Classical Conditioning Definition Examples In Everyday Life

Classical Conditioning Definition

Let us dive further to understand its major applications across different business lines. This article will provide examples of classical conditioning in business and everyday life.

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List of Classical Conditioning Examples in Business & Everyday Life

Example #1 – Stock Markets and Participants’ Behavior

Stock markets have been the biggest example of classical conditioning over a long period. The place is often thought of as a platform where intellectuals make money while speculatorsSpeculatorsA speculator is an individual or financial institution that places short-term bets on securities based on speculations. For example, rather than focusing on the long-term growth prospects of a particular company, they would take calculated risks on a stock with the potential of yielding a higher return.read more consistently lose it has again proved that reactions are often knee jerks and in the heat of the moment. A simple rule of finance states that when the economy is booming, the equity should give you better returns. However, safe assets like sovereign bonds and gold should be preferred when the economy is going through a rough phase. But what happens when a large firm in booming market posts unexpected results.

The unexpected result might differ from the expectations in terms of top-line numbers. But still, an analysis is required to understand what lies beneath. One must decode the layers of these implicit details to understand how the firm has performed in the last quarter. But what do market participants do? They only look at the initial numbers; if they are unexpected, they start selling the firm’s stock.

The simplest reason being they have been conditioned to react in such a way over the years. Just because everyone is doing it, one should do the same. But unfortunately, it leads to a knee-jerk reaction, often an overreaction by the market and its participants. That is why we sometimes face situations where stocks of even blue-chip stock Blue-chip StockBlue chip stocks are issued by companies possessing large market capitalization. Blue chip companies are market leaders. They provide good returns on stocks, offer dividends, and are considered safe investments.read more firms are down by 5% -10% even when they have posted decent results. However, an investor with basic knowledge of finance but who can calm his anxiety and avoid blind sheep behavior can weather these storms and use these situations to generate better market returns. It is a classic case of behavioral financeBehavioral FinanceBehavioral finance refers to the study focusing on explaining the influence of psychology in the decision-making process of investors. It explains the occurrence of irrational decision-making in the financial market when it is expected to be a manifestation of rational decisions and an efficient market.read more and its effect on investors.

Example #2 – Conditioning the Consumer: An Application in Advertising

Firms across the globe are as much dependent on advertising, if not more, as they rely on the quality of their products. To generate consistent profits, retain a positive image, and customer retention, they need to reinforce the brand value among the consumers. The advertising firms use classical conditioning to support these values and acquire more customers. Take the example of cold drinks and their advertising mechanisms.

Time and again, they have positioned their market strategy to position these products with heat, thirst, refreshment, and adventure. In the classical conditioning scenario, these activities act like unconditioned stimuli to attract customers. Such has been the effect that customers start feeling thirsty as soon as they come across any poster leading to an impulse buy. With time the brain gets conditioned, and the response becomes even stronger.

One can apply the same principle to the sponsorship these firms target. For example, they often try to associate themselves with major sporting events worldwide and sign in as the biggest sports celebrity. For example, an association of the Indian great batsman Sachin Tendulkar with major soft drink brand Pepsi has been so successful that it has become a case study for marketing strategists and enthusiasts. Another example is the keyword SALE and its effects on the consumers. It is common in the retail industry to increase footfalls as the consumers have been conditioned to enter the store as soon as they see a boarding or a poster marked SALE.

This keyword acts as an unconditional stimulus and generates a favorable response from our brain leading to an impulsive urge to feel like shopping. Online commerce portals use a similar strategy to attract customers. They also utilize the concept of FOMO – fear of missing out, which further reinforces the urge to shop. Surprising is the fact that the SALE is around the year, but still, the customers have a fear of missing out.

Example #3 – Corporates: Conditioning the Employee

Time and again, corporations across various lines of business have used classical conditioning to improve employee outputs. For example, rewarding the agent with a variable bonus better than the expectations reinforces the positive behavior. It motivates them not only to perform better but also to motivate their peers. It acts on two grounds – first, it encourages the employees to positive behavior and reinforces that behavior to generate expected results. Similarly, one can use the same to improve the safety of the employees in manufacturing firms and eliminate accidents on the shop floor.

Example #4 – Insurance

Often, one suggests insurance to counter any unusual activity or a life-changing event. The most important is term insurance, where the victim can safeguard the interest of their dependents in case of his death. The concept is mainly to ensure that the loss of an earning family member may be countered by a lump sum payment to his immediate family. However, the insurance companies have designed new products like ULIPS, which have conditioned the consumers to generate some returns even on these insurance premiums.

The fear of losing the money to generate returns attracts customers to these products. Since everyone else is taking it, it reinforces the consumer’s behavior, and eventually, he purchases it. Even for this basic product, the insurance firms have influenced consumer behavior through advertising and reinforcing behavior through classical conditioning.