Rational Choice Theory in Marketing

Lesson Transcript
Instructor: David Whitsett

David has taught computer applications, computer fundamentals, computer networking, and marketing at the college level. He has a MBA in marketing.

The rational choice theory states that individuals make rational decisions based on evaluating the cost and benefit of an option. Explore the rational choice theory in marketing, and learn about imprinting, availability bias, and zero price effect. Updated: 01/05/2022

What Is Rational Choice Theory?

In a perfect world, humans would always make prudent decisions that would yield the most possible benefits. All options would be carefully considered, and the choice that provides the most satisfaction and advances our self-interest would be chosen. This is the premise of rational choice theory, which is widely discussed in economics and marketing and states that people tend to make decisions that maximize benefits while minimizing risks. So this sounds pretty logical, right? Here's where it gets a little fuzzy - a rational decision can also be justified not just by monetary gain, but also by the level of emotional satisfaction it delivers. A balancing act between the heart and brain in the decision-making process is possible.

Often a decision is a balancing act between what the heart and the head want
Balancing between the heart and the brain

Rational choice theory also states that consumers should behave in a consistent, predictable manner and exhibit control over their behavior, but we know that doesn't always happen. A good example is when snack food companies put snacks in large containers and people eat more even when they know they shouldn't. A more vivid description of a food item makes it more emotionally appealing than a generic description of the same food. We assume a crowded restaurant is good because of the crowd, and an empty restaurant must not be as good.

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  • 0:04 What Is Rational…
  • 1:22 Imprinting & Availability Bias
  • 2:26 The Zero Price Effect
  • 3:29 Lesson Summary
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Imprinting & Availability Bias

There's also a phenomenon called imprinting, which says the first price we hear for an item, or the first brand of an item we try, becomes our ''anchor,'' and all others are compared to it. A similar theory to this is availability bias, which states that we tend to refer to the most recent example or one that comes to mind easily when making a decision. This bias shows itself in cases like investors changing their investment strategy based on a temporary, well-publicized downturn instead of sticking to a proven long-term plan.

So how does a company get us to behave irrationally and abandon our ''anchor'' item or move away from the lowest price? Look at Starbucks as an example: they changed the experience of buying coffee by addressing the ambiance, the gourmet snack items, and the baristas. By changing the experience, they moved the focus away from the price. There are certainly less expensive alternatives for coffee, but can you sit in the competitors' shops and use their internet access for free like you can at Starbucks?

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