Herd Behaviour – Keeping Up With The Joneses
the propensity of members of a group to act more like the other members of the group than as independent individuals
Herding is the process of getting a group of people to think and behave in harmony with one another via informal peer pressure rather than top-down command and control.
Herd behaviour occurs when members of a group make decisions and take action in concert with one another but lack clear leadership. Animals in groups such as herds, packs, flocks of birds, schools of fish, and so on exhibit herd behaviour, as do people. Examples of human-based herd behaviour include voting, protests, rioting, general strikes, athletic events, religious gatherings, and daily decision-making, judgement, and opinion-forming.
Herd behaviour is best illustrated by a group of animals trying to escape from a predator. In his widely-referenced 1971 article “Geometry for the Selfish Herd,” evolutionary biologist W. D. Hamilton proposed that individuals in such a group minimize risk to themselves by clustering together. Therefore, the herd seems to be a unit in motion, but its function arises from the disorganized actions of self-interested individuals.
The study of social groups was also of interest to psychologists back in the 19th century. The French polymath Gustave Le Bon wrote about the French Revolution crowds in his 1895 book The Crowd: A Study of the Popular Mind. After reading Le Bon’s work, Sigmund Freud developed his theories on crowd psychology, and Wilfred Trotter’s Instincts of the Herd in Peace and War, published in 1914, is considered a classic of social psychology and is often credited with popularizing the term “herd behaviour.”
The Asch Experiment
Evidence and backing for conventional practices increased as psychological research progressed. While the Freudian method fell out of favour, experimental research stepped in to fill the hole in the field of psychology. Solomon Asch’s 1951 study on the influence of groupthink on individual decision-making is still included in basic psychology classes throughout the globe. Asch had groups of eight people judge how long three lines were in comparison to a target line. Only one of the lines was the correct length, while the other two were either longer or shorter than the desired length. However, only seven of the eight people in each group knew about the experiment. Asch had them act as though the larger or shorter line was the same length as the intended one. The purpose of the study was to determine whether “real” participants would change their correct response to coincide with the group’s incorrect response. Even though the inaccuracy rate was less than 1% when respondents were allowed to evaluate the lines on their own, an astonishing 37% of replies conformed to the wrong group response.
When you look at the lines, it’s easy to see that Asch found the right answer. This wrong conclusion exemplifies the irrationality of collective decision-making. The concept of herd behaviour is ripe for the study of behavioural economics, which was largely founded on efforts to empirically support evidence of human irrationality and has given rise to well-known concepts like groupthink and the bandwagon effect. As a consequence of behavioural economics’s focus on herd behaviour, there has been extensive study of this behaviour in the financial markets, forging a solid conceptual relationship between herd behaviour and economic decision-making.
- Finance and economics
As was previously indicated, the field of finance has paid a lot of attention to herd behaviour. Sheer herd mentality at the group level may cause stock market bubbles and other inefficiencies in the marketplace. Take the worldwide financial crisis of 2008 as an example; it’s easy to envision that some investors, rather than making an informed choice, just followed the herd and bought mortgage-backed securities.
In the case of Bitcoin and other cryptocurrencies, the early exponential growth in value before the massive sell-off in 2018 has been attributed in part.
When investors worldwide believe a government cannot honour its debt obligations, they often act in unison by selling the country’s currency and buying commodities like gold or other foreign currencies. This kind of approach is known as speculation and often results in mild inflation in the near term. If people start hoarding and stockpiling products as soon as they realise the cost of necessities is rising, inflation will surge much higher than it already is. The currency will collapse, and there will be widespread discontent if this continues.
It’s easy to foresee a substantial role for herd behaviour in the development of political opinion.
A well-executed marketing strategy may take advantage of herd behaviour to boost sales and even alter the social order of a society. Despite evidence that monetary incentives motivate widespread behaviour change, “keeping up with the Joneses” typically triumphs due to the persuasive power of the herd mentality.
- Brand/ Product
As a result of advancements in communication technology, consumers now have more options than ever before and can tap into the “power of the crowds” to make decisions by reading reviews, listening to podcasts, and watching videos posted by regular people. Consumers will use the views of others expressed on these platforms as a strong compass to lead them towards items and brands that correspond with their assumptions and the choices of others in their peer groups, especially if those products and companies are popular. Direct social connections between shoppers have an impact, and herd behaviour becomes more noticeable as the group size increases in a retail setting. Exciting and interesting conversations have a larger influence on the probability of future interactions and purchases when more people are involved.
The ability of social media to spread herd mentality cannot be underestimated. Consumers benefit from the recommendations of their peers and proof of a favourable online experience, while opinion leaders are given a stage to share their insights and influence buying choices. Examining these cases has revealed that herd behaviour can be utilised to push sales and profits tremendously in favour of any brand, and so many companies have come to see the value of brand ambassadors and influencers.
- Marketing for a Purpose or Social Cause
When used for health, environmental protection, and other societal issues, marketing may quickly go beyond its original economic purpose. Appealing to people’s herd mentality makes campaigns like Earth Day and the numerous anti-smoking and anti-obesity initiatives seen in every country possible. Marketers need to focus on swaying opinion leaders within communities and cultures so that they may in turn sway the masses, since the herd mentality of any population guarantees the success of any social campaign.
Social marketing’s ability to capitalize on herd behaviour has the potential to effect significant change if done properly. It’s obvious that influential people have a lot of sway within their social circles, and this means they may be used as a rallying cry for any cause.