PEOPLE & GAMBLING BEHAVIORAL ECONOMICS 101 FOR GAMBLING SERVICES
UK bank customers only switch providers once every 26 years - 3.8% each year.
In 2013 ‘seven day switching’ will be
implemented in the UK.
PEOPLE OFTEN STICK WITH WHAT THEY HAVE OR WHAT THEY KNOW – EVEN IF
THERE ARE BETTER ALTERNATIVES
The emotional impact of a financial loss is double that of an equivalent gain.
We hate losing what we have
(or think that we have).
PEOPLE ARE MORE SENSITIVE TO LOSSES THAN TO GAINS
82% of patients preferred surgery over radio therapy when surgery was
described as having a 90% survival rate
56% preferred surgery over radio therapy when it was described as
having a 10% mortality rate.
THE FRAME OF REFERENCE MASSIVELY
INFLUENCES THE CHOICES PEOPLE MAKE
A pilot of the “Save More Tomorrow” saving
approach increased the average saving rate over a
three year period from 3.5% to 11.6%
PEOPLE TEND TO PREFER SHORT-TERM
GRATIFICATION OVER LONGER TERM RETURNS
The typical household in the sample of Americans had more than $5,000 in liquid assets (typically in savings accounts earning less than 5% per year) and nearly $3,000 in credit card balances, carrying a typical interest rate of 18% or more.
MONEY IS TREATED AND VALUED DIFFERENTLY DEPENDING ON WHERE IT
CAME FROM OR HOW IT’S KEPT
In the USA people rate the chance of death by homicide higher than the
chance of death by stomach cancer, even though death by stomach cancer is
five times higher than death by homicide.
PEOPLE JUDGE THE LIKELIHOOD OF AN OUTCOME BY HOW EASILY IT CAN BE
BROUGHT TO MIND OR IMAGINED
“Organizations with high trust outperform
organizations with low trust by nearly
three times.” (Watson Wyatt 2002)
TRUST IN AN ORGANISATION REDUCES THE NEED TO CHECK INFORMATION AND IMPOSE
CONTROLS
People are 67% more likely to stop smoking if their
spouse does.
36% more likely if a friend kicks the habit.
25% more if a sibling quits.
WE TEND TO COPY PEOPLE WE TRUST
10
SO, WHAT IS BEHAVIORAL ECONOMICS?
Behavioral economics is the study of the effects of psychology on decision making.
In other words, how people’s emotions and
thoughts can affect how they make decisions.
11
WHAT DRIVES OUR DECISIONS?
Reasoning Logic Self interest
Inertia
Laziness?
Peer pressure?
?
BEHAVIOUR CHANGE THEORY TWO BROAD APPROACHES
Rational/Cognitive Automatic
The standard model in economics.
The presumption is that people will analyse the various pieces of information and the numerous incentives offered to us and act in ways that reflect their best interests.
Much of advertising is predicated on this approach
The context within which people just act.
Recognises that people are often irrational and inconsistent in their choices > Behavioural Economics
Influenced by surrounding factors.
About changing behaviour without necessarily changing minds (first).
?
13
THE BRAIN’S TWO SYSTEMS
Controlled Effortful Deductive Slow Self-aware
Eg Learning a foreign language Planning an unfamiliar journey Counting calories
Uncontrolled Effortless Emotional Fast Unconscious
Eg Speaking in your mother tongue Taking the daily commute Desiring cake
Rational Automatic
14
THIS REPRESENTS A FUNDAMENTAL CHALLENGE TO CONVENTIONAL WISDOM
IN MARKETING
“It is rarely advisable to view attitude change as a pre-cursor to behaviour change”
COI Communications
15
MINDSPACE A BEHAVIORAL ECONOMICS MODEL
MINDSPACE
MESSENGER We are heavily influenced by who communicates information
INCENTIVES Our responses to incentives are shaped by predictable mental shortcuts such as strongly avoiding losses
NORMS We are strongly influenced by what others do
DEFAULTS We ‘go with the flow’ of pre-set options
SALIENCE Our attention is drawn to what is novel and seems relevant to us
PRIMING Our acts are often influenced by sub-conscious cues
COMMITMENTS We seek to be consistent with our public promises, and reciprocate acts
EGO We act in ways that make us feel better about ourselves
AFFECT Our emotional associations can powerfully shape our actions
MESSENGER
Who communicates matters:
Are they expert and/or trusted?
Are they similar to us - the more similar the better?
Are they liked?
Overcoming the adversarial relationship between bookmaker and punter is key! (Victor Chandler?)
INCENTIVES
Gambling is full of incentives:
1. Losses loom larger than gains: “Loss Aversion” Remove barriers of failure to incentivize action
INCENTIVES
One recent study on weight loss asked participants to deposit money into an account, which was returned to them (with a supplement) if they met weight loss targets.
After seven months this group showed significant weight loss compared to their entry weight.
The weight of participants in a control group was not seen to change.
INCENTIVES
Reference points matter 10 is much more that 0, but 15 is not perceived to be a great deal more
INCENTIVES
We overweight small probabilities Lotteries may act as a powerful motivation (since people overweigh the small chance of winning) People are likely to over-emphasise the small chance of, say, being audited, which may lead to greater tax compliance
INCENTIVES
Loyalty programs don’t work in gambling: We live for today at the expense of tomorrow. £10 today is preferred to £12 tomorrow. But £12 in eight days may be preferred
to £10 in a week’s time. We usually prefer smaller, more immediate payoffs to larger, more distant ones. We don’t differentiate between medium and long-term rewards.
INCENTIVES
Some incentives can back fire. Free cash / bets for opening an account can actually increase churn overall.
NORMS
We tend to do what those around us are already doing
We take our social norms from Observing what others
do Environmental clues
about what others have done or are doing
Norms spread rapidly though networks
NORMS In store Score casts are
too complicated – and there is little chance of punters winning from them.
This often frames gambling as something difficult and challenging or unlikely to happen.
Something open only to experts.
NORMS Building cultural reference points to establish ways
of thinking
NORMS
Use norms to create social interest:
Most popular bets Bet of the Day Top 5 bets
NORMS
Use norms to create social acceptance:
The National Lottery The Health Lottery Scratch cards /
Practice money
NORMS
Use norms to create social acceptance: Social Gaming:
Followed by Zynga Slingo with 2.2 million DAU and then Platika’s Slotomania – Slot Machines with 1.9 million DAU.
AppData shows the top social gambling game on Facebook is still Zynga’s Texas HoldEm Poker with 7 million daily active users.
NORMS CAN BACKFIRE
Two signs were placed in different areas of a national park
Sign A Urged visitors not to take wood
and depicted a scene showing a single thief doing so
Result: Amount stolen increased by ~2%
Sign B Urged visitors not to take wood
and depicted a scene showing three thieves stealing wood
Result: Amount stolen increased by ~8%
Source: Robert Cialdini
DEFAULTS
We go with the flow of preset options
Ventilators have settings that allow doctors to decide how much air to blow into the lungs per minute.
Lungs can be injured if volumes are too high.
A research study changed the default setting of the ventilators to lower volumes of air into patients lungs.
The mortality rate reduced by 25%
DEFAULTS
Online, defaults could be set to £10 for lower bets.
Re-targeting: using data to pre populate forms with pervious session data.
Football coupons defaulted to £5 bet per line.
SALIENCE
Our attention is drawn to what is novel, simple and seems relevant to us
Creating excitement itself drives people to want to gamble “Game On”
SALIENCE
It is hard to create relevance and differentiation in gambling.
Every book maker is using the same technolgy
platforms: OpenBet Global Draw
PRIMING
Our acts are often influenced by unconscious cues Verbal / Audio Images / feeling
“Noise of winning” “Chips make it a game”
AFFECT (THE ACT OF EXPERIENCING EMOTION) Emotional associations can powerfully shape our
actions People in good moods make unrealistically
optimistic judgments. Whilst those in bad moods make unrealistically
pessimistic judgments.
COMMITMENT
People who express commitment are more likely to fulfill their commitments.
Virtual / practice money get people betting without any risk, making it more likely they will place money latter
COMMITMENT
Get customers to place small bets first, to get bigger bets latter.
Provide free money, or no money online games. i.e Online Casino’s / poker sites.
Social gambling: “Getting people talking about gambling first, betting later”
UK online bingo game maker Gamesys‘ new game Bingo & Slots Friendzy is the first on Facebook App Centre to pay real cash prizes (Aug ’12)
SIGNING CONTRACTS – VISIBLE COMMITMENT
Motivating people to get fit through exercise A study compared two groups
Group A signed a contract specifying the exercise goals to be achieved
Group B group were simply given a walking program but did not enter sign a contract.
Source: Department of Health Sign-up to Interactive betting guides
SIGNING CONTRACTS – VISIBLE COMMITMENT
COMMITMENT CAN BE ACHIEVED VERBALLY A restaurant needed to reduce
the number of ‘no shows’
When taking bookings the receptionist used to say “Please call if you have to cancel”
The no shows reduced dramatically when this was turned into a question (From ~30% to 10%) “Would you be able to call if you have to cancel?”
(and waited for reply) Source: Robert Cialdini
EGO
We act in ways that make us feel better about ourselves When things go well in our lives, we attribute it to
ourselves; When they go badly, it’s the fault of other people,
or the situation we were put in. (known as the ‘fundamental attribution error’)
We are biased to believe that we perform better than the average person in various ways:
93% of American college students rate themselves being “above average” in driving ability
EGO
Online players can use the information to judge the likely actions other players based on previous data.
SharkScope is the largest database of poker players tournament results.
PokerStars on Pintrest – celebrating stars of the Game
LABELING INFLUENCES BEHAVIOR
The greater the expectation placed on people, the better they perform.
Thus, people with positive expectations internalise the “positive” label and succeed accordingly;
But this influence can also be detrimental if a negative label is used
WHO’S USING BEHAVIORAL ECONOMICS?
Actively used in government policy planning in many countries (See The Cabinet Offices “Nudge unit”)
Actively used in architecture of public buildings
Used in Direct Marketing and Shopper Marketing
Beginning to be used in marketing departments and creative agencies – few case histories
WHAT YOU CAN DO
Start by reading ‘Nudge’
Think about how these insights can be applied from the perspective of your domain
Remember that real people are not rational, linear creatures and that the behaviour mapping tools we use are a rough proxy to reality
Apply this thinking in the work you do, every day
47
THANK YOU