Behavioural Economics, a branch of behavioural science that studies decision making, was popularised by Nobel Prize winners Richard Thaler and Cass Sunstein in their book Nudge. Since then, a whole library of books has been created, from Daniel Kahneman’s Thinking Fast and Slow to our latest Book Group Discussion topic Alchemy, by Rory Sutherland.
Some Governments and firms have even set up their own “Nudge Units.”
It came from questioning the traditional view of many economists and business folk that decisions are based on self-interest and rational comparison of pros and cons. Thus, behaviour change is mainly achieved by informing, convincing, incentivizing or penalising people
The alternative view is that human decisions are strongly influenced by context, and more subject to emotions, “cognitive biases,” and social influences. A lot of work has been done in seeking nudges or prompts to address gaps between what people say they will do – eat healthier, become greener etc – and what they actually do.
Such factors have been found at work as much in B2B decisions as B2C, despite the need to be seen to make rational choices.
Of course, it’s much messier than “either – or.” As with so many things in business – and marketing especially – it’s too easy to generalise. The reality is nuanced, and the specific context has to be considered.
Examples of where BE seemed to work include:
Social Proof: The idea that people like to follow the herd – “I’ll have what she’s having.” Probably the most popular and effective “nudge.” One charity improved legacy donations simply by changing copy to read “many people choose to leave us a legacy.” Reviews and testimonials are examples of social proof. They work best when they seem to come from “people like me.”
Framing: When the Economist added a print only subscription alongside the original print+digital or digital only, the more valuable print+digital option rose from 68% to 85%
Scarcity: At its crudest – “while stock last” or “limited edition.” A more interesting example is Monzo Bank, who initially restricted the number of applications and created a waiting list for their current accounts.
Placebo: people report that red pain killers are “more effective” than blue ones with identical active ingredients.
Anchoring: The most common example is putting higher prices first to set expectations, so cut or lower priced items seem more attractive. By using coffee shops as a benchmark rather than ground coffee at home, Nespresso effectively changed the value equation.
Reducing Friction: removing the need for customers to register and letting them “checkout as guest,” helped one online retailer increase first time purchases by 45%.
The literature is full of examples and ideas – Richard Shotton’s Choice Factory or our Book Group choice, Alchemy might be good places to start.
If you want more detail on cognitive biases, here is a good overview https://www.verywellmind.com/what-is-a-cognitive-bias-2794963
However, it’s crucial to think how it might apply to your specific customer journey and to take small steps and test before going for BE wholeheartedly.
