Neuroeconomics

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Introduction
The process of decision making which occurs in brains of human beings has always
been a mystery for the natural and social scientists. For nearly three centuries they used
various method and approaches to explore the issue, but nobody had success.
Since the end of the twentieth century a group of interdisciplinary scientists started
combining various natural scientific and social approaches in order to create a new discipline
which is today called Neuroeconomics.
Neuroeconomics is based on the assumption that it is possible to provide better insight
to the discipline of economics, psychology, and neuroscience if various tools, both theoretical
and empirical, are combined to result into synthesis to study the disciplines.
It is noticeable that all the studies in the field of Neuroeconomics which have been
conducted to the present day support such statement. In order to promote the discipline,
scientists engaged various theories from psychology and economics to change the structure of
neurobiological decision making understanding. Moreover, some of the recent findings
started suggesting theoretical models constraints of psychological and economic domains
theoretical models of choice constraints.
In order to identify the issues which Neuroeconomics can explain while standard
economics fails, it is necessary to explore the whole systems of both disciplines in terms of
studying human behavior and decision making process (Glimcher, 2008).
Literature Review
Prediction is the goal for many economists who try to study the process of decision
making. These professionals try to develop various models based on some principles of
mathematics, axiomatic as these are believed to predict choices of people.

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As a rule, these models use the issue of the external world as the inputs state and after
the analysis they get outputs which are likely to be choices of people. Experience economists
use such models successfully and they give them an opportunity to make accurate
predictions. One of the models is demonstrated at the picture below:
However, economists do not take into account a range of facts which are believed to
be important by Neuroeconomics. As a consequence, models are considered to be abstract.
Still, the final product of the discipline is revealed through behavioral hypotheses which are
testable, normative, and of high quality.
Psychologists investigate the mechanisms of decision making in greater details, trying
to understand mental constructs which are used by people as a base for the judgment, which
leads to taking a decision.
Psychological choice models, unlikely those economical, are based on processes
which occur in brain, such as fears, tendencies to overestimate possibilities, etc. The models
give more thorough results than economic calculations as they capture and analysis mental
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events which lead to particular decision. As a consequence, the psychological theories are
much more complicated than decision models which are offered by the economists.
However, psychological models are very difficult to be tested completely because
they are complex and provide greater realistic insight to many issues and details.
Neurobiologists explore the process of decision making at the deeper level, trying to
explore various neural pathways which lead to particular behavior. They examine
computations as well, trying to understand the way the brain studies its own computational
architecture.
However, neurobiology has made only its first steps of development and only simple
decisions are studied; these, in their turn, are so simple that any psychologist or economist
would consider them to be uninteresting to be studied.
Neurobiologists’ goal to understand the way decisions are many by tracing the
pathways, which have been already mentioned above, studying the simple decisions which
are neglected by psychologists and economists.
The disciplines combines all the three approaches in to a single science which
provides insights from various levels of analysis, constraining and impairing insights at
analysis of other levels. It is suggested that in the future the discipline will come to
encompass more areas of science, such as basic statistics and theory of control, which would
promote its studies of decision making.
However, it is expected that adding of new disciplines to the Neuroscience will
restrict possibilities of its cooperation with economics and psychology; it is believe that the
studies in the flied will be divided into two stages. The first one would deal with social
sciences high level theories which would be used to promote insights from biological point of
view, creating unified framework of concepts.

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The second state would promote creation of new algorithms by means of development
of new neurobiological insights; new high level theories are planned to be developed.
Thus, it is possible to conclude that Neuroeconomics explores processes which occur
in the brain of a human being, leading to making of decision, as well as various paths
between the processes and the decision making itself. These two issues cannot be investigated
by standard economics (Glimcher, 2008).
All activities of people are based on the process of decision making. Multiple
decisions are made every day and they influence people’s finance, well-being, health, future
possibilities, etc. Recognition of importance of the process of decision making made many
researchers interested in the reasons which influence selection of one or another option.
Traditionally neoclassical economics was dealing with the way people should behave,
while others disciples, tried to answer the question why people acted one way or another.
However, Neuroeconomics is a new discipline which combines methodology and theory from
various areas of psychology, economics, statistics, cognitive neuroscience, behavioral
finance, theory of decision, etc.
Neuroeconomics, being a combination of many sciences, has an opportunity not only
to explain why people act in some particular way, but also predict their further decisions
(Glimcher 2008).
According to Gazzaniga (2002), “Neuroeconomics looks at the structure, functions,
and development of the nervous system and brain, while cognitive Neuroeconomics studies
how behavior and the nervous system work together in humans and animal. In other words,
cognitive Neuroeconomics is the study of the neural mechanisms of cognition.”
The area of studies of Neuroeconomics uses techniques to neuroscience in order to
identify specifically how people make choices. Neuroeconomics does not only explore
various regions of people’s brain which are associated width the process of decision making

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and particular behavior, but also identify systems which are neural or specialized on some
particular tasks, such as control, preference, choice and judgment (Camerer et al. 2003).
Development of Neuroeconomics
During the last half a century, researchers have been experimenting with various
hypotheses and scenarios, trying to create more accurate models of acting of people in
situations which require decision making. According to Zak (2004) “before imaging
technology, it was not possible to accurately investigate the influence of emotions and
cognition on these economic models of decision making.
However, behavioral economists have begun to challenge the assumptions of the
rational agent and have found that psychological and emotional factors do indeed play an
important role in people’s economic decision making process. Essentially, Neuroeconomics
looks at two branches of choice: solitary choice and strategic choice.”
According to the traditional theory of economic, people are entities who are rational
when it comes to decision making; each person possesses clear sense of personal preferences
and does his or her best in order to promote well being and make the right choices all the
time.
However, there is evidence that such model is often not followed do, because people
try to outwit density and evolution. As for Neuroeconomics, it gives the scientists an
opportunity to reveal indicators which would explain how all the process of decision making
work in the brain, promoting assessment of risks, choices, and preferences (Glimcher 2008).
Neuromarketing
Neuroeconomics is an academic science which deals with the mechanisms which
cause and run the process of decision making. Neuromarketing is the field of application of
Neuroeconomics and particularly using brain scanning technology in order to find answers to
traditional questions of marketing and reach goals of the marketing industry.

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Neuromarkieng has been created approximately 30 years ago and Ale Smits, who in
2002 worked as a Professor at Erasmus University, created the term of the science.
The first conference which was focused on Neuromarketing took place in 1999 and it
discussed Neuromarketing burgeoning field. It was acknowledged at the conference, at a
range of techniques of Neuroeconomics are more effective than other ones, for example
Functional Magnetic Resonance Imaging, Magneto Encephalography or Quantitative
Electroencephalography are used more frequently. However, the earlier forms of the
techniques were used already in the 1960s.
Before the technologies were developed, researchers used divided which were
involved into measuring spontaneous pupil dilation. This way they managed to indicate
interest of people while they were viewing advertisements.
Later, at the beginning of the 1970s, a new technology was developed. It allowed
identifying at what part of a page or advertisement people focused most of all, and the image
which was pictured there, was considered to be the best advertised one.
Finally at the end of the 1970s, the processes which occur at both hemispheres of
people’s brain in the process of decision making were started to be studied. As a
consequence, researchers had to create new technologies and each one of them was heralded
as groundbreaking at the time and none of them became widespread in terms of promotion of
commerce.
At the beginning of the 1980s, Steady State Topography technology was started to be
utilized, as well as many devises which were aimed at brain scanning. They demonstrated
areas of brain which were stimulated and produced brain snapshots. Studies which were
conducted with this technology demonstrated that people tend to buy brand goods as their
brain right parietal cortex was stimulated. Thus, the theory of “location of brand equity”
occurred.

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Latter, in 2000, more studies were dealing with monitoring of the brain of people who
were watching television advertisements. The studies allowed predicting the scenes which
could be recognized by people in one week. It was found out that the scenes were recognized
after certain activity in the left brain during the posterior region exposure in the frontal
cortex.
Later many similar studies were conducted; however, none of them brought any
significant results. Various techniques were used to deal with neuromarketing, but all of them
had their own weaknesses and strengths, so the researchers spent a lot of time in order to
interpret the data.
As Belden indicates, “Most imaging studies report activations arising from the
difference between two tasks. For each brain area, the signal during the takes is compared to
the signal at rest; those areas of the brain with stronger signals during the task are presumed
to be processing the information. A very recent breakthrough however, may be able to detect
the activity of an individual neuron in the future. At this stage however, the smallest brain
area that can be represented – a voxel, is the size of a grain of rice and contains tens of
thousands of neurons. It is interesting to note that there are about 100 billion neurons in the
typical brain, but current FMRI resolution is only about 150,000 voxels. The changes in
blood flow in a voxel thus, indicated increased activity of not a single neuron but a huge pod
of tens of thousands of neurons.”
Components of decision making
As it has been identified by Neuroeconomics, there are multiple factors which affect
the way people make decision. However, some of them are essentially important for the
process of decision making and accepting or rejecting some options.

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Since the theory of decisions making, which has already been mentioned above, is
frequently violated, there were alternative models developed in order to explain how choices
are made and how risks are taken.
Prospect theory is one of the alternatives. It contains a range of effects which might
alter or lower the possible value of the gains and losses (Kahneman, Tversky, 1979).
Kahneman and Versky also mention that “phenomena such as the certainly effect,
which states that people are prone to underweight probable versus certain outcomes, or the
isolation effect which finds inconsistent preferences for identifiable outcomes based on how
the outcomes are framed, or anchoring, biases and correlation illusions effects challenge the
notion that utility theory holds in real life causes of human judgment.”
Researchers state that probability of calculation of relationship between some events
and actions, as well as their possible outcomes is critically important for surviving.
According to one of the studies, primate ventral midbrain dopamine neurons might be
responsible for errors of coding, which are important for the process of decision making
(Fiorillo et al 2003).
Researching the same issue (however, in the context of gambling), Gold and Shadlen
(2002) “it was found that dopamine levels increase during gambling, which indicates that
uncertainty may be the mechanism tha induces this dopamine rush.
It is hypothesized that this may explain the reward people feel when gambling, which
cannot be explained by the monetary gain of gambling since losses usually outnumber gains.
This uncertainty induced increase in dopamine may act to reinforce risk taking behavior,
while the physic response after predication error may serve to mediate the reward
reinforcement itself.”

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The researchers also identified a relationship between a range of theoretical
frameworks and practical decisions in order to get to know how they were computed in the
brain.
The conclusion was that the decisions can be made after the evidence reaches a
threshold value; the value, in its turn is under control of neural circuits which are responsible
for calculation of the reward rate (Gold, Shadlen 2002).
However, there are some factors which influence the process, described above and
these factors deal with some moral values. For many people trust and cooperation are very
important for the process of interaction and neural response. They allow promotion of mutual
action and sharing gains over the choices of personal interest and also create a stability sense
in long term scenarios.
Fairness is one more important component. It is natural that people try to reject any
cooperation and avoid the process of positive decision making when they are believed that
they might be cheated. The issues of fairness and unfairness are very powerful when it comes
to taking risks of gain and loss.
However, these are still valuated and calculated in the brain and Neuroeconomics is
the society to deal with the process Neuroeconomics. A range of experiments were conducted
by Montague and Berns (2002) in order to develop a computational model which would
anticipate a single-unit neural responses class in the striatal neurons and orbitofrontal.
These and many other studies revealed that there are two choice systems. They are
integrated functionally and at the same time they are independent one from each other; both
of them can be characterized as sensitive to loss because of their anatomical structure and
processing.
Smith et al (2002) states that “the dorsomedial system processes loss when
deliberating risky gambles, when subjects make a choice that results in loss, there is a greater

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use of the dorsomedial system which serves to calculate versus the visceral representations in
the more primitive ventromedial system which animals most likely use to make decisions.
Choice processing seems to be centered in the more medial structures with more ventral than
dorsal distribution.”
Many animals studies brought significant contribution to Neuroeconomics, as they
helped to reveal new information about the way the animals are able to estimate benefits
which they might get from particular actions.
In the process of decision making people deal with the issues of choice and risk
judgment, so Neuroeconomics studies them as well. The science states that risk aversion is
related to the amyglada and frequently people are pushed towards some particular choice by
their fear.
As Bechara (1997) states, “cortical override of the fear response is demonstrated in
animal studies using shock. Over time, the response will be “extinguished.” If the
connections between the amyglada and the cortex are severed, the fear response will return.
This demonstrates that the amyglada does not “forget” but the cortex is suppressing the
response.”
Neuroeconomics and brain
There are four lobes of brain. According to Colins Camerer, from the brain’s front to
its back and from its left torgiht, clockwise. These parts are called frontal, parietal, occipital,
and temporal.

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The first one is believed to be the place where planning occurs. It is also responsible
for cognitive control and cross-brain input integration. Areas of parietal type are the place for
motor action; the occipital lobe controls the process of vision; the temporal – deals with
issues of recognition, memory and emotions which are experienced by the person. Each of
the areas has neurons and all of them are interconnected. The connection enables the train to
give response to all stimuli.
Human behavior is believed to be the “golden middle” between instructs and animal
emotions and human foresight and deliberation. Gazzaniga talks about automaticity, sense-
making, and modularity of the functions of human brain, stating that architecture of human
brain is build in a way that enables its functional modules to become capable for working
independently and at the same time cooperate. The modules have their own functions both
outside and in parallel with conscious experience.
External and internal behaviors are influenced by the modules on a regular basis.
Interpreter is the system which is based at the left side of the brain and which is responsible
for the process of monitoring.
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It considers all functional modules outputs at once they occur; after that the system
involves a hypothesis considering possible reasons of the action monitored (Camerer et al
2004).”
The picture below demonstrates where each of the parts of brain which participate in
the process of decision making and are studied by Neuroeconomics:
Neuroeconomics and commerce
Neuroeconomics is paid attention to by many professionals who represent various
spheres of business. However, probably, the greater interest is demonstrated by those people
who are employed in the sphere of commerce and trade as Neuroeconomics helps them to
influence decision of the customers at various levels and thus, promote sales of their goods
and products.
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Neuroeconomics is used in commerce with aim to stop the process of losing
customers, sale opportunities, experiencing negative reputation, meeting customers’
expectations, and ability of the company to remain competitive.
Neuroeconomics brings innovations in the process of management by the companies
and changing the tactics and approaches to attract more customers, they gain more profits.
Customer Innovations is one of the companies which help other organizations to create
experience to improve their retention of the customers, acquisition, and their profitability.
As it is reported, application of Neuroeconomics knowledge by the company helped
other organizations to reach:
- Acceleration of their sales from the “outside in”
- Retention of rapid revenue
- Promote reactive insight of the customers
- Improve design of signature experience
- Effectively deal with aligning of the employees and intermediary experiences.
There are various techniques which are used by this company and other ones in order
to contribute to the process of decision making of their customers and increase the sales.
Practical Part
Neuroeconomics Approaches: Choice architecture
A representative of Customer Innovations comments about this approach: “Well-
designed experiences influence behavior. A well-designed customer experience can influence
customers to return for additional purchases, spend more money during each purchase, and
tell lots of other potential customers about the experience they’ve had with your business,
etc…
In addition, a well deigned-customer experience can influence customer behavior in a
way that decreases the cost of service. For example, the experience can be designed to

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increase the likelihood the customer will place an order or look for service on the web rather
than calling the call center. ”
Earlier these issues were disregarded by the classical economics in order to make the
process of running by the companies simpler; the whole approach was based on a relatively
stable amount of actions which were taken on the basis of settled preferences.
However, this approach cannot increase sales as in real life people tend to change
their experiences, they tend to buy something better and use improved production. Moreover,
sometimes they actually have little idea about the issues they want.
Customers create some preferences and pass a process of decision making in order to
put away all the alternatives which bring fewer benefits.
As it has been already mentioned above, more and more attention is paid to
Neuroeconomics. Moreover, nowadays usage of the science in order to influence customer
decision making process is not only about directing innovative actions on the customers, but
also improving attitudes and approaches in the employees of the company.
Sunstein and Thaler give advice on the issue, sharing useful information which
promotes the approach of choice architecture and contributes to the process of problem
solving:
Goal Decision
Increase employees’ savings Encourage the employees to enroll the
savings into various plans
Increase supply of some products Create a plan which would promote increase
of percentage of supply in the future, create
conditions for the suppliers which would
motivate them to increase the portions of the
products which will be supplied to the

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company in the future
Increase charity activities These activities are very important for the
company; it is necessary to create a plan
which would provide employee with further
benefits if they become involved into charity
and volunteer work.
Respond to requirements of the market
effective
Design polices which would be aimed at
meeting needs of the customers,
demonstrating them that prices of the
produces are equal to the quality, etc.
The same researchers, Sunstein and Thaler, mention that there are three the most
important elements which are aimed at creation of a choice architecture which promote better
results for the customers and the society:
1. “Default Design. Whatever you choose as the default option has the highest
likelihood of being selected. For example, the states that have organic donation as the default
option when individuals get a driver’s license have a might higher acceptance rate. In fast
food restaurant, highly profitable combo meals have become the default option…customers
often need to explicitly ask for just the burger. Design architects need to pay careful attention
to the default option.
2. Providing Feedback. People respond to feedback about their decisions. For
example, in some markets electric utilities are starting to provide specially designed bulbs
(called orbs) that glow red as homes use higher levels of energy. These devises have
influences customers consumption behavior and have proven to reduce energy use during
peak periods by 40 % in Southern California.
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3. Anticipating Errors. People make mistakes and it’s possible to design a choice
architecture which anticipates these mistakes and thus leads to better outcomes. [For
example,] Save More Tomorrow is based on the same principle of expecting error…
We ask people if they want to commit now to saving more lately, because all of us
have more self control in the future. The first company that adopted it tripled savings rates,
and the program is now spreading.
They also use the example of the Paris subway card, which allows users to insert it
into an electronic turnstile in any of four ways to gain entrance to the subway. Compared that
to most payment kiosks in which there are 4 possible ways to insert your credit card…only of
which will work. ”
Neuroeconomical choice architecture in practice
Advantages which are provided by Neuroeconomics and choice architecture are
applied in numerous companies and most of them are successful. The most famous of them
are Chicago GSB, Google, and Gmail. As Thaller said, “Good is developing choice
architecture to remind Gmail users when they forget an attachment or may be about to send a
rude email… if you mention the word attachment in the text of your email and you don’t
include an attachment, it would prompt you… even better would be able an emotion
detection system that will send you a warning if you are about to send an angry email.”
For years the strategy of choice architecture has been used by Google and it made it
the most popular search engine in the world – nowadays it is used by millions of people all
over the world every day as the engine possesses characteristics which meet requirements of
the users (56th annual management conference).
Neuroeconomics approaches: Priming and Framing experience of the customers

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Customers experience priming and framing is one more approach which is used by the
companies to influences the process of decision making. What is interesting about this
approach is that it is not logical or rational.
Experience of the customers demonstrates that their decisions are frequently
influenced by subconscious shortcuts. These, in their turn, significantly influence the way
people think, and as a consequence, the way they evaluate risks, gains and what decisions
they make.
This method of influencing the process of decision making in customers was
researcher by Amos Tversky and Daniel Kahneman, who were pioneering economists of
behavioral theory.
It was found out by them, that framing which is loss-averted contributes to the lack of
rational decision making. This factor was called framing effect and later it was identified to
be added by the fact that experience of the customers is priming.
Priming involves association activation in memory of the customers who are involved
in the process of decision making; priming influences the customer’s decision just before the
process of decision making is completed.
Priming creates a kind of an “anchor point” and it affects decision of the customers
significantly. However, working with leading retailers, it is necessary to pay attention to the
impact of drawing customers’ signage into the shop, as well as on one’s opportunity to
influence eventual purchase of the clients.
Priming and Framing experience of the customers in practice
Similarly to the previous case, the current strategy is used by many companies all over
the world. Some of them are Wipro, Mariti Udyog, and Infosys Technologies. It is important
to pay attention to the fact that nearly all companies, including such giants as Samsung, LG,
Nokia, Philips, and Ariston use this strategy in order to attract more customers.

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These companies build particular reputation and become brands. On the basis of
experience of using their products, customers buy more goods from these companies as they
are sue that they quality is high (Concept of corporate strategy).
Neuroeconomics approaches: Optimization of the elements of customer
experience
Elements of the customer experience are very important o be optimized in order to
promote sales. However, it is impossible to influence all of them, so it is necessary to take
into account those which are the most important for each particular sphere of business.
In most situations these would be:
1) The choice of the customer to buy something;
2) The choice to have some recommendation;
3) The choice to continue visiting the store and continue making purchases.
However, practice demonstrates that there are few companies which have adequate
opinion considering alternatives of the customers and their choices. Moreover, many
companies act in a way to create barriers in the process of decision making of their
customers, and thus, prevent profitable behavior of the customers.
According to the rational economic theory, if the client has more choices that are
better only. Of course, there are several methods which are aimed at creation of greater level
of satisfaction in the clients:
Type Description Example Solution
Preference matching
experiences
Customers start
having some
experience and they
clearly understand
Customers enter a
music store, looking
for a particular group
disk, or particular
Greater selection
increases the
opportunity that the
customers will find

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what they are looking
for
year of record;
People are going to a
restaurant in order to
have some meal
what they need;
The more items they
find in the menu, the
more likely that they
will be satisfied
Exploratory search
experiences
Customers looking
for alternatives to
some item, which
matches their unique
interests
A customer might
search for a perfume
which he had in the
past, but if it is not
available, the buyer
might try to find
some similar smell.
Availability of
greater choice
increases the
opportunity that the
customer would find
the item he needs.
However, there are many cases in which people have to manage the process of
decision making in order to solve complex choice problem. Some people might experience
conflicts cause of attractiveness of some product or its alternatives. In such situation some
choose default option or just refuse from buying anything.
It is suggested by the researchers that when the number of alternatives starts
increasing, people tend to rely upon heuristics; this means that they take into account fewer
alternatives, using the information which is valuable for them about the product.
One of the research researches in the sphere of Neuroeconomics states that an
approach which is based on bounded rationality is of more information processing type. The
researcher demonstrates that people who make decision are usually limited on the basis of
their motivational level and their processing information capacity. Such issues as limited

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working memory and capabilities to foresee all possible incomes are involved in the process
as well.
It is not a secret that nowadays people are overloaded with information, various
activities, and choices to the extent that these become challenging and this are one more
barrier to promotion of profitable behavior of the customers.
The method of optimization of customer experience, as well as any other one, requires
taking into account various levels (there are four of them) of decision making. All the levels
are complex and they are based on the goals of people, as well as on the level of their
motivation and involvement intensity:
First level – decisions which are based on
recognition
The current level is aimed at including
various quick, and mostly automatic,
unconscious, and habitual decisions. Such
decisions are made by people every day and
in the process of decision making, people do
not pay a lot of attention to the attractiveness
of the product because they know from their
previous experience what decision should be
made.
Second level – decisions which are based at
simple attractiveness
The level involves decisions which are made
with references to some features which are
considered to be attractive by the customers.
There are no conflicts between the features
and frequently the solution to the problem is
obvious to the buyer. Such decisions might

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be driven by a habit or affected by some
feelings; they might be made quickly,
similarly to the decisions which are based on
recognition
Third level – decisions which are based on
alternatives
Decisions of this type involve various
choices between various types of the same
products; in this case the process of decisions
making involves not goals only, but conflicts
as well. In most cases some features of the
products might be favorable, while others
might not bring any benefits. Any decision
from this level might become transformed
into decision of the first or the second level.
it is necessary to pay attention to the fact that
most researches which were conducted,
addressed the problem of this particular level
Fourth level – decisions which are made on
the basis of innovation solutions of the
problems
Such situations can be characterized by
alternatives which are not fixed; there are not
attributes which might serve as features to
characterize the alternatives. The forth level
involves creative problem solving and it is an
important process which promotes generation
of more alternatives. Добавлено примечание ([A6]): название таблицы, откуда

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However, as practice demonstrates, usually customers try to make decisions at the
first level as it is less time consuming. Buyers cannot become involved in the process of
evaluation which is based on alternatives, nor they can solve innovate problems as a part of
their usual experience.
No matter what level of decisions making the customers are involved in, for
companies which use Neuroeconomics it is very important to understand how decisions are
made. The theory of decision making has been already described above. However, it is
natural that theoretical knowledge sometimes differs from the facts and events which are
faced by the processionals in practice. So, a representative of Customer Innovations shares
experience of the company:
“Customers follow decision strategies that are depended on the situation, their goals,
and their persona. Rather than an invariant approach to solving choice problems, customers
leverage a wide range of approaches, often developed on the stop. Since decision makers
generally cannot process all of the available information in a particular situation, they
develop problems representations by filtering or restructuring the available information.
Hence, which information is selected for processing can have a major impact on their
choices.
In general, it is not true that customers follow complex decision process for complex,
high involved decisions. In fact as the complexity of the decision increases, the complexity of
the decision process often decreases. As decision situations become more complex,
customers use rules of thumb or heuristics to reduce the complexity of the options and the
information they must consider. For example, options that are superior on the most prominent
of a small set of attributes are favored as the decision talk becomes more complex.
The decision process that customers follow and the options they select will depend on
the extent to which customers’ goals are:

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- Minimizing the cognitive effort required for making a choice;
- Maximizing the accuracy of the decision;
- Minimizing the experience of negative emotion during decision making;
- And maximizing the ease of justifying the decision or some combination of
such goals.
The way customers make choices is also highly dependent on the way their choices
are present or framed. This creates a significant opportunity for providers that understand the
psychology of their customers’ decision processes to present options in a way that improves
the customer experience and divest additional revenue. One of the ways to do this has to do
with understanding customer attention.
There are two types of attention:
- Voluntary
- Involuntary.”
According to the expert, the first type of attention is devoted to data which is
perceived to relevant to the customer given the aims. People are expected to devote their
efforts in order to examine information which in their opinion should help them and promote
attainment of goals.
However, it is necessary to pay attention to the fact that attention might be captured
involuntary by some environmental aspects – that is some events which are surprising,
unexpected, novel, threatening, salient, etc.
Thus, attention can be influenced both by goals and by some involuntary factors
which are percepted. The current model is demonstrated on the picture below:

25
The strategies of decision making which are described as those to be applied at the
third level, can be characterized on the basis of the overall amount of data,
comprehensiveness of attributes, and selectivity.
Optimization of the elements of customer experience in practice
Notonthehighstreet.com is one of the leading online markets of the United Kingdom
and it uses the strategy of optimization of the elements of customer experience. In order to
reach this aim, the management of the market uses various personalization, testing,
prompting online shopping improvements and making experiences of the customers better.
Moreover, the market does not only become promoted through such strategy, but it
provides over 3,000 small businesses which are registered on in with the testings in order to
help them promote their own activity.
The Head of Product Management Department of the market, Dave Thomson, says:
“We are a growing brand with products from over 3,000 small British businesses, so we need
to make sure our visitors can easily find the original, quality items they desire. We have only
just started on our testing programme, but already it is clear that you can’t base decisions on
your instincts when it comes to making website content decisions… we can take a
взяли?

26
sophisticated approach to our web strategy…to insure it puts the user experience at the heart
of our business (Notonthehighstreet.com partners with Maxymiser to enhance its website
with customer experience optimization).”
Neuroeconomics approach: Seeking for novelty and differentiated experience
design.
Novelty is what every customer is looking for and this is why all the companies tend
to bring some innovations into their products – this might be additional function, some extra
devise, new look of good, new components, etc.
However, it is necessary to pay attention to the fact that novelty seeking usually
requires dealing with a more complex problem of decision making and in such cases the
customers usually involve various strategies to choose the necessary product.
Strategies which are applied to the process of decision making and which are used at
the third level are:
Strategy Actions
Adding of weight The strategy involves taking into
account only one alternative at a time
and examination of all the attributes for
this current option, as we as
multiplication of each of the attribute
value in order to weight it with greater
importance. As consequence the
product which has greater value would
be the one chosen.
Equal weight strategy This strategy is a variation of the
strategy which deals with adding of the

27
weight, but it involves simplicity
assumption which is of great
importance to each attitude.
Selection of the most important
attribute
According to this strategy, it is
necessary to provide a strong contract to
adding of the weight – the alternative
product which has the best value on its
attribute which is the most important
one, is the good to be selected.
satisfying The strategy involves choosing the
product which is the first option which
meets requirements of the customer. All
the options are viewed sequentially; if
some attribute turns out to fail to meet
expectations of the customer, it is
simply rejected and the next good is
analyzed. It is very important to pay
attention to the fact that using such
strategy, the process of decision making
is influenced by the order in which the
products are viewed.
Elimination on the basis of some aspect The current strategy is aimed at
combination of some elements of the
strategies of satisfying and the most
important features of the good chosen.

28
Elimination on the basis of some aspect
rejects the good which do not meet
minimal requirement value for the most
important feature. The second most
important feature might be added to the
process of elimination in order to make
the search more sophisticated.
Confirming dimensions majority The strategy involves alternatives which
are processed and have the highest
values of the alternatives; they compare
each of the features.
Voting of feature This strategy belongs to the simplest
ones as it only counts the amount of
positive and negative features which
characterize various alternatives; then
the strategy is aimed at the good which
has the greatest amount of positive
features and the smallest amount of
negative ones.
Choice Heuristics This strategy is used to solve problems
with decisions making. The method is
acquired through imitation, experience
and training. Добавлено примечание ([A8]): название таблицы, откуда

29
It is important to pay attention to the fact that frequently customers combine these
strategies, i.e. take features from each one of them which are the most credible and relevant
and apply them when it is necessary to choose some particular good.
Seeking for novelty and differentiated experience design
As it has already been mentioned above, all the companies in various spheres of
activity and form various industries tend to introduce innovations to their goods in order to
increase sales. Some of the companies are very successful, some are not as lucky as creation
of innovative concepts is not the only thing which is required for increase of sales. The table
below mentions the companies which are claimed to be the most successful ones in terms of
innovations and promotion of the sales through these innovations:
Company Innovation concept
Adobe Customer feedback ideaspace on
acrobat.com
Amazon Marketplace
Apple Web servers of open type
BBC Backstage and labs of the company
Cancer Research UK Challenge of open venture
Dell Idealstorm
eBay Online market
Facebook Social networking
Flickr Sharing by photographs and images
Google Research engine, Googwave
Guardian Storing of data, research on crowd
source
Hewlett Packard HP labs open innovation office

30
IBM Global Innovation Jam
Health & Medicine How to get rid of tonsil stones
Last FM Radio on the internet
Lego Mindstorsm
Livework Streetcar service design
MIT Open course ware
Moodle Learning environment which has open
source
Mozilla Firefox
Nokia Research network of open innovation
P & G Connect and Develop
Sony Imageworks Five digital image – software tools
which allow manipulation under licenses of
open source
Twitter Microblogging
Wikipedia Online encyclopedia
YouTube Sharing by video
Microsoft Direct Project data transfer of easy
type (The Open 100)
(See Annexes to find the complete list of the companies which increased their profits
due to the current approach)
Neuroeconomics approach: violation of justice
There are numerous issues which contribute to the process of decision making
Neuroeconomics states that violation of justice is one of them. A range of situations which

31
are created by the companies might be developed in order to increase their profits through
penalties which are applied to the customers for violation of rules of behavior some of them
are:
Institution Violation of justice
Video rental stores They generate a great part of their income
through the late fees
Credit card companies Provide approval rather than decline over
transitions which re limited and later
change fees of the customers
banks Present check in inappropriate order of
magnitude, that is in reverse. This way
the greater amount of checks are more
likely to be drawn against insufficient
funds
Cellular providers These companies limit their customers
through contracts and do not tend to
create any loyalty through excellent
service
Car dealers Rise costs of the models of cars which
are popular in a shortage case
shops Raise prices of issues when these are
especially needed (umbrellas during some
rains, winter clothes in winter) Добавлено примечание ([A10]): название таблицы,
откуда взяли? если сами сделали, то тоже просьба указать

32
Such unlawful actions inevitably reduce reputation of the companies as the customers
never come back to the stores where they felt that they were not treated fairly. Moreover,
people instinctively feel that such institutions should be punished, so the news about violation
of justice spreads quickly and the companies which do harm to the customers quickly lose all
their buyers.
In some cases such actions from the part of the companies are intentional. However,
sometimes they are not, so dealing with promotion of the sales by means of Neuroeconomics,
it is necessary to pay attention to three types of justice which are related to the experience of
the customer and might influence level of sales:
Type of justice description
Distributive In order to make sure that policies of the
company do not violate this type of
justice, it is necessary to take care about
customers to perceive the outcome they
receive through fair treatment at the
levels of their investment, believes, and
receiving.
Procedural To promote this type of justice,
management of the company should get
to know if the process which was used to
arrive to the outcome was fair concerning
the customer, whether the buyers see that
the their time was treated as a valuable
issue or they believe that it was wasted in

33
long terms; it is also necessary to identify
whether people who arrived first were not
served the last.
Interactional The customers should be treated fairly;
they should see that they are respected by
employees of the shop or the company.
Thus, it is possible to conclude that Neuroeconomics make a significant impact on the
way business develops as it enables all the companies to influence the process of decision
making in the customers. There are various approaches to achieve this aim and many
companies prove to be successful addressing the issue.
Добавлено примечание ([A11]): название таблицы,

34
Case Study
The company’s actions are aimed at development of the retail strategy, disruptive
breakthrough packaging design and strategy of merchandising. The actions are targeted with
the usage of proprietary tools and frameworks. Integer’s proprietary insight frameworks are
used:
1) 3-lens Model
2) The Shopper Continuum
3) Shopper Mindsets and Modes
As for the key strategy frameworks, these are Disruption at Retail, shopper-Based
Design Frameworks, and Principles of Shelf Design.
The 3-Lens Model
The company sees the world three the three lenses of Brand, Retailer and Shopper
which are aimed at finding solutions to the problems of the clients. In order to target them,
the three lens model was created. The company states that:
- “We start by understanding the objectives, obstacles, and cultural relevance of
the brand.
- We understand the values, behaviors, and cultural context of the shopper, with
a focus on purchase motivations and barriers.
- And we understand the business goals, constraints, and shopping context of the
retailer. This is how we attack business problems.”
The Shopper Continuum
The company views shopping not as a kind of linear affair, but as a complex and
messy process. The company recognizes its need to understand the process which the
shoppers are involved into and it created a framework which would help it to explore and

35
codify their understanding of the shopping process in order to reduce the complexity of
decision making.
The traditional funnel of the purchase is limited, so the company created a framework
which is more powerful and provides greater opportunities. The framework is called The
Shopper Continuum and it involves three activities, which are aimed at understanding of
motivations, decisions, and behaviors which occur in the process of development of shopping
experience. Qualitative and quantitative information is used in order to map the shopping
process complexity. The base model of The Shopper Continuum looks in the following way:
Below an example mapping of the main points actions which are taken for making a
purchase in the category “Girl Aisle” are shown:
1. “Beauty is important to her; she knows that looking good and feeling good go
hand-in hand.
2. When it comes to looking good, she things of beauty products such as
cosmetics & hair care; not deodorant, razors & body wash.
откуда взяли?

36
3. She often wonders, “Why is that the TV & print advertising for deodorant,
razors & body wash products feel so beauty-oriented and inspirational, yet when I shop for
these products in store, the aisle is void of both?”
4. I just used my last razor blade and am also running low on deodorant and body
wash; guess it’s time to head to the store.
5. I could not get out of the Deodorant, Razors, & Body Wash aisle fast enough;
now on to cosmetics, yeah – time to play!
6. When it comes to the current Deodorant, Razors & Body Wash products that I
use, I feel like I am in a rut; am I really using the products that are best for me?
7. I will talk to my friends/family and read through current beauty publications
for new product ideas and inspiration.”
Shopper Mindsets and modes
When people shop they are rarely in the same mind frame. The reason is that there are
many factors which impact the way customers behave and think, so their purchasing
decisions are changed as well. Thus, actions of the company which sells the products should
be changed in different categories and browsing, researching and replenishing are the most
important issues to be taken into account.
Basing all the actions on such approach, the company takes an approach of
understanding of the shopper mindset when he or she looks for some product in various
categories. The company finds that there are broad and universal mindsets in operations and
all of them are quite stable.
The company also pays attention to the fact that shopping processes can never be
alike since there are many situational factors which impact the mode of shopping. Thus, it is
essentially important for the company to create mindsets understanding for various
categories. The table to reflect the understanding might look in the following way:

37
The discussed company is a member of the TBWA family, so Disruption is practiced
by it. The company has adapted and developed many tools of TBWA in order to deal with the
issues of promotion, retail, and shopping. After such approach has been implemented, the
company managed to create its set of exercises and tools which were caused Disruption and
retail Recipes.
To make understanding to he issue better, the company draws the following example:
“during a Disruption at Retail workshop for the PuR brand, we identified confusion in the
brand’s in-store merchandising and messaging. It was unclear if the brand wanted to be
perceived in the retail context as a home improvement brand or a self-improvement brand.
This was a revelation for the client. As the Vision for the brand is to improve lives through
cleaner water, the Disruption at Retail quickly became evident – to become a new form of
self improvement brand.”
Shopper Based Design Framework was developed on the basis of many years of
shopper marketing experience. It is used as the foundational approach of the company, which
establishes the guiding principles that “leverage key purchase triggers and shopper insights
within the store context that address primary purchase barriers, improves shop ability and has
a marked effect on improving sales.”

38
The company also uses principles of shelf design which are:
- Inspiration
- Education
- Navigation
- Selection
As for the development of digital practice, the company establishes it on the five
pillars:
откуда взяли?

39
References
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Belden, Sarah. Science is Culture: Neuroeconomics and Neuromaketing. Practical
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Camerer C et al. 2003, Neuroeconomics: How Neuroscience can inform economics.
Camerer, C& Loewenstein, G & Prelec, D, Neuroeconomics: Why Economics Needs Brains,
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%20Why%20Economics%20Needs%20Brains.pdf>.
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Notonthehighstreet.com partners with Maxymiser to enhance its website with customer
experience optimization, viewed 28 July, 2012, < http://econsultancy.com/ua/press-
releases/6600-notonthehighstreet-com-partners-with-maxymiser-to-enhance-its-website-with-
customer-experience-optimisation>.
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