“I’d love to commission a Behavioural Economics project but I have never known how to spot when my challenge was relevant”.
These were the recent words of a marketing industry peer, in a discussion about how BE can help organisations to grow. She was well read on the literature, and aware of the widely-publicised success stories, but wasn’t sure how to implement BE in her own organisation. Knowing where to begin is a common challenge that we hear across the industry and it is something the following should help to address.
Behavioural Economics’ stock has never been higher. Following the publishing of Cass Sunstein & Richard Thaler’s Nudge, the establishment of the UK government's Behavioural Insights Team, and the awarding of the Nobel Prize in Economics to Thaler, BE has evolved from an academic curiosity to a legitimate commercial opportunity for both the public and private sectors.
Irrational Agency believe that BE’s immediate appeal lies in its ability to deliver provable commercial results using accurate and methodical tests and trials. Taking best practice from the lab, practitioners of BE identify opportunities to change behaviour, develop nudges to unlock the opportunities, and tangibly measure the impact of those changes and the subsequent return on investment.
At their best, BE interventions allow clients to create sustainable wholesale changes to the behaviour of large groups of customers or stakeholders, with oftentimes minimal investment. These could be anything from increasing response rates by rearranging words on the page of a letter, driving behaviour change with subconscious sign posts to the built environment, or increasing profitability by changing pricing options.
At Irrational Agency, we have been helping first-time clients bring the benefits of BE to their organisations. Below are some of the typical behavioural interventions that new clients use to introduce BE, enjoy its benefits, and deliver their first BE wins to their organisations.
Behavioural Pricing to help ING increase revenue
Irrational Agency worked with ING, a multinational European bank, to create a framework to design and test new behavioural pricing strategies. Across 10 countries the bank tested 25 different pricing changes including:
- Anchoring – communicating a higher starting price to show that the current price is great value
- Goldilocks pricing – presenting 3 price options to make the middle option more appealing
- Left-digit effect – using a supermarket strategy to set interest rates – e.g. 3.99% rather than 4%. This both gives customers better value and makes the bank's offer look more attractive, winning business from competitors
Results: The strategies were tested in field, using an empirical economics methodology, achieving an average revenue increase of approximately 5%. When rolled out across all the bank's products this could achieve returns as high as €800 million.
Behaviour Change to help Highways England create safer motorways
Social research may start with understanding attitudes and existing behaviours, but to be effective it must engage with changing behaviours to bring about better outcomes. Behavioural economics can tell you how to use nudges to change behaviour, and even how to modify attitudes and beliefs so that better behaviours occur as a result.
In a recent project with Highways England, Irrational Agency looked at safe driving behaviours and knowledge, finding that respondents overestimate the safety of their own driving and don't always know how to drive better. We designed interventions that will result in better and safer driving, and support the smart motorways program that reduces congestion and pollution, allowing drivers to get there faster with less frustration.
Results: Several dozen lives will be saved by the behavioural interventions now being put in place.
Behavioural Economics to help Danone increase sales
Subtle psychological effects can have a big impact on consumers' behaviour online, especially during a sales funnel. Behavioural economics shows how to change the text, pricing and layouts of a website to increase conversion rates online. Simple changes can often increase conversion rates by 40% or more.
Irrational Agency worked with Danone to change how information was presented in an e-commerce environment, testing the effect of:
- Showing information in a different order
- Reframing (e.g. "3% fat" vs "97% fat-free")
- Graphical changes such as showing separate roundels to highlight product features, vs straight pack shots
Results: We were able to show Danone how to increase clickthroughs to their product pages by 30%, and sales by 7-10% - evidence they could take to retailers and use in their merchandising negotiations.
If you would like to introduce the benefits of a behavioural approach into your organisation, we’d love to talk.