective weights.is critical to predicting consumer hot-statedecision making. SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 8 A
    • To illustrate the cognitive and emotional trade-offs in a elicited to the carat size stimulus as compared to her emotionalconsumer decision, envision a young single woman passing by a reaction in a cold-state. Because the proportion of emotionTiffany & Co. store with a couple of friends. As any fantasizing model effectively captures the emotional weights of differentyoung woman would do, she casually decides to go into the store attributes and quantifies their impact relative to cognitiveand look around. At one of counters there are two emerald-cut considerations, it can predict what consumers’ preferences willrings. One ring is .83 carats and costs $5,250; the second ring is be in a hot-state.1.05 carats and is $9,300. During this casual browse, the womanimagines that she wouldn’t have a strong preference for either This has profound implications for how we conduct marketdiamond ring (a classic example of temporal discounting). If research. If we are in a category where purchase decisions arewe were examining this young woman’s choice in a laboratory commonly made in a hot-state, then our research will needsetting, her palms would produce essentially the same to assess which attributes evoke the most hot-state emotionsproportion of sweat when considering the price and carat size thereby carrying greater weight in the decision context. Ifof each diamond ring. marketing predictive models are always built on consumer valuation during cold-states, we can expect that those models Fast-forward two years. The same woman is madly in love and will be off the mark when trying to predict consumer behaviorrecently engaged. She and her fiancé elatedly enter a Tiffany & in a hot-state environment. This calls for more elegant researchCo. store in search of that perfect engagement ring. Her eyes design that can evoke consumer hot-states (e.g. deprivationlock upon that same 1.05 carat diamond ring and the smaller exercises, priming and other saliency cues) and assess what isone next to it. Her hot-state changes everything. She now has a most important to consumers when in that mind set.stronger positive emotional reaction to the larger carat size andwhile she is cognitively struggling with the higher price, she PREDICTING THE “UNPREDICTABLE:”doesn’t feel the same strong negative sting when considering MODELING HOT-STATES IN MARKETINGthe $9,300 price tag. Her hot-state emotions are functioningas a weighting mechanism on the differences in the diamond Since hot-states change the emotional weights that are elicitedattributes as she cognitively goes back and forth between in correspondence to different alternatives, the proportion ofthe options. In a hot-state, when the larger diamond arouses emotion model can quantify the intensity of emotion that hot-the woman, she has a disproportionate amount of emotion states induce. In the diamond ring example employed by ReidQUANTIFYING THE GUT: A MODEL OF HOT-STATE DECISION MAKING.The sign and magnitude of d* determines the strength ofpreference. If d* is positive, then the consumer will choosethe more expensive 1.05 carat ring. ß1 is the degree of theemotional reaction to the carat size, and ß2 is the degreeof the emotional reaction to the price, measured by SCR.These variables indicate the importance for carat size andprice, and they are weighted against the cognitive sym-bolic information for each attribute.Cold State Example: Hot State Example:In a cold state, the carat sizes evoke a degree of arousal However, in a hot state, the same carat sizes evoke a degreeequal to 0.49 microseimen units of sweat, and the price of arousal equal to 0.65 microseimen units of sweat, andtags evoke 0.39 microseimen units of sweat. Proportion- the price tags only evoke 0.23 microseimen units of sweat.ately, the emotion elicited by the larger diamond is not Now, the emotion elicited by the larger diamond size over-enough to outweigh the negative pull of the cost. whelms the negative pull of the cost, and the bride-to-be decides to purchase the more expensive ring, as the equa- tion above demonstrates. d* = -0.08 d* = 0.04 SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 9 A
    • and González-Vallejo (2009), the two attributes were carat size Psychophysiological Techniquesand price. When individuals are in hot-states of desire rather Psychophysiological methods are perfectly suited forthan cold-states, their values of the two attributes based on revealing consumer emotion. Participants are brought intosymbolic information will be stable, but the emotional weights a lab or consumer testing center and are presented withtied to each attribute will change according to the rise and varying stimuli (brands, static and dynamic advertisements,fall of their emotions in the moment, thereby influencing the new products, etc.) and their natural physiological responsedecision outcome. to the exposure is recorded. There are advantages and disadvantages to the various techniques which are reviewedMathematically, this engagement ring shopping experience is below.represented by the equation below. The ring that the womanchooses in her hot-state has a carat size of 1.05 and costs Functional Magnetic Resonance Imaging (fMRI)$9,300 while the other ring is 0.83 carats and costs $5,250. fMRI measures blood flow in the brain. Brain scans showIn this scenario, the value of ß1 increases so significantly in which areas of the brain are most active when processingthe hot-state that it causes the positive pull of carat size to a stimulus (e.g. exposure to a brand, advertisement, newdominate the negative pull of price, thus shifting the direction product, sensory sample, etc.).of choice. The couple purchases the ring in the hot-state butnot in the cold-state. Some of the advantages of fMRI include: • Brain scan data is hard to argue with (results areEFFECTIVE TECHNIQUES FOR very convincing to clients)MEASURING EMOTION: BALANCING • Definitive emotional data (interactions withDEPTH WITH SIMPLICITY Amygdala and stimuli) • Heat maps show level of activity across allSince emotion and hot-states play such a central role in decision regions of the brainmaking, market research firms that measure emotion canmore accurately predict consumer preferences and behavior. Some of the disadvantages of fMRI include:Effective techniques need to merge both a quantitative and • Not yet broadly available to business communityqualitative analysis in order to explore decision making as • Unnatural environment for participants (in tube)more than just a winner-takes-all process. After taking into • Time consuming to collect data (one at a timeaccount attribute importance as well as emotional intensity participation)and combining this with qualitative research methods, • Less representative than larger sample responseresearch firms can then assess the impact of hot-states on time techniquesconsumer decision making. • Time consuming to analyze data • More expensive than EEG, SCR and ResponseThe advent of neuromarketing and brain imaging research Time techniquesprovide a wealth of data that support emotion’s quantitativeimpact on the decision process. Technological tools such as Electroencephalography (EEG)fMRIs and EEGs measure the neural activity in different EEG measures electrical brain wave activity across thefunctional areas of the brain, thus providing insights into entire brain region to show which areas of the brain are mostphysiological valuation mechanisms. Yet, while the idea active when processing a stimulus (e.g. exposure to a brand,of having access to millions of neural data points sounds advertisement or new product).convincing, these techniques produce data with a largeamount of noise and thus require this level of measurement Some of the advantages of EEG include:in order to achieve stability. In addition, some techniques, • Brain wave activity is very convincing to clientsincluding fMRI, are expensive, time consuming, and are • Test arousal and boredom (alpha, beta and thetaonly able to evaluate one individual at a time in a relatively wave activity)unrealistic environment, which may have consequences for • Frontal lobe activity differentiates betweenevoking relevant hot-states. In contrast, priming and response approach related emotion (left frontal lobe) andtime methods get around these issues by assessing emotional avoidance related emotion (right frontal lobe)connections on hundreds of consumers in a single day. Yet • Less expensive than fMRIthese methods also have their own limitations. Reviewingwhich method is right for your research question as you design Some of the disadvantages of EEG include:a study to model hot-state decision making is critical. A brief • Time consuming (one at a time participation)review of methods follows. SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 10 A
    • • Less representative than larger sample response time techniques Some of the advantages of priming and response• Time consuming to analyze time techniques include:• More expensive than response time techniques • Captures subconsciously activated goals to determine product and brand success at deliveringSkin Conductance Response (SCR) on those goals.Skin conductance response (SCR) is a psychophysiological • Reveals the strength of automatic emotionalmethod for measuring degree of arousal. It is a method that is associations with products, packaging and brands.used widely for “lie detection” because it serves its purpose of • Determines the subconscious attribute associationsrevealing what people may not be willing or able to tell us about that connect with activated goals to drivetheir emotional responses. As detailed above, Reid & Gonzalez- emotional preference.Vallejo’s (2009) use of SCR shows how incorporating emotion • Provides emotion-based ROI by tying into brandinto traditional models of choice increases the accuracy in premium measures at the individual level andpredicting consumer preferences between diamond rings. predicting future market sales. • Delivers a practical and efficient solution:Some of the advantages of SCR include: implemented in person or in online studies to• Emotional data is not dependent on self-report collect hundreds of completed interviews each day• Ability to show concepts, messaging, designs and across market segments. gauge emotional response • Cost-effective relative to Psychophysiological• More natural participant environment (non-invasive methods. and greater mobility)• Less expensive than fMRI and EEG Some of the disadvantages of priming and response time techniques include:Some of the disadvantages of SCR include: • Harder to show link to brain activity to clients• Labor Intensive (brain wave data is very convincing)• Time consuming data collection (one participant at • Online environment is not as controlled as lab or in- a time) person research center• Extensive data analysis time • Accurate data interpretation is critical• More expensive than response time techniques Emotional intensity can be measured with any of the abovePriming and Response Time Techniques physiological or behavioral methods. These measures are thenPriming techniques were originally developed in the Cognitive plugged into the proportion of emotion model as emotionalpsychology literature and were adapted by Social Psychologists weights to predict consumer choice. Once you’ve implementedto study stereotypes (an area where people either can’t or won’t research techniques to measure consumer emotion you’rereveal their true emotions). These methods have been recently in a position to apply this knowledge to the benefit of youradopted in the study of consumer behavior (Dijkerthuis et al., business and the marketplace. This places us back where2004). The IAT (Greenwald & Banaji, 1995) and Sentient’s we began, with the power to influence consumer hot-stateAutomatic Brand Associations (ABA) and Subconscious decision making we have to ensure that we’re winning in bothActivation of Goals (SAG) methods measure the impact of the short and long term. We need to maximize pleasure andsubconscious processes (including emotion) on choice and minimize pain for our consumers.willingness to pay price premiums for products. TWO HUMAN TRUTHS THATUsing these methods, researchers can collect data from MAXIMIZE PLEASURE AND MINIMIZErepresentative samples of hundreds of shoppers to ensure PAIN FOR CONSUMERSthat the subconscious findings are generalizable to targetpopulations. The method can be run among qualitative Understanding hot-state decision making can provide aresearch participants following exposure to products in focus significant short-term boon in purchase behavior. But ethically,groups or IDIs. Total sample sizes can be as small as 25-30 or up and from a long-term business health perspective, we don’tto hundreds or thousands of consumers broken out by market want to sacrifice long-term consumer satisfaction for short-segment if the method is run using online software. term reward. SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 11 A
    • The first note of solace on the ethical front is this: people do passionate about certain long-term values, then you can benot respond emotionally to things they don’t value. Thus, if sure that activating goals related to those values will arousea consumer is responding emotionally to your product, it is consumer emotion.because the value for that product is inherent in the consumer.The debate on consumer values, and the attempt to influence As an example, consider again the rising cultural values ofwhat consumers actually value, is better left to be battled sustainability and environmentalism. These are concepts thaton the socio-cultural level. Consumer values are influenced arouse a lot of emotion in certain segments of the population.heavily by culture and that cultural influence is in a From a hot-state decision making perspective this iscontinual state of evolution. For instance, in the ripe for capitalization. If you offer a product orU.S. there is currently a growing cultural value service that is consistent with these values,for sustainability and care for our natural you are in a unique position to capitalize onenvironment. As the culture exerts If you are a marketer or hot-state decision-making while simulta-its influence on the consumer, the neously delivering on consumers’ long-emotional response to products and product manager, you can put this term values. Marketing that raises theservices that align with sustainability first human truth to use by answering salience of consumer environmentaland environmentalism heightens, the question: which of my product values will heighten in-the-momentand the market then has a sure sign benefits arouse emotion in the short- arousal. Delivering a product that sa-that these values are increasing in tiates that desire produces an imme- term while also arousing emotionalimportance for consumers. Thankfully, diate sale that simultaneously avoidsmost enterprises are in the business satisfaction in the long-term? post-decision regret because it is in lineof providing products that consumers with long-term values. This maximizesvalue, rather than imbuing consumers with pleasure and minimizes pain.values. Those values are largely coming fromexternal sources. If you are a marketer or product manager, you can put this first human truth to use by answeringSecond, from a business model perspective, a the question: which of my product benefitsshort-term visceral delight that is followed by arouse emotion in the short-term while alsodeep post decision regret does not have arousing emotional satisfaction in theany legs for sustained business growth. If you are a marketer long-term?We do not want to induce regret in a or product manager, you canconsumer base whom we’re hoping put this second human truth to use The second truth is that the humanwill praise and recommend our by answering the following questions: condition is characterized by aproducts in the marketplace. This constant state of reconciling short-creates an interesting challenge how does my product suite provide term decisions with long-termfor the marketer and product options that serve consumers’ short-term goals. On a daily basis, consumersmanager. How do we capitalize on as well as long-term goals? How well is are faced with decisions thathot-state decision making while my marketing providing consumers satisfy short-term needs whilesimultaneously delivering a satisfying compromising long-term values. To with reasons for their purchase thatexperience? Two basic human truths reconcile these conflicts, consumershelp answer this question and serve justify their decision? conduct a “mental accounting”, notas guides in implementing hot-state allowing themselves to get too far afielddecision making in your initiatives: from their ultimate goals. Consumers do this in two ways. First, when consumers feelThe first truth is that not all hot-state decision too deviated from those long-term goals, theirmaking is in conflict with long-term goals. In fact, inducing decision making realigns naturally with those goals becausehot-state decision making within a context that is consistent they begin to feel greater emotion for choice options thatwith long-term goals is the perfect storm: you create immediate put them back in sync with their long-term values. Second,consumer delight without any lingering post-decision regret. consumers use post-decision justification to reconcile theirHot-states can be aroused in relation to long-term values, short-term choices with their long-term goals. We call thisjust as they can be for short-term visceral delight: all that is justification “cognitive recalibration.”required is the evocation of emotion. Thus, if consumers are SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 12 A
    • In ConclusionFor marketers and product managers, The heightened levels of arousalthis human truth is critical for business that define hot-states play a powerfulplanning. The human tendency to role in consumer decision making. Sinceconsume short-term rewards is part and consumers are often in a hot-state whenparcel of who we are and that tendencyis not going away. This creates a natural they make the decision to purchase a givenmarket for products. product, it is essential marketers and product managers understand the dimensions of hot-If you are a marketer or product manager, states and how their products and brands alignyou can put this second human truth to in order to better predict consumer behavior.use by answering the following questions:how does my product suite provide Many current market research techniques do notoptions that serve consumers’ short-term sufficiently quantify differing degrees of arousal,as well as long-term goals? How well is and thereby cannot accurately predict howmy marketing providing consumers with consumers will behave in a hot-state. Cold-statereasons for their purchase that justify research may lead to predictive models that lacktheir decision? validity in hot-state consumer situations.For example, if you are in the Salty Snackcategory, you might ask yourself how well is Very few models on the forefront of psychologicalmy marketing inducing short-term arousal research effectively incorporate consumer hot-statesthat is easily justified cognitively after into the decision making equation as well as thethe fact. If one of your products is seen proportion of emotion model does. To understandas a guilty pleasure, or special indulgence, consumer hot-state decision-making and continuemessaging around the fact that periodicindulgences are justified will help reduce to move the industry forward, it is our responsibilityconsumer post-decision regret. Similarly, if as market researchers to continually improve onyour product line lacks a snack that aligns existing models. Enterprises that incorporatewith consumer long-term values of healthy techniques in their research toolbox to effectivelyeating, you are likely losing significant leverage emotion and its weight in the decisionrevenue to a competitor who offers thatchoice. An optimized product line allows making process will have models of consumerthe consumer to wax and wane between behavior that more accurately predict futureher short-term and long-term values while market trends. Using behavioral sciencestill remaining within your brand suite, techniques to model emotion and followingthereby maximizing her pleasure and the human truths of hot-state decision-minimizing her pain naturally. making will empower marketers and product managers to maximize pleasure and minimize pain for consumers and thereby benefit both short-term and long- term business goals. SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 13 A
    • REFERENCESAriely, D., & Loewenstein, G. (2006). Elster, J. (1998). Emotions and economic Loewenstein, G. (2000). EmotionsThe heat of the moment: the effect theory. Journal of Economic Literature, in economic theory and economicof sexual arousal on sexual decision 36, 47-74. behavior. The American Economicmaking. Journal of Behavioral Review, 90(2), 426-432.Decision Making, 19, 87-98. Frijda, N. (1994). Emotions are functional, most of the time. In P. Montague, R., & Berns, G. (2002).Bechara, A., & Damasio, A.R. (2005). Ekman , & R. Davidson (Eds.), The Neural economics and the biologicalThe somatic marker hypothesis: a neural nature of emotion (pp. 112–122). Oxford, substrates of valuation. Neuron, 36,theory of economic decision. Games New York: Oxford University Press. 265–284.and Economic Behavior, 52, 336-372. Gigerenzer, G. (2007). Gut feelings: the Reid, A. & González-Vallejo, C. (2009).Brendl, C.M., Markman, A.B., & intelligence of the unconscious. New Emotion as a tradeable quantity. JournalMessner, C. (2003). The devaluation York: Penguin Group, Inc. of Behavioral Decision Making, 22, 62-effect: activating a need devalues 90.unrelated objects. Journal of Kaufman, B.E. (1999). Emotional arousalConsumer Research, 29, 463-473. as a source of bounded rationality. Savage, L. (1954). The foundation of Journal of Economic Behavior & statistics. New York: Dover.Damasio, A. (1994). Descartes’ error: Organization, 38, 135-144.emotion, reason, and the human brain.New York: Avon Books, Inc. Loewenstein, G. (1996). Out of control: visceral influences on behavior. Organizational Behavior and Human Decision Processes, 65(3): 272-292. ABOUT THE AUTHORSAaron A. Reid, Ph.D. / Maria Perille /Chief Behavioral Scientist Behavioral Science Intern,Sentient Decision Science, Inc. Sentient Decision Science, Inc.Dr. Reid is Chief Behavioral Scientist at Sentient Decision Ms. Perille is an Economics and Psychology double majorScience with over 15 years of experience studying consumer at Middlebury College with a keen interest in the driversdecision making and advising global brands on the drivers of of consumer behavior. Maria’s research at Sentient hasbehavior. included investigation of the Decoy Effect in a consumer decision-making context, Automatic Brand Associations,An experimental psychologist by training, Dr. Reid’s areas of and the application of the Proportion of Emotion model inexpertise include how emotion influences behavior, advanced the Consumer Packaged Goods vertical. Maria’s backgroundconsumer choice modeling and the subconscious drivers of research in hot-state decision making helped form thebrand associations. With a published research record in foundation of this paper and her examples helped bring theconsumer decision-making, Dr. Reid commonly presents story to life.novel research and mathematical models of consumer behaviornationally and internationally. More writing by Dr. Reid and Ms. Perille on how behavioral science principles are applied to real world behavior can be found on: www.sentientinsight.com and http://twitter.com/SentientInsight. SENTIENT DECISION SCIENCE WHITE PAPER SERIES // FALL 2010 14 A