Bruce Olson, Managing Partner & Shelly Ray, VP - Client Relationships
SYSTEM 1 AND SYSTEM 2 IN MARKETING RESEARCH
As System 1 thinking grew in popularity over the last decade; like many “new trends”, it was viewed as the end all be all for marketing researchers - the answer to all of our problems.
Much like Big Data, the thought was that System 1 would give us more accurate insights into shopper behavior in order to accurately predict how a shopper will respond and act in the marketplace.
But has this been the case? As we head into 2022, it’s our POV that advances in System 1 technology and methodology allow for nuanced insight, but it is critical to align System 1 research with the right context and right application in order to derive actionable direction.
Keep reading for our thoughts on when to apply System 1 and System 2 methodology.
UNDERSTANDING SYSTEM 1 & 2
System 1 and System 2 thinking, known as dual-process theory, is a leading framework explaining how our minds process information. Popularized by Nobel Laureate Daniel Kahneman, the theory breaks human reasoning into two categories.
System 1 thinking is fast, unconscious, and intuitive thought.
Often, System 1 triggers our behaviors based on automatic ‘rules of thumb’, known as heuristics, that combine information efficiently. System 1 thinking is seemingly effortless, with little computational demand on our thought process. In marketing research, System 1 suggests you see a color, style, or brand of car and make the purchase with little to zero consideration of price, financing, or other factors.
System 2 thinking is slow, conscious, and rational thought.
Complex computations, logical processing, and reasoning dominate System 2. Our System 2 reasoning is more demanding, the thinking process serial, slow, and full of effort. It is designed to make accurate decisions, so decisions based on System 2 thinking often match expected, rational norms. In marketing research, System 2 implies you buy a car after calculating the price, the financing options, the fuel efficiency, and the resale value.
Here’s a fun example to help understand the difference between System 1 and System 2.
A bat and a ball together cost $1.10. The bat costs $1 more than the ball. How much does the ball cost? Answer below.
It’s important to understand that System 1 and System 2 don’t live on opposite sides of the brain. Rather, we use them in tandem to process information and make decisions throughout our day. In fact, a growing theory, called System 3, goes a step further arguing that our imagination plays a critical role in creating context for our decision making. System 3 is our prediction of how we will look, what we will feel, what we will taste, and what we will see if we make a certain decision.
To our car shopping example used above - System 1 guides our intuitive decision to purchase based on color; System 2 guides our calculated decision to purchase based on long-term value; System 3 guides our contextual decision to purchase based on our imagined sense of how we will feel driving the car… What we think our friends, neighbors, even strangers will think of us in it…
When System 1 and System 2 don’t explain everything we look to System 3 to fill in the gaps.
System 3 considers:
How situations/context change decision-making.
How social influences and network effects guide decisions.
How perception of time changes behavior.
How energy and fatigue influence decision-making.
How thinking about the future impacts present behavior.
How uncertainty moderates emotions and choice.
System 3 can help us understand why on a specific occasion, at a specific time, in a specific place, why someone will deviate from their typical behavior.
Researchers also must consider how experience and perspective play into someone’s System 1 and System 2 thinking. Over time, people make better instinctual decisions based on their experience. They have already processed their rational thinking when making a similar decision previously and will apply this past experience to their intuition.
SYSTEM 1 - ALL IT'S CRACKED UP TO BE?
At MMR, we find that System 1 works well for specific needs and industries. For instance, advances in eye-tracking and facial coding provide real informational advantages in advertising. Meanwhile, the consumer product goods industry can derive nuanced, incremental insights to complement other product and market research.
System 2, however, done well, dives deeper than some in our industry give it credit for. MaxDiff and Discrete Choice and other multivariate, derived approaches give us insights that lay below the surface. Further, we find that people can accurately explain much of their behavior. The degree of accuracy is dependent on the approach and methodology. Unfortunately, some approaches aren’t always effective. But, System 2 can overcome the shortcomings of System 1 to effectively gauge the average behavior of the average person over time. And that average behavior is highly relevant to development of marketing strategy. In tandem, System 1 and System 2 reinforce each other. System 1 will identify the nuance that respondents are resonating with. Once identified, we can quantify the frequency of these nuances with System 2 research.
BEST APPROACHES & METHODOLOGIES
Passive Consumer Observation
MMR’s POV ON SYSTEM 1, 2, 3 - CONTEXT MATTERS
So where should you focus your research today?
It depends on your objective and what you already know about your category. At MMR Research we repeat a simple maxim - context, context, context. It might sound cliche, but research is only effective when applied within the context of your business environment and the specific issue, stakeholders, risks, costs and timing needs of the project.
What are you developing, an advertising campaign or packaging material? What’s the incremental piece of information that’s the center of debate in an organization? What’s your timeline? What are you doing today… tomorrow? Who are you trying to convince?
Selecting a specific approach on a specific project depends entirely on the understanding of the business context that prompted this question to arise today.
When considering a System 1 project for the first time, make sure you plan ahead and take incremental steps to support your hypothesis. True System 1 projects can be expensive, so you are well served to support your research in smaller bites to reduce risk and build confidence that you will uncover new insights.
Often System 1 methods can be applied to System 2 projects in order to demonstrate value without diving into a large-scale EEG study.
Further consider past research and complementary System 2 projects that will help inform your System 1 approach. There’s no certainty that your System 1 project will uncover anything new. It is best to layout all of the available choices to properly gauge if a System 1 project is worth the time and investment. More often than not, System 1 projects are attempting to deliver NEW insights on questions that have been researched repeatedly… that’s a tough objective! But, applied correctly, System 1 research may well uncover the nuance that could make or break your business decision.
Interested in learning more about our approach to System 1 and System 2, how we apply context to research, and when it’s best to dive into a System 1 project?
By the way - how much does the ball cost? 5 cents!