Understanding and actively managing how people make decisions

Every day, people make decisions – as consumers, employees, leaders and even board members. But there is a big difference between how we think we decide, and how we actually decide. Understanding and actively managing how people make decisions (or, as we term it, ‘decisioning’) is now a big focus for forward-thinking businesses – and the organisations that regulate them. 

The rise of ethical decisioning

The implications of poor decisioning are significant and far-reaching; it can disadvantage customers, disable critical thinking and fracture stakeholder relationships. Poor decisioning can even collapse corporations and disrupt entire economies. Fortunately, fields like behavioural economics (the study of judgements and decision-making) and neuroscience are helping us avoid these outcomes. We can even  leverage the natural way our brains work to achieve win-win results for organisations and their stakeholders. One of the big current trends involves focusing on the way customers make purchasing decisions, and how the customer journey created by organisations influences these choices. 

Behavioural economics helps define a balanced view of what constitutes ethical practice in the development and marketing of products, grounded in a more informed understanding of the consumer brain. This exciting field is now being used by regulators around the world as the basis for both research and the development of guidance and standards for industry. 

One erroneous, but commonly held, assumption is that the best solution is simply to ‘remove all bias’ from purchasing environments. However, this isn’t physically possible. Insights from both behavioural economics and neuroscience clearly indicate that all our decisions are inherently biased; this reflects how our brains are structured and enables us to manage the vast amount of information and interaction we encounter every day. As a result, any approach that focused on ‘removing bias’ would be both ineffective and impractical.

Instead, the onus on ethical organisations is to consider not only the impact of the bias on decision-making (i.e. do the prevalent biases encourage or discourage the consumer from making the purchase?), but also the degree to which the product actually ‘fits’ the customer (i.e. will it deliver real value for the customer, meet their needs, and meet reasonable and informed expectations?).  

Based on these two questions, a product and the way it is marketed will generally fall into one of four outcomes (as shown in the diagram):


Products that provide what the customer functionally wants and which also tap into implicit consumer biases - typically leading to sustainable revenue.

Question marks—Products that inadvertently or intentionally exploit consumer bias without functionally delivering what they wanted. These will increasingly attract regulator and consumer group focus and possible intervention. The imperative here for the organisation is to adopt one of the following: increase consumer benefit (i.e. improvement in product selection support); demonstrate existing value through validated research (validation); or adjust marketing practices to ensure that consumers are purchasing with informed consent and full awareness of what the product does or does not deliver. 

Dead weights

Products that are poor performing, failing to deliver significant value to either the organisation or the consumers who purchase. In many cases, externally mandated controls lead to withdrawal of these products from portfolios.

High potentials

Products that may currently be performing below expectations and represent an opportunity for ethical growth through leveraged consumer insight. 

So what do companies need to do to examine their own products and marketing practices in order to satisfy both their own governance and the regulator’s spotlight?

The Financial Conduct Authority in the UK has leveraged behavioural economics to propose three broad steps in the journey:

Step 1: Identify and prioritise risks to consumers

  • How can we identify consumer 

  • risks caused by biases?
  • How can we prioritise these risks?

Step 2: understand root causes of problems

  • Are consumers choosing reasonably?

  • If behavioural bias is at play, what do consumers truly want and need?
  • How should we analyse institution-specific issues?
  • How should we analyse market-wide issues?

Step 3: Design effective interventions

  • Are there interventions available that protect consumers?

  • Should we intervene and, if so, how?
  • How can we assess the impact of interventions?
  • With these aspects clarified, an ethical organisation becomes more equipped