The Yellow Papers Series

How to Influence Behaviour, Not JustAttitudesA Hitch-Hikers Guide to Behavioural Economics

Behavioural Economics

The term sounds dry, academic, intimidating even. But read on, because it deals in insights right at the heart of creating effective communications. In particular, it reveals a stark human truth – we consistently make irrational decisions. For instance:

• We’re happy to pay £3.80 for a cup of coffee in a shop, when it costs just 5p a cup at home

• If your plate or drink size increases, you’ll eat or drink more

• People pay more for leather seats in a new car than they do a new leather settee at home, even though they spend more time on the home settee

• Simply adding a new option can make people trade up to a higher price point

In fact, Behavioural Economics shows it’s possible to predict how humans will behave irrationally, and to change people’s behaviours through the way we apply creativity.

If you’re not surprised, you should be. This is radical news in the boardroom because it contradicts the major assumption underpinning 300 years of economic theory: that humans make rational choices. It also contradicts the Persuasion-focused classical marketing model.

Behavioural Economics can provide a roadmap for improving commercial effectiveness, through a new marketing approach which:

• Focuses more on changing human behaviour than attitudes

• Understands context is as important as content

• Pays the same attention to small details as the big idea

• Realises emotional associations are more powerful influencers than facts

• Designs experiences, not messages

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Learnings from Behavioural Economics highlight the opportunity for a new marketing approach focused on influencing behaviour, not just attitudes.

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What is Behavioural Economics?

Simply put, it’s the scientific missing link between psychology, neuroscience and economic cost-benefit analyses, that reveals how humans make decisions in practice.

It shines a light on the incredible power of ‘Choice Architecture’- the context and emotional feelings underpinning decisions – to radically bias our behaviour almost unconsciously. Choice architecture dominates every decision we make, from infrequent ones like buying a car or starting a pension, to everyday ones like whether to recycle or choosing a beer brand.

Behavioural Economists have found there are some predictable features in the way we react to choices – and studying this provides breakthrough commercial insights for marketers. It helps understand why people don’t do the things they should do, why they don’t do the things they say they’re going to do, and why they end up doing things they never thought they would do.

Dom Boyd is Strategy Director at DDB London, with 12 years experience across International and UK business. He has written articles for Marketing and the Financial Times, won IPA Effectiveness Awards on Direct Line and Ryvita Ltd, lectured at Surrey University and WARC, and moderated Behavioural Economics workshops for clients including the Central Office of Information.

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Proof it’s powerful stuff

The men’s urinal in Amsterdam’s Schipol Airport had an unpleasant problem: spillage. This increased the time staff spent keeping it clean and created an unpleasant atmosphere for people visiting. What to do?

The authorities hit on a behavioural insight that had a far more positive outcome than placing a polite sign above the urinal: the problem was not that men didn’t want to aim right, but that they didn’t know how to – they needed something to focus on during the process.

So they etched a fly inside the urinal.

The fly acted as a mental ‘nudge’ changing real life behaviour, and spillage reduced by 80%.

How to Influence Behaviour, Not Just Attitudes The Yellow Paper Series

Another example is the UK’s teacher recruitment campaign. The insight here was although the advertising made people want to be teachers, this wasn’t converting into applications as candidates ‘stalled’ during the process: it was too big a decision.

The marketing solution wove Behavioural Economics into a new strategy designed to break this big life-changing decision into a series of small steps, constantly nudging candidates along the journey like a pinball machine

Despite marketing spend reducing by -8%, the campaign lead to record levels of applications (+25%), delivering an astonishing ROMI of £101 for every £1 invested.

These examples illustrate how behaviourally-inspired creative thinking lead to results an approach focused on shifting attitudes would have struggled to achieve.

Social media!From

TV + Press!

Shift Attitudes!

Events!

SEO!

Digital!

Nudging !Behaviour!

TV!

Outbound!Calling!

eCRM!

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Why We Need to Un-Think Marketing

Marketers and economists instinctively understand sales are a result of Choice Architecture – hence promotional techniques like sales, introductory free trials,‘3 for the price of 2’ and the ultimate simplifying choice architecture device: brands.

But they’ve been trapped by the centuries old belief peddled by economists that rational man makes decisions consciously to maximise returns - whether buying a car, a house or a packet of cereal. Consequently, marketing theory fetishises rational benefits meanwhile communication objectives obsess about shifting purchase intent and message recall. This all assumes changes in behaviour are preceded by conscious shifts in attitude or intention.

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Unfortunately, Behavioural Economics demonstrates with unnerving scientific precision how this assumption is flawed: there’s often little correlation between our intent and actual behaviour.

Instead, Homo Economicus plays a bit part to Homo Emotionicus, mainly making choices through gut instinct. We are closer to Homer Simpson than to Spock.

 

Image of ourselves: Homo Economicus The uncomfortable reality: Homo Emotionomicus

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Homo Economicus, make way for Homo Emotionomicus

As Lucy Jameson and Richard Butterworth’s Yellow Paper ‘Do you know your audience as well as you think’ shows, millions of years of Darwinian evolution have hardwired human brains to operate as efficiently as possible – and the most efficient way possible is through our instincts.

These act as mental ‘rules of thumb’ – what Behavioural Economists call ‘heuristics’ - and offer huge advantages for us as a species. Homo Emotionomicus enables us to tackle processing-intensive tasks like driving a car, crossing the road or successfully navigating a supermarket shop, without thinking. Without heuristics, we’d be paralysed with inaction trying to contemplate cost-benefit variables of picking a pack of peanuts.

But Behavioural Economics highlights heuristics come with an unexpected design flaw – they distort information.

These distortions cause us to misinterpret information.

How to Influence Behaviour, Not Just Attitudes The Yellow Paper Series

Fig. 1 Fig. 2

Most people think the central circle on Fig 2 is bigger than Fig 1. In fact, they are the same size.

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Homo Emotionomicus, exposedHere’s a hitch-hikers guide to the Top 5 ways our mental heuristics distort information in practice to alter our behaviour.

1In the same way geese become strongly attached to the first thing they see in their environment, brains cling disproportionately to arbitrary associations – especially initial ones or ones promoted in the media - which quickly fix like concrete to forge long-term habits.

This explains why:

• Retailers place huge emphasis on sales, and ‘free’ – these act as irrational hot-buttons making us forget the financial downsides of decisions (how often have you bought an extra book on Amazon because the second book is shipped free, or an extra pair of shoes just because there was a sale on?)

• People think they are more likely to die in a plane crash than through statistically riskier activities like sunbathing or driving to the airport – because plane crashes are reported more in the media

• Diamonds increased in popularity only after they were associated as a visual sign of eternal love: a very powerful emotional anchor that also made us appreciate their expense

• When people move to a new city, they will anchored to the price they paid for a home in their last city, even if the average cost for an equivalent home is far lower

• Fashion and car brands use the prominent back-cover positions inside colour magazines, an anchor demonstrating they are on ‘public display’ and so highly sought-after

• Coke tastes better than Pepsi in branded taste tests, but the opposite is true when unbranded

Anchoring: We lean disproportionately on specific associationsQuestions to ask:

What powerful new associative connections can you make? (e.g. Diamonds + love; Cheese + Burger)

What connections are absent in your category or customer journey?

What behaviours could you adopt from parallel categories to forge a new anchor for your brand?

What new brand rituals can you start or amplify?

What anchor points make it easier for people to imagine the consequences of action or non-action, or remind them of the negative consequences of a past action? E.g. Bud’s ‘whassup’ acted as a powerful short-hand for shared good times.

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Humans have a mental blind spot – in order to prioritise information, our brains decode meaning through making relative comparisons. As result, the way a proposition is presented will strongly influence the action taken.

Consider this experiment on magazine subscriptions: adding a ‘decoy’ option of ‘print-only’ to The Economist, increased interest in the most expensive option from 32% to 84%:

2Framing: We make decisions based on relative not absolute information

So simply introducing a new option at an existing price point radically altered the perception of ‘good value’ – making more people choose the more expensive option! This highlights how our world is framed: the absolute information has not changed, but the way our brains interpret the relative value of the choices, has.

Framing explains why:

• ‘Still or sparkling’ is an incredibly effective tool for restaurants to increase their mark up – it stops people asking for tap water or hard-to-find random choices

• Rolls Royce sells lots of cars at boat shows – because after you’ve seen boats ranging from £1-£5m, a car worth £100,000 seems like a bargain

• Savvy restauranteurs know the most popular items on a menu will be the second-most expensive wines and aperitifs – because they seem like the ‘best value’

• You’ll pay more for leather seats in a new car as you would a new leather settee at home – because cars are associated more strongly with ‘enjoyment’

• People are happy to pay £3.80 for a cup of Starbucks coffee, when it costs 5p a cup at home, because competitors are similarly priced. This justifies the indulgence factor

• Doctors are more likely to recommend an operation if they are told 90 out of 100 people survive, than if 10 out 100 die (NB this is the same ratio)

• In an experiment with jam, when the number of brand options was reduced from 24 to 6, sales increased by 500% - too much choice literally blinds us to making a decision.

Questions to ask:

What problem can you reframe? E.g. Dove reframed ‘real’ beauty from flawed to desirable

What new framing behaviours could your brand start that locks out competitors (e.g. ‘Still or sparkling’)

What could get people to reframe value so they trade up?

What could you do to frame your brand associations via media e.g. Red Bull = intensity, via creating and sponsoring extreme events; The Economist = business success, via using profile posters highlighting how most people aren’t intelligent enough to benefit from it

How could you use wording to heighten emotional sensitivity?

How can you simplify the choice in a category or brand portfolio?

Before Decoy After Decoy

.com only $59 68% 16%

Print only $125 (the decoy) - -

.com and print $125 32% 84%

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Our brains are designed to be risk averse: in fact, losing something makes you twice as miserable as gaining the same thing. This has two consequences:

1. We ‘endow’ what we own with an inflated sense of value

2. We overstate the perceived risk of things we don’t have direct experience of

3Loss Aversion: We work harder to avoid losing things that they do to gain them

Loss Aversion explains why:

• Ticket touts can sell tickets for concerts at exorbitant rates on Ebay – the need not to miss out on the occasion becomes overwhelming, at almost any cost

• Devices like money-back guarantees and free introductory trials are effective: once you have something, it becomes hard to give it back

• The best way to get people to start a pension – and save a higher amount - is to allocate a percentage of future pay rises rather than a percentage of what people currently earn

• People remain very loyal to brands in higher-risk categories, such as cars

Questions to ask:

What ways can your brand prevent loss from happening, or remove perceived future losses?

How can you ‘endow’ people with your brand before they start to use it/buy it/start it for real? E.g. i-pod’s ‘clicks’; Coke bottle’s unique shape

What can you create to make people continue something difficult? E.g. Gym programmes

How can you amplify the feeling of missing out? e.g. deadlines or limited editions

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When the brain is swamped by local information, it prioritises the new. As a result we make decisions favouring short-term tangible pleasure over long-term rewards or consequences.

This explains why:

• People are more likely to splurge on big luxury purchases after receiving an expected windfall than if they’ve accumulated the same amount from savings

• People are more likely take out accident insurance after an accident has occurred – when the statistical odds of an accident happening have not changed

• People will reduce their average traffic speed more if they see an interactive sign telling them what their speed, than if they get a fine from a speed camera

• People eat fatty foods, even if we’re trying to lose weight – our brain is a slave to immediate gratification

• Visibly highlighting where a university health centre was situated on campus, with appointment times, increased tetanus-shot take up by 800%

• Mobile apps became successful when placed on the front menu of the i-phone (they’d previously been available, but within fiddly sub-menus)

4Immediacy bias: We respond more to information that is recent than is important

Questions to ask:

What nudging behaviour could make you visible every day?

What new information could help reinforce or encourage new behaviour?

How could you start or amplify ‘thank you’ moments?

How can you make a long process feel faster, or shorten actions?

How can you demonstrate progress?

What ways can you accentuate emotional high or low moments?

What are the top 5 behavioural barriers in the user journey, and how can you get up-close-and-personal so your timing is right? E.g. interactive road-signs

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Humans are creatures of habit because we are – literally – unthinking. The more we repeat a particular habit, the more automatic it becomes. This becomes reflexive and unconscious – we literally become fluent in the behaviour, even if it has adverse consequences.

5Status Quo bias: We unthinkingly do what we’ve always done

Questions to ask:

What automatic behaviours can you extend or start via defaults?

How can your reinforce experiential rituals? e.g. sounds, smell, touch, visual signifiers

How can you reduce the effort required?

What ways can you raise non-conscious habits to consciousness to stimulate behavioural awareness or self-improvement? E.g. diaries can help dieters

What automatic behaviour towards a competitor can you raise to the surface to prompt negative reconsideration?

This explains why:

• People eat more if their plate size increases

• Default options and self-filling forms are such powerful tools online

• Readers Digest would continue to be successful, even if most readers never read an issue (many people never read the magazines they subscribe to)

• 80% of car insurance is renewed with the same company – often despite increasing premiums

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New Opportunities

Behavioural Economics presents a number of exciting opportunities:

1. It highlights that a new marketing model is needed

The last decade has seen a quantum leap in understanding the way humans work. This shows our feelings predetermine much of our behaviour, not our logic. Our behaviour responds to associations, not announcements. We do things we say we are not going to, and don’t do the things we probably should do. And then we post-rationalise. Yet marketing and research practice remains stuck in the dark ages, fixating on a false picture of Homo Economicus emphasising benefit ladders, conducting cost-benefit analyses at the supermarket shelf and assuming consumer behaviour mirrors claimed intentions.

2. It shines a light on different sources of insight

Given this new view of how humans really work, we can find new insights in understanding things like heuristics. And we need to understand better which

behaviours we can nudge.

Sarah Carter’s Yellow Paper on ‘Researching the Brain’ goes into this subject in more detail, but techniques this new behavioural approach favours include:

Deprivation Studies and Repertoire Swapping; Semiotics and Linguistic Codes; Ethnography Observation and Digital Tracing; Photo Diaries and Pre-Tasking;

Customer Journey Mapping and Analytics; Hypnosis; and visual techniques such as scrap art and spatial drawings.

The time has come for a new more powerful, marketing armoury that recognises that messaging is less important than associative meaning; that facts are less powerful than feelings; that take-out is less important than tone of voice.

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3. It forces us to recognise that implementation is as important as ideas

In an ideas business, it’s easy to think that the only thing that generates value is the big brand idea. Behavioural Economics demonstrates why this is a not just a false assumption, but a dangerous one. The seemingly trivial is also critical. The way a piece of direct mail is written can have huge short term effects on decision making as can the way a menu is written or the order in which it is laid out.

In advertising we have spent too long obsessing about ‘the big picture’ - we also need to recognise the power of the ‘small details’.

4. It helps us solve business problems not just write ads.

Behavioural Economics can help us in our quest to become behaviour planners, not just advertising planners.

It gives us a glimpse of the game-changing value that creative solutions can have when taken upstream. The kind of inventive thinking that created the cheeseburger as a way to sell cheese, that increased diamond profits by positioning them as the ultimate symbol of eternal love, and that understood the best way to get people to start saving for a pension now is to ask people to pay into it from future salary increases.

The Idea!

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Insights!

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Execution 2!Execution 1!

Media! Media!

Media! Media!

Media!Media!

Media!

Media! Media!

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5. It provides a common language for ‘ad-brain’ to connect with ‘board brain’

For too long marketers and communications professionals have been outcasts from the boardroom. And no wonder – it’s hard to made headway in an EBITT conversation when your calling card is ‘that’s great….but look how our new animated rabbit amplifies your brand personality.”

Behaviour Economics provides a credible and science-based framework to persuasively articulate the commercial power and rationale underpinning new ideas.

Conclusion

It’s clear from the above that Behavioural Economics has profound implications for what we do and how we do it. Simply put, if you’re not using Behavioural Economics to apply creativity you’re missing out on making more profit. That’s a sentiment the great-grandfather of economics, Adam Smith, would surely have approved.

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DDB Worldwide Communications Group Inc (www.ddb.com ) is one of the world’s largest and most influential advertising and marketing services network. With more than 200 offices in over 90 countries, DDB provides creative business solutions by its proprietary philosophy and process built upon the goal of influence. DDB and its marketing partners create and deliver unique, enduring, and powerful brand experiences for competitive advantage.

DDB is excited by ideas. We invite you to visit our website to share yours and keep abreast of ours. We believe that creativity is the most powerful force in business and that ideas get sharper with more minds rubbing against them.