Advertising that encourages consumers to act on emotion rather than logic can lead to poor decisions and unsuitable product purchases, suggests a new paper from the behavioural economics and data science unit at the U.K.’s Financial Conduct Authority (FCA).
“Understanding psychology and how we process information is crucial to understanding the impact of advertisements and identifying when they might be unclear, unfair or misleading,” the FCA’s paper says. “It can help us to understand when behavioural techniques might be used to facilitate understanding and when they might result in misunderstanding.”
The paper notes that “problems can occur at every stage of consumers’ information processing.” Specifically, it finds that, “consumers may be influenced into action through techniques which encourage reliance on heuristics or emotion, rather than reason, and that this may cause problems.”
For example, ads that play on consumers’ emotions may drive them to action without much thought, the paper says: “In straightforward low-risk cases, such an approach may be entirely appropriate; but in others, consumers may end up with unsuitable products they don’t understand.”
The paper also shows that certain ways of presenting information, “particularly those which make use of behavioural biases or which involve percentages, may impede understanding and have the potential to mislead consumers in certain circumstances.”
The FCA is planning to host an event in June at its offices in London that will examine the behavioural science behind financial promotion.
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