Successful business strategy goes beyond a spreadsheet and into the mind of the buyer. As the business landscape surges into the future, behavioral economics will be pivotal in staying ahead of current demands and remaining competitive. Dr. Alison Sanchez, a professor at Knauss School of Business, fuses her expertise in neuroscience with business analytics to offer unique perspectives into the field of behavioral economics. Read on to hear her insights into understanding the mind of the consumer.
Interested in learning in-demand business analytics tools to power a career in behavioral economics? Explore USD’s Master of Science in Business Analytics program.
What is Behavioral Economics?
Behavioral economics combines insights from psychology and consumer behavior data to understand how people make decisions. It challenges the traditional assumption that individuals always make rational choices based on complete information, and instead recognizes that most decisions are influenced by psychological and social factors.
Through behavioral economics, business strategists can explore data with a gaze that seeks to understand the consumer and predict their behavior, rather than relying on traditional strategies. Successfully implementing behavioral economics requires consumer data acquired through business analytics like purchase histories, online behavior patterns and survey responses.
The Intersection of Behavioral Economics and Business Data Analytics
Integrating behavioral economics with business data analytics enriches the understanding of consumer habits and tendencies. Through business analytics techniques, businesses can capture and analyze behavioral economics data.
Detailed consumer behavior data can hold a wealth of insights for business strategy. It allows businesses to better target their marketing strategies, anticipate market trends and improve risk management. By digging deeper into the mental processes that get a consumer to the buying stage, they can predict future purchases and improve overall customer satisfaction.
Decoding the Consumer Decision-Making Process and Behavioral Analytics with Dr. Alison Sanchez
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Dr. Alison Sanchez, Associate Professor of Economics and Business Analytics at Knauss School of Business, utilizes her interdisciplinary background in neuroscience, psychology, information theory and machine learning to specialize in consumer behavior and behavioral economics.
While working on her Ph.D., Dr. Sanchez attended a seminar given by a neuroscientist using machine learning techniques to understand how people made decisions and was fascinated by the overlap between behavioral economics, bioengineering and neuroscience. “It opened my eyes to how disciplines overlapped and how specialists with different backgrounds saw the same problem in unique ways,” said Dr. Sanchez.
We sat down with Dr. Sanchez to discuss the unique study of consumer behavior and the future of behavioral economics.
Q: What types of data are most valuable for understanding consumer behavior through the lens of behavioral economics?
Dr. Sanchez: There is an abundance of data being gathered by different entities (e.g. social media data, medical data, machine data from sensors and machines like smart home devices). The largest problem researchers face is (lack of) availability of the necessary data and inferring meaning from data.
The data available for researchers to analyze and the data required to answer a question can sometimes be two entirely different sets of data. Data that reveal consumers’ true preferences is difficult to come by, so researchers often must infer preferences from available data (e.g. surveys, social media data, purchasing data).
Having a solid understanding of consumer preferences and behavior is fundamental to understanding any results one finds from analyzing data. This is where having an interdisciplinary background comes in handy. There’s more than one view of the world and human behavior, so being able to see consumer behavior from multiple perspectives helps add insight.
Q: Could you share a specific example where insights from behavioral economics significantly changed an outcome?
Dr. Sanchez: Nudges, subtle changes to decision-making environments that influence people’s decisions, are devices that are often deployed to help people make better decisions. For example, retirement savings accounts. For years, many people in the United States were not taking advantage of their employers’ retirement savings matching programs, which led to many people not having enough money in retirement. A simple change in the forms employees filled out during their initial employment helped change this.
In the late 1990s and early 2000s, behavioral economics studies found that people often deferred to the default setting, since it takes energy to change from the status quo. Using this knowledge, behavioral economists suggested changing the default choice on employment forms to automatically enroll employees in retirement savings programs. Instead of asking employees if they wanted to opt-in to their employer-sponsored retirement plan, employees are automatically enrolled and given the option to opt-out.
Changing the default option from “opt-in” to “opt-out” has, by some estimates, nearly doubled the number of employees who are now saving for retirement. This type of nudge has been so successful in the decades since its inception in helping people save for retirement that Congress recently incorporated similar nudges in the SECURE 2.0 Act in 2022. That’s the power of behavioral economics!
Q: How do you see technology shaping the future of behavioral economics in business analytics?
Dr. Sanchez: Technology is allowing for easier and faster analysis of data, but it’s not a replacement for knowledge. For example, years ago, it would take a lot of knowledge about coding to be able to write programs that would analyze data. Now, coding and statistical analysis has become more accessible than ever before through the advancement of technology. This will make data analysis more available to people who weren’t able to utilize it before, which should in turn help them understand the problems they’re studying. However, there’s a difference between being able to crunch numbers and being able to understand what those numbers are telling you.
Q: What are some highlights students expect to learn in your classes?
Dr. Sanchez: I’m a proponent of challenging the research status quo. Being able to analyze data is a necessary, but not sufficient, condition for understanding human behavior. I like to charge my students with finding ways to gain new insights by showing them multiple perspectives on a topic. Economists, psychologists, neuroscientists and data scientists all see problems through different lenses. When students take my classes, I teach them to gather all perspectives, since there’s value in each one as well as value in seeing the differences in perspectives.
Study Economics and Business Analytics at Knauss School of Business
Behavioral economics and business analytics have the power to shape the way businesses utilize the abundance of data available through modern technology. While current technological advancements have shaped the way that data is gathered, the underlying human behavior in the consumer decision-making process remains unchanged and well worth studying. The Master's in Business Analytics program at Knauss School of Business guides students to understand consumer behavior through the lens of behavioral economics and business analytics.
Classes like those taught by Dr. Sanchez equip students with a comprehensive understanding of data analysis techniques, cutting-edge tools and real-world applications. With an M.S. in Business Analytics from USD, you will be able to drive data-driven decision-making, foster innovation and unlock new opportunities for growth in your chosen career path.
Students are shaping the future of business with behavioral analytics at USD. Dr. Sanchez sees the field of behavioral economics continuing on the trajectory to advance understanding of human behavior. “The thing that interests me most about economics versus other STEM fields is that human behavior is so complex that there’s always something new and interesting to learn and study,” said Dr. Sanchez.
Upgrade your business mindset by joining the intersection of data and consumer behavior at Knauss School of Business.
