Imagine a regular morning in your life. Like clockwork, you wake up, brush your teeth, get dressed, and commute to work. At work, you grab a coffee and read your emails. Then you set off to work on a creative project.

In 2011, Daniel Kahneman published Thinking, Fast and Slow, which introduces two distinct types of thinking that people use in their daily lives. These different types of thinking are illustrated perfectly in your typical morning routines.

Routine tasks like brushing your teeth or hopping in your car or on the bus are examples of things that probably don’t need much deliberation. On the other hand, picking out an outfit that represents you or most certainly starting to work on a creative project will require more thoughtful and analytical thinking. These Kahneman has differentiated as System 1 and System 2 thinking.

System 1: Thinking Fast

When you go to the bathroom in the morning, brushing your teeth is an intuitive step in your routine. Likewise, when you leave your home to drive to work, you probably take the same route without thinking twice about it.

In life, we are constantly faced with situations where we need to make decisions. Typically, these decisions are small and quick, and thinking deeply about them would take an overwhelming amount of our energy. That is why our brains have created a quick, intuitive reaction to these kinds of stimuli. System 1 thinking is fast, automatic responses to situations.

System 2: Thinking Slow

On the other hand, there are times in our life when we make more deliberate decisions that have analytical thinking behind them. While a lot of time we work on autopilot, more demanding tasks will require slow, thoughtful thinking. For example, choosing the most optimal route to a new place or making critical decisions in a work project. This is System 2 thinking.

How Do System 1 and System 2 Impact Our Purchases?

Like with any other facet of life, we use both systems in our purchase decisions. Fast, quick purchase decisions tend to happen with things that we use repeatedly in our daily lives. System 1 thinking is ever present in our grocery shopping and other errands, like making repeat purchases of things that you already know and love.

And actually, we make even more of our purchase decisions using System 1 thinking than we might realize. Research has claimed that up to 90% of our decisions are made quickly, which means that in most purchase decisions prices are not really compared, and decisions not made with deep thought. If the price that is offered meets our expectations, we more often than not accept it without a second thought. System 1 thinking allows sellers to utilize easy cues of a good deal, such as yellow discount stickers. With System 1 thinking, promotions tend to work well.

On the other hand, when we are making purchases that we are less sure of, we typically employ System 2 thinking. Especially large or complex investments get us to do our research and compare prices to get the best deal. However, people have limited capacity to process information. Therefore, System 2 thinking is also prone to mistakes.

When we are setting prices for our products, we often think that our buyers are thinking hard about the price and are aware of our competitors' prices. However, in most cases this is not true, even for System 2 decisions. Therefore, it’s always the sellers’ responsibility to ensure buyers have all the relevant information easily available.