The Gallup Organization has identified some interesting flaws in modern economic theory. Research indicates that false assumptions about human behavior have generated serious discrepancies between accepted theory and why people buy. The delta between the two makes a difference between companies who win and those who fail, or at best, accept mediocrity.
Irrational Decisions… Us?
Specifically, classical economic theory says that people look at a set of data (large or small) and make rational decisions. And yet, the Gallup research shows that approximately 70% of economic decision making boils down to emotions. That means only about 30% of the decisions we make line up with the classic economic model.
Neruoscientific evidence supports Gallup’s findings. According to How We Decide,the rational brain maxes out at about 7 pieces of data. As a result, using the rational brain when making complex decisions generally points us in the wrong direction. Here’s why:
Gut Feelings = Knowledge
Humans develop intuition through experience. The cycle of trial and error, trial and success moderates the flow of dopamine, which creates the ‘gut knowledge’ we cannot explain yet know to be right. The people who ignore their gut instincts and rely on the data typically rationalize themselves into poor decisions when faced with complex, multifactorial questions.
“. . . the danger of too much information: it can actually interfere with understanding . . . We are constantly exceeding the capacity of our prefrontal cortexes, feeding them more facts and figures than they can handle . . . When the prefrontal cortex is overwhelmed, a person can no longer make sense of the situation.”
—How We Decide
In other words: Information overload clogs up a person’s decision making ability. Some might call the symptom analysis paralysis. Now let’s think about how that translates to the customer experience—and ultimately whether or not people buy from you or someone else.
If all your company talks about is a long list of product features that ‘differentiates’ it from the pack, you’re forcing customers to engage their rational brains during the buying process. Chances are, they’ll walk away. If not now, then most certainly in the future.
We already know that customers base 70% of buying decisions on emotion. A list of features and benefits opens the doors for savvy competitors to engage prospects at a primal level. Car manufacturers know this. What they sell is the convenience of having personal transportation. What people buy is reliability. Or prestige. Or freedom.
You get the drift.
We Make Winning Harder Than It Has To Be
So, what does that mean to your business? Employees want to be part of a winning team. Customers want to own something that gives them status or meets some other primal need. The best way to figure out what will elicit positive employee and customer emotions throughout your company’s lifecycle begins with corporate self-awareness.
Answering the question about your company’s reason for being and using it as the cornerstone for developing corporate self-awareness can increase performance-based business outcomes by 240%.
That is not a typo.
And, it bears repeating. According to Gallup, companies can gain a 240% in performance-based business outcomes if they engage employees and customers. I believe that establishing corporate self-awareness is the cornerstone to engagement for both employees and customers
Deliberately Foster Corporate Emotional Intelligence (CEQ™)
Just as people exhibit emotional intelligence (EQ) in the form of self-awareness, self-management, social awareness, and relationship management, we can attribute the same labels to organizational behavior and the underlying systems that enable those behaviors.
Your company’s purpose for being becomes one of the pillars of self-awareness, which enables you to communicate clearly to employees and customers in a very exciting way. Skip this step and you’ll just be another company with a long list of features and benefits to wade through as people try to figure out where to spend their money.
And who doesn’t want to be part of a big win? Learn the secrets of corporate emotional intelligence (CEQ™), starting with organizational self-awareness.
The Global Impact of A Flawed Model
A concluding thought: If our collective worldview is based on a flawed perspective of economics, then we cannot hope to foster economic recovery without changing the accepted model. For more on applied behavioral economics, check out what the Gallup Organization has learned during the past 30 years.
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