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Facebook, Big Data, And The Ethics Of Behavioral Economics On LSE’s Marketing MSc

When does behavioral economics in marketing become dangerous? We spoke to the London School of Economics’ Dr Heather Kappes to find out

Behavioral economics is hitting the headlines. Richard Thaler, one of its founding fathers, just won the Nobel Prize for economics. He’s co-author of Nudge, a global best-selling book and study of human decision-making.

If you understand how to apply behavioral economics, you can understand and influence human behavior. In marketing, behavioral economics can be applied to help marketers improve engagement with their customers—by identifying their biases and beliefs, and adapting their offerings accordingly.

It’s what Donald Trump’s team say got him the presidency. On Facebook, the Trump campaign was able to target ads to prospective voters based on their beliefs—their Facebook likes, friends, profiles, and behavior online. Their data.

But what about ethics! When does behavioral economics in marketing become dangerous? How far should you go?

Dr Heather Kappes, who has a PhD in Social Psychology from New York University, teaches on the London School of Economics’ (LSE) MSc Marketing, a one-year master’s programs with big data analytics and the understanding consumer behavior at its core.

That 21st century buzzword—big data—drives marketing today. But, like a nuclear weapon, big data in the wrong hands can be dangerous.

Rather than telling students what’s right or wrong, LSE— ranked second in the world for social science and management by QS Top Universities—provides its students with a framework to make the right decisions in the modern-day workplace.

The marketing MSc combines LSE’s scientific, research-led approach with practical application—MSc Marketing students at LSE engage in real-world consulting projects.

In the current class of 70 students, 21 nationalities are represented. Ages range from 20 to 33. LSE’s top graduate employers include Google, Amazon, Coca-Cola, Unilever, and the BBC.

heather

BusinessBecause caught up with Heather, whose course—Consumer insights I: Behavior Fundamentals—explores all the forces that guide consumers as they make decisions, to find out more.

How important is behavioral economics in marketing today?

Because behavioral economics gives us so many ideas about why people do what they do, and how we can influence what they do, it’s only going to become more influential in marketing and business in the next few years.

There’s a lot of excitement around big data. But, today, the challenge is not about getting data, it’s about what to do with it; how to make sense of it. You need an explanatory framework to apply to your data, and ideas from behavioral science can give you that framework.

When does behavioral economics in marketing become dangerous?

That’s difficult to answer. People react differently to a loss of privacy than they do to never having the privacy in the first place. And, sometimes, it’s not perceived as a problem by people whose data is collected until something goes wrong.

We saw a big backlash to an experiment that Facebook ran with some academics, where they varied how much people were exposed to happy or sad content in their feeds to see whether that effected peoples’ moods. When that came out, a lot of people said it wasn’t ethical; that Facebook was trying to affect how people were feeling. But businesses are doing this all the time—experimenting on their users. When you make it academic research, it just becomes more visible.

One of the challenges for graduates is that ethics falls off the radar when you get into an environment where results are so heavily weighted—whether it’s getting likes, or votes, or sales, there’s no time to stop and reflect.

If you lose sight of the people on the other side of the data—if you only see them as numbers on a spreadsheet—then it becomes easier to do things that you wouldn’t do to people face-to-face. That’s a challenge as the world becomes more and more digital.

How do you focus on ethics in marketing at LSE?

In contrast to a business school, where MBA degrees have whole courses on business ethics, we approach these things more scientifically. We don’t give people principles, saying ‘this is right’ and ‘this is wrong.’ We give our students the frameworks for how to evaluate their decisions, through data and thoughtful evaluation.

One of our students might go on to work for the Trump campaign; one might use behavioral economics to sell cigarettes; one might try to get more people to get polio vaccinations. We’re not going to agree with every choice our students make, but we do hope to lead them to think about whether their decisions are appropriate or not.

Will marketing inevitably become more and more data-driven?

Probably, yes. But with everything comes a backlash. I think there will be some marketing agencies that say, ‘with the advent of big data, we’ve lost sight of individual user experiences.’

There will always be small players looking for opportunities to be gained by doing something differently. I don’t know what that is yet—if I did I’d probably have my own business!

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