An Interview with Stephen Hersh on System One and System Two Thinking

Tortoise & Hare Marketing” by Tatiana Sturdza for BigArrowgroup

I interviewed faculty member and lecturer, Stephen Hersh, who specializes in consumer insights and brand strategy, on the theory of System 1 and System 2.

Coined by Nobel Prize winning psychologist Daniel Kahneman, Phd., this theoretical framework is useful in qualifying and understanding consumer behavior and thought processes. With new research suggesting consumers make purchase decisions with less rational or measured consideration than previously believed, the framework provides telling insight into consumer behavior. Stephen was generous enough to lend his time and expertise on this topic.

Sean: How do System 1 and System 2 rule purchase behavior?

Stephen: What is marketing to begin with? It’s never far from my mind what Peter Drucker said  “Marketing is not selling people what they don’t need. . . it’s the process of creating a customer, which means the process of carrying out a mutually beneficial relationship between the consumer and the company.”

How can you do that as a company unless you understand your consumer ? That should always be at the center of everything you do.

You need mental models and theories, it’s a way of simplifying the world. The idea of System 1 and System 2 is a simplified model of the world or how people behave.

The idea is, we have two basic ways of thinking.  We spend our entire lives alternating between one mode and a second mode. System 1 is what he [Daniel Kahneman] calls thinking fast, the things we do as we are going about our lives and being who we are. We take in what is going on around us and we jump to conclusions about what is going on. It’s an automatic process that happens whether we like it or not. It’s effortless. So that is what is happening most of the time. We see someone and quickly size them up.

System 2 is what kicks in when System 1 says, “I need some help here.” System 2 is effortful thinking. It’s what kicks in when we encounter a situation or problem when it’s not immediately obvious what to do. We go through life alternating between these two different things.

Sean: Do both systems always work in tandem?

Stephen: When we watch a movie, we may do the whole thing in System 1. They work together in that System 1 says, I need help and grabs System 2.

Sean: Which system is more powerful is shaping the perception of ourselves?

Stephen: Most of the time System 1 will handle it; we will have a perception of ourselves. Generally, we have an intuitive impression about ourselves. We may stop and deliberately think something about ourselves, most of the time [though], it’s not necessary. Most of what we do happens unconsciously.

When we drive, we know how to do it and we don’t have to think step by step. It becomes an automated process for us. That’s a System 1 function. When we are learning, we use System 2.

Sean: Can you explain heuristics and how it relates?

Stephen: A heuristic is a summary model that we have, [which] helps us simplify a situation and help us deal with it. A brand is a heuristic. It’s a simplifying conceptual tool. It makes us feel like, okay, that’s a way to help us get a handle on it.

Sean: Are there any brands that help us harness this summary model to sell products?

Stephen: I hate to go with the obvious , but Apple does have to be a great example. If you look at the way Apple presents its iPhone on its website and compare it to the way other brands present their smartphones, everything is presented in a simple way and the message that I get is everything is clean, sleek, modern . For many consumers it draws the eye to a feeling that, ‘Hey, it looks good. Where can I click to buy it or find out what I need to do to buy one?’

It’s pulling you towards an intuitive decision. The way they design their products requires a minimum amount of thinking . They do a great job of that. And it’s a strong contrast [to] other companies, which present a ton of information which is taxing to the consumer. They have a different approach to how a consumer relates to the brand.

Sean: Do you think, when deciding to purchase, triggering System 2 can be a negative?

Stephen: Well, it depends on the product. There are situations where people need facts to make a decision.

When you give people a lot of facts and logic they are supposed to sort through . . . , it’s kind of not the way people think naturally. People are generally not looking for a research project. Cognitive strain .  It literally takes calories to think about it. You become much more a critical thinker and much more suspicious. It makes it harder for the consumer to feel they are in a mutually beneficial relationship. It’s easier for the consumer to think this is a System 1 sort of way. It’s harder for everyone to end up feeling satisfied [thinking in System 2.]

Sean: Do you think that when purchasing luxury items or cars, higher priced items, there is an assumption you should appeal with System 2?

Stephen: If it’s an expensive, serious thing, and the consumer feels they have to do their due-diligence.

If they are buying, let’s say a furnace, they may need to do a bit of System 2 thinking. Maybe you ask your heating person, your expert, which is the right one?

If you are talking about a luxury item, that’s expensive because it’s a luxury thing, then it may not be a System 2 type of logical thing. It may be purely an emotional decision.

I walked by my neighbor’s house and there was a new Porsche in the driveway . . . . I said, ‘New car?’

He said: ‘It’s a new, slightly used car. It’s something I always wanted. The salesman said, “Wanna take it for a drive?”’

So he did . . .  . He comes back.

The salesman says, ‘So what do you think?’

He says, ‘Let me think about it.’

The salesman was seemingly an expert at System 1. He says, ‘There’s nothing to think about, either you want it or you don’t, you don’t need it.’

So, he bought the car.

It was appealing to System 1. The salesman steered him away from System 2. If you look at it as something that’s pleasurable, it’s a desire, it’s not a matter of figuring out the logic.

Sean: Can you think of a company that uses logic and System 2 well to brand itself and sell products?

Stephen: Well . . . I think Amazon does a nice job with this. When they give you those grids . . . , that says here’s some important aspects of the product and here’s how they all stack up. You can sort of at a glance see the information and, as long as they don’t provide excess information and throw you down a rabbit hole . . . , if they can keep the information in the ‘Goldie Locks position,’ not too little, not too much, but just the right amount . . . then that can work.

You have to ask, when does a concern about price come up? Once you are in an information-seeking mode . . . , it makes you feel responsible and like you may find other options and think ‘I may find a better price out there.’ It can derail people and make them think it’s too much effort, make them drop it and do it another time.

Sean: Are consumers much less rational than researchers previously thought?

Stephen: Yes, there is a lot of marketing that attempts to persuade consumers by providing a lot of information. As marketers . . . we get really involved in the stuff we offer and . . . we naturally start to assume everyone feels that way too. . . . It comes naturally to provide more information than people want.

When business people are making decisions, they are making big investments. When they are making these decisions, they are in a System 2 mode; they are in a place where it seems natural. They want to provide logic. And its only one step further to say, ‘Let’s provide logic to the consumer.’

Sean: When it comes to CPG goods, which system is more powerful?

Stephen: When I think System 1 is what people are thinking about. People aren’t looking for a lot of facts. Generally, consumers don’t have a huge factual agenda.

Sean: I think mascots operate at intuitive level. Do you agree?  

Stephen: Yeah, mascots and logos, and the whole idea of brand, it’s about letting people know it’s that thing, yeah this is it, you have to look no further — this is what we stand for. It’s that thing that makes System 1 possible, that you are learning this information that you are storing away. You see that logo or mascot and bang . . . you can go head and make that choice.

Sean: People talk about today how persuasion-based marketing is dead and not effective in the modern marketplace, in favor of pushing the consumer to have a dialogue with the brand. Do you think System 1 or System 2 is more effective at getting the consumer to have a dialogue with the brand?

Stephen: Well, you have to ask, why should there be a dialogue and who wants it? To me, it comes back to ‘what is marketing to begin with?’ It’s a mutual beneficial relationship . . . . So, it’s a matter of the brand and the consumer kind of letting the story and experience unfold.

If the consumer feels like, ‘hey, I want something,’ they will talk with a brand. They don’t want it to be laborious, they don’t want it to be frustrating.

Sean: So you think System 1 is more effective or they both have a place?

Stephen: Well, they both have a place. But to the extent that it can be a System 1 process, it’s going to feel more comfortable and enjoyable.

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