Leveraging Behavioral Economics to Improve Marketing Efficacy and Increase Retail Sales

Abstract

Research in behavioral economics has demonstrated that individuals often make irrational decisions, contrary to neoclassical economics that depicts the consumer as someone with consistently good judgment. A common economic setting in which consumers make numerous decisions, often through cognitively simple heuristics, is retail. Despite immense marketing efforts seeking to exploit human irrationality and the abundance of decisions made in retail environments, traditional economic thinking hinders the traceability of a given marketing technique to a given result because the rational consumer is presumably not influenced by such tactics. Drawing upon previous empirical research, this paper uses behavioral economics to investigate how retailers can increase sales by using priming and framing heuristics in advertising, in-store displays, and sales promotions. While primarily directed to physical retailers, certain recommendations can also be implemented in a digital retail setting.