Opportunity knocks: getting your buyer to answer

In the past week I've had two door knockers - those poor souls who have to go door to door to peddle their wares - attempt to win my business.  One succeeded and one failed, and here's why.

What was the product offer?
Door knocker one, let's call her Sally*, represented Energy Makeovers who on behalf of the Victorian government, are installing free Embertec 'smart switches' to reduce energy consumption.  Door knocker two, let's call him Bruce*, was from Fairfax, offering a free trial to The Age newspaper print edition together with a bonus copy of The Good Food Guide.

Some background on me.  I don't leave my appliances on when they are not being used, so I don't really feel like I am wasting much power and I do read The Age online and buy it occasionally on the weekend.  If you were segmenting me by my usage patterns, things would look shaky for Sally but encouraging for Bruce.

Then why did Sally succeed in getting me to agree to a smart switch where Bruce failed to get a paper in my hand?  The behavioural approach they took.

Day and Time: Beware depletion effects
Sally called on my house around midday on Saturday, whereas Bruce came by at 6.30pm Wednesday night.  This made a difference to me because by Wednesday night I had already made a lot of decisions in the course of my day.  As Jonathan Levav of Stanford and Shai Danziger of Ben-Gurion University examined in their study of over one thousand parole judges, when we get mentally depleted we tend to opt for status quo. In this case, my status quo was not to have a newspaper delivered so it was easier to say no than think about saying yes.

Sally on the other hand caught me at lunchtime on Saturday - fewer complex decisions had been taken leaving more mental room to face the task of hearing the offer.

Vividness: Help me see the outcome
When Sally came to my door she had the switch in a box, ready to go.  This made a difference because I could see the unit - it was real.  Whilst I had never bothered to respond to direct mail or marketing flyers about the switch, here was one on my doorstep with someone ready and capable of installing it.  We are enormously influenced by what happens in the immediate term and by the vividness of the what is being proposed, so having the units on hand and on display had impact.

Bruce came to my door with what looked like a script and holding a copy of The Good Food Guide.  Nice try - having the book there was a good idea.  But, the guide was not the core proposition, the printed newspaper was.  Why on earth did Bruce not have copies of the newspaper to give out?  Show me what I'm signing up for, don't distract me with 'steak knife' bonuses.

The catch of Free
Both Sally and Bruce had a 'free' product for me; a free power switch and a free trial.  There is no doubt that 'free' is the most persuasive price point you have at your disposal - it can definitely change behaviour because it wipes out the economic risk on the part of the buyer.  But with 'free' comes the invariable question, 'what's the catch?' which is the buyer's attempt to assess the social and psychological risk involved in the transaction.

Whilst Bruce may have been offering the newspaper for free, I was busy calculating the psychological trauma of getting out of a contract once the trial period concluded as well as the social implications of having a newspaper delivered.  Bruce's offer came with a commitment that I didn't want to make.

By contrast, Sally's free switch was also free of obligation.  If I didn't like it, I could remove it.  The psychological and social costs of the transaction seemed low so I  didn't feel that there was a hidden catch.

Treat reasons given for decision with caution
Having worked as one I couldn't help but think of the product managers back at HQ assessing the performance of their door knocking strategy.

Embertec would have been pleased because my house had one of their units installed.  They didn't ask me why I agreed to the unit so I can only hope that they know the transaction was won in large part by having the product in the hands of their representative.

Fairfax would have been disappointed to have missed an opportunity to convert a digital reader.  To his credit, before I closed the door Bruce asked me why I didn't want to take up the offer.  I told him that I read the paper online - which is true - but I did not tell him the real reason was I couldn't be bothered with the process; that I was midway through preparing dinner, the last thing I was thinking about was a newspaper and I was mentally fatigued.  When Bruce reports back to Fairfax, the results of this self reported behaviour will invariably influence the decisions they take in future even though it was not accurate.  Fairfax will never know that they could have won my business if the door knocking process had been different, and for product managers that is immensely frustrating.

Lessons for your business

• Make your product or its outcome vivid so that it is real to your buyer
• Segmentation can be meaningless if you don't carefully design the behavioural interaction
• Remember that free has a psychological and social cost that you also have to manage
• Reasons cited for a decision must be treated with caution
• Place greater emphasis on observation of behaviour to identify what elements of your offer work

* Names are fictitious

PS Did you know I can audit your website or marketing materials for behavioural effectiveness?  Just email bri@peoplepatterns.com.au to find out how.

PPS Why not join like minded colleagues by signing up to the People Patterns mailing list?  Every month you'll receive a short wrap-up of behavioural tips for business. Click here for the 20 second sign-up.


Image credit: http://www.rgbstock.com/photo/mfeb7f2/Doors+4

Innovative packaging bridges analogue and digital divide

How to simplify the experience of using unfamiliar technology?  This was the question resolved by Vitamins Design Consultants on behalf of Samsung who were interested in selling more smart phones to older consumers.

The answer lay in the packaging.

The roadblock to purchase
When you are unfamiliar with a piece of technology - could be a phone, oven, car, DVD player - it can inhibit your willingness to purchase.  After all, we all hate feeling like we are stupid, and not feeling capable to use something that other people obviously can is extremely off putting.

Removing the mental barrier
With this in mind, Vitamins determined that more could be done to support consumers in the initial stages of setting up and familiarising themselves with their new phone, and that this promise of support would inspire more people to purchase. 

Out of the Box
In a brilliant lateral move, Vitamins turned the packaging of the phone - the box it came in - into a storybook of what to do when.  As the user flicked through each page they were instructed to complete a stage of the set-up. For instance, the SIM card was embedded in the page with the instruction "This is your SIM card, the heart and soul of your phone, please lift it out".  

From there, the user was asked to physically slot the phone into the book, like placing a picture in a frame.  Each page took the user through the phone's interface - what to press to make a call, how to email and so on.  A perfect blend of analogue and digital!

Behavioural techniques
I love what Samsung and Vitamins did with their Out of the Box packaging because they used key behavioural insights and techniques;

• Overcoming loss aversion - we hate to feel stupid because it reduces our sense of identity. They created something that supported even the most nervous of new users. 
• Vividness - clear, concise steps meant that there was no confusion as to what to do in which order.
• Completion - once started, there was no giving up but also no need to.  Simple instructions lead the user through each stage so they ended up with a fully functioning phone and the confidence to use it. Contrast this with technology that you get home, try to set up, get lost in the manual and therefore leave it sitting as a white elephant.  My multi-function printer springs to mind as an example.

Lessons for your business
A few blog posts ago I talked about "consumption design'; that part of the product experience that relates to how the product is consumed.  Vitamins have demonstrated that the product (the phone) doesn't necessarily need to be changed, but the context in which it is 'consumed' can be.  We often limit our thinking about packaging to its functional benefits ie keeping the product free of damage and/or sexy of the shelf, but we should be thinking about how packaging can be behaviourally improved to enhance consumption.  Here's to thinking out of the box!

For more on Vitamins, visit http://vitaminsdesign.com/projects/out-of-the-box-for-samsung/

PS Why not join the People Patterns mailing list?  Every month you'll receive a short wrap-up of behavioural tips for business. Click here for the 20 second sign-up.

Don't underestimate the impact of fees on consumer behaviour

Imagine you are at an ATM withdrawing cash. Before you do, a message comes up reminding you that there will be a $2 fee for accessing your money through an ATM that is not part of your bank's network.  Do you proceed or do you cancel the transaction?

If you were an economist with the Reserve Bank of Australia (RBA), you would have predicted that most would proceed with the transaction. After all, it's only $2.  We lose that behind the couch.

Well, much to the chagrin of RBA financial wizards, they didn't count on the impact of consumer 'irrationality'.  Instead of consumers banking like they had in the past, when the fee for a foreign ATM withdrawal was buried in terms and conditions and you only found out when you looked at your account statement, consumers have turned away from using these ATMs. 

What can you learn from the behavioural economics of ATM fees?

Red rag to a bull
People are more likely to adapt to a new price if they are not constantly reminded of it - it's like a red rag to a bull.  In this case, there was no choice for the ATM owners - the communication of the fee was mandatory, but in your business you may have more flexibility.  If you can, parcel the fee in with the price point and/or change once and not every time the customer pays.

I'm buying the good not the service
In previous posts I've talked about delivery fees.  For instance, order through Amazon and you pay less for the book but get hit with shipping.  Order through Book Depository and you pay more for the book but shipping is 'free' (ie included).  

People hate service fees so much because they decouple the value of the good from the service in getting it to them. Why? Because you retain the product not the service. Your opportunity is to gain  advantage by offering to wipe the cost of service (ie offer "free delivery" or "free installation") because 'free' is extremely persuasive and 'free' on a hated cost of service even more so.

Choose your number 
Was the fact that the fee is $2 the issue?  I think it did have something to do with it.  A lower fee structure, say 50 cents or 90 cents and more customers would have proceeded with their transactions  because dollars and cents are psychologically different.  If I told you that you are entitled to a $2 discount after you've purchased $30 worth of groceries does that hold more or less appeal than me offering you 4 cents off a litre of petrol (which works out about $2 a tank if you are lucky)?  Judging by our slavish devotion to petrol vouchers, 4 cents is extremely persuasive.  As a business you therefore need to consider the number context of the fee or discount you are using.

The big lesson out of the RBA experience is that people's irrationality should not be underestimated. Where something looks inconsequential on paper, it can have dramatic behavioural impacts. Your job is to make sure irrationality works in your favour, and behavioural economics is your guide to knowing how. 

To find out more about what happened with $2 ATM fees, read Peter Martin's article "Banks' $2 fee has big effect"in The Age. 

PS Why not join the People Patterns mailing list?  Every month you'll receive a short wrap-up of top news from the behavioural sciences and other nuggets of goodness from me. Click here to sign-up.


(Image from http://www.bikyamasr.com/69294/india-launches-first-talking-atm-for-blind/)

Being a devil: Influencing your buyer's willpower

We are really good at tricking ourselves into acts of indulgence.


Take a study by Chandon and Wansink (2007) for instance that found that when people visit a 'healthy' restaurant, they tend to underestimate the calories they are consuming.  In effect, the restaurant's healthy 'halo effect' mucks with our ability to assess our behaviour.


And similarly, a study by Wilcox, Vallen, Block and Fitzsimmons (2009) that found that the mere presence of healthy items increased the likelihood of an indulgent item being selected.  In other words, we trick ourselves into thinking we have done the right thing by our mental calorie account through merely considering the healthy item and as a reward, select the indulgence.  McDonalds seem to be playing on this through their healthier options, luring us with salads and wraps but then bombarding us with burgers and fries once there.


As the researchers write 

"Results demonstrate that individuals are, ironically, more likely to make indulgent food choices when a healthy item is available compared to when it is not available... Presence vicariously fulfils nutrition related goals and provides consumers with license to indulge".

What do these studies mean?  Context is crucial and can lower our rational defences.  And as a business, you can and should influence that context.


Business implications
For businesses there are some opportunities to consider;

• If you are marketing healthy options, you need to contextualise your product.  Presenting salads amongst pies and sausage rolls may not be as successful as segmenting healthy and less healthy choices.  
• If you are marketing indulgent options, consider the role healthy products can play in stimulating choices in your favour.  Desserts tucked in amongst fruit and vegetables might be worth pursuing.  

And for businesses not involved in food, the lesson of context still holds. Do they see your product as an indulgence or a necessity?  Help them feel like they've earned a reward to promote purchase of indulgences and if your product is more utilitarian in nature, try keeping it clear of distracting 'goodies'.


PS Why not join the People Patterns mailing list?  Every month you'll receive a short wrap-up of top news from the behavioural sciences and other nuggets of goodness from me. Click here to sign-up.

Getting buyers to buy more often

Getting your buyers to buy more often by helping them know they need to is something every business should be doing.  Relying on your customers to design their own re-purchase cycle is leaving yourself open to forgetfulness, delay or worst still, substitution.


Here are three things you should consider implementing.


1. Build in cues of product redundancy
If you have a perishable product, most of your work will be taken care of by nature and health standards.  "Use By" and "Best Before" dates are examples of cues that are designed to protect the health of the consumer.


But what if your product's life cycle is not so obvious?


Take your pillow for example.  Every night you rest your head on a pillow you purchased maybe years ago, never thinking that it too has a useful life.  Not a great re-purchase model for pillow manufacturers.  Enter Tontine and their ingenious date-stamped pillow that reminds the customer that the pillow should be changed every two years, and serves as a cue every time the pillow case is removed.  Suddenly after the pillow's "expiry" you are not sleeping so well, worried about what pillow gremlins have been unleashed in the depths of the night.  For Tontine, whether people buy a new pillow immediately or just sooner than never, they have created a sense of product redundancy and improved their chances of repeat purchase.


So the question for you is whether your product has a life cycle, real or perceived, that you can highlight to your customers?


2. Activate re-purchase by providing a cue
Smart manufacturers give their consumers advanced warning of the need to take action. Examples include;

• Tissues that change grade and colour as you near the bottom. You know when your white tissue turns pink and scratchy that the good times are over.
• Rolls of cling wrap that include a reminder sticker to buy more when you near the end of the reel
• Car dashboards that signal when your service is due

And here is an interesting idea for food.  A recent study into self-control saw chips coloured red with food dye inserted at intervals in the Pringles-like packet. Whilst the objective of the study was to interrupt over-eating patterns, it shows that there are ways to include cues without interfering with the quality of the food.  


The lesson here is that you can help your customer avoid running out of your product by providing them explicit cues.

3. Make the cue transportable

It's great that you have created a need to re-purchase through redundancy and triggered the need to re-purchase, but there's still a long way to go between home and the cash register.  You need to help your buyer be reminded to buy your product in the context of purchase.

For example, ever had the experience of being out and enjoying a bottle of wine so much that you sometime later look for it in the bottle shop?  If only you can remember what it was called! Clever wine makers have closed this gap by providing a transportable cue in the form of a perforated, take-away tag on the wine label so that the customer can rip it off and keep it handy for their bottle shop hunt.


QR codes can likewise be used to close the gap between product use and repurchase...if only anyone used them.   But code scanning technology aside, mobile phones are definitely the key linkage between home and the retailer because they are with your customer in most contexts and used as a source of information and reminder.


The question you should be asking yourself here is how are you physically helping to remind your buyer to buy your product?


Repeat purchase is something that businesses hope for but often don't invest enough time and thought into.  Challenge yourself to look at how you can cue the need for re-purchase and you might be pleasantly surprised at the influence you can have over your buyer's cycle.


PS Why not join the People Patterns mailing list?  Every month you'll receive a short wrap-up of top news from the behavioural sciences and other nuggets of goodness from me. Click here to sign-up.



Images

Best before image: http://www.ers-online.co.uk/files/products/options/images/3879_26x12%20best%20before.jpg
Tontine pillow: http://cdn.mumbrella.com.au/2010/10/tontine-pillow-350x185.jpg
Wine label: http://themarketingguy.files.wordpress.com/2010/06/wine-label-1.jpg

Making dough from the right behaviour

Fresh from a breakfast seminar with Tom O'Toole, I wanted to share some of his pearls of wisdom plus some behavioural insights.


Who is Tom O'Toole?
Tom O'Toole is known as the Beechworth Baker, a man who started a bakery in a country town in Victoria (population 3,500) which, over the past 28 years, he has grown into a multi-million dollar, multi-site business.  He is now sought out by businesses across the globe to learn his recipe for success.


Business is very straightforward for Tom.  It's all about staff and customers.  As he says, 5% technology and 95% psychology and attitude.


Here are some of Tom's pearls;


Staff training:  "What if we train them and they leave?" "What if you don't train them and they stay?!"

• Tom's first nugget was in response to small business owners who lament spending money on staff who then leave (loss aversion rears its head). Yes, it's a hassle if you invest in someone who then leaves, but you don't really have any other option.  Instead, focus on creating an environment that they don't want to leave.

Staff empowerment: "If you wouldn't buy it, then don't sell it"

• Tom recalls being torn between anguish and pride whenever he sees goods disposed of for failing to meet the standards of the staff member in charge.  Whilst he may have disagreed with their decision, Tom knows it was theirs alone to make.  This is where too many owners and managers undermine their own policies when it comes to the marginal, subjective decisions.  Overruling means undermining. 

Customer focus: "You're not making 200 pies, you're making one pie 200 times"

• Tom used this when training a baker who was making 200 pies.  Known as the "Drop in the bucket effect", it can be hard to focus on the outcome of our work when we are producing things repetitively and/or en masse.  In this case, it was easy to see 200 pies but forget the 200 customers that would each have an individual experience of their pie.

Accountability: "Anytime I have a problem in my business, it's within my four walls"

• In other words, stop blaming external factors.  Your competitor, the roadworks out the front, the weather...Known as "actor-observer bias", we tend to blame negative outcomes on things external to us whilst thinking positive outcomes are always down to us.

Pricing:  "Quality and service will be remembered long after the price is forgotten"
Tom tapped into a few very powerful behavioural principles here.

• First, there's what is called the "hedonic treadmill". This means we overestimate the joy we will feel from a purchase (eating this pie will make me happy for weeks), because we adapt very quickly and move on.  But the experience of service and atmosphere will be with us longer.
• Second, we have a "remembering" and "experiencing" self.  This means we are persuaded by not only the experience but our memory of it, 
• And finally, we self-herd.  This means we follow decisions we've made previously so because the memory of a great quality pie and great service will outlive the memory of cost, we will be more likely to buy a pie in future.

Personal growth: "Everything you want is just outside you comfort zone"

• A believer in raising the bar and constant self-improvement, Tom challenges our "status-quo" bias where we tend to stay in our comfort zone.

Leadership: "When you are placed in charge, take charge"

• We can often be scared to assert ourselves as leaders because that can mean failure is on our head.  This is classic "loss aversion" where the risk of losing is more persuasive than the benefits of succeeding, so acknowledge that's what is holding you back and try anyway.

Communication: "Everyone smiles in the same language"   

• In talking about language gaps he has experienced here and overseas, Tom keeps it simple; See similarities rather than differences. We can all smile, and that's the greatest bonding device you can have.  Behaviourally, Tom is using our tendency to seek patterns and commonality to overcome our tendency to demarcate.

A refreshingly authentic and animated presenter, Tom is the poster-child for smashing through lazy mediocrity by keeping it simple and getting it done.  As he says, "you can starve to death reading a cookbook".  Time to get cooking. 


PS Why not join the People Patterns mailing list?  Every month you'll receive a short wrap-up of top news from the behavioural sciences and other nuggets of goodness from me. Click here to sign-up.


Image from http://blogs.abc.net.au/victoria/2012/03/by-popular-demand-tom-otooles-inspiring-conversation.html

What business are you in?

If I asked you what business you are in, what would you say?  Consulting, retail, manufacture, accounting, health...Well you're wrong, kind of. You see I think you are in the business of behavioural change because everyday you are influencing people to do something.  Buy, sell, read, write, talk, type, click, swipe, walk, run, turn up.  Each of us everyday has the task of influencing others to move from one state to another, and that's why behavioural economics is such an opportunity; it's a playbook on what you need to do.


Lessons from the fitness industry
Let's take some guidance then from one of the most challenging behavioural changes that we can make - getting ourselves or others into shape. The difficulty has always been sustaining the change once initial enthusiasm has worn off, and this is due to the potency of the outcome (looking better, feeling better) not being as forceful as the immediate attraction of other choices (lazing on the couch, staying in bed or eating the wrong foods).  After all, you can experience the benefits of the chocolate now, but the benefits of not eating the chocolate are distant and ambiguous. 


Given this challenge it is therefore no surprise that a range of websites and Apps have been developed to help people sustain the behavioural change of a healthier lifestyle.

GymPact App

One that garnered a lot of attention last year was GymPact because it charges you if you don't follow through on your commitment.  The concept is that our desire to avoid a penalty will be enough to push us towards fronting up at the gym when we would otherwise have been able to talk ourselves out of it. The App is clever because it creates activities in the short term to keep us on track as we inch toward to longer term benefit.

Another site that works for any type of personal commitment is StickK. Here you are required to make public your commitment contract and even put money on the line that goes to a recipient of your choice if you fail.  

A more recent example is SlimKicker.  I first heard about the concept last year when it's creator got in touch to discuss how behavioural economics could be incorporated to help keep people motivated and accountable.  


According to SlimKicker developer Christine Chu, the site is designed to maintain motivation and emotional engagement by rewarding and reinforcing progress.

"I think the main problem with being healthy is motivation. It's an abstract, overwhelming goal. I think the best way to counter this is to turn it into winnable games and small victories.

 So... my app makes living healthy, and fitness into a RPG game, where users earn points, and "level up' as they accomplish their health goals.

Everytime they add something healthy like veggies to their diet, they earn points. Everytime they complete a workout, they earn points. As they achieve more and more, they'll level up and unlock badges, and discounts/coupons to  rewards like spas, health foods, etc."

A few of the clever elements of SlimKicker include;

• Levels - people move through different fitness levels, collecting points and rewards along the way which breaks the task of 'getting fit' down to goals that are attainable. (Overcoming behavioural short-term bias.)
• Progress -  Throughout each level the user can see how far they have come and have to go. (Using behavioural principle of completion to secure continuation once started.)
• Inspiration feed - a sense of community has been created through users sharing how they are feeling about their successes and slip ups. (Uses social norming to influence behaviour.)

By far my favourite part of SlimKicker is the Challenges section. You can sign up to participate in challenge (for instance, no snacks after dinner) and be rewarded with points upon completion.  What's great about this is that you can see at a glance "who's in" and how many others are giving the challenge a go.

SlimKicker's Challenge

There are some areas of SlimKicker that can be further improved, for instance showing how many points are needed to complete a level, clearly stating that the website is free to join and explaining
how the site is financially supported but I think they are doing a great job of tackling behavioural change.

Applications for your business
Getting people to exercise and eat healthier is really no different to the challenge of getting people to buy something today when the benefit is not immediate.  Examples include building a house, securing investors for your proposal, ordering something online where you have to await delivery, signing up for a course, contracting a consultant and paying insurance. You need to overcome the pain of now whilst keeping your customer's 'eye on the prize'.

• Make the benefit vivid:  Draw it, mock it up, make a model...do something that ensures the customer can see what they are working towards.
• Use milestones: stage the process so that your customer feels like things are progressing.  Think of it like FedEx parcel tracking where your customer can see how far the parcel has travelled and how far it has to go.
• Keep the connection: communicate with your customer throughout the process so they feel comfortable that things are progressing.  I ordered a new iPhone cover through a Kickstarter project in December last year for expected delivery in January. Today I received project update number 18 advising me where they were up to in production, so whilst it's a long time to wait, I have been taken on their journey throughout thanks to their frequent and transparent communications.

It's easy to think we are  simply in whatever business we spruik on our business card or website, but always remember we are behavioural change experts and it is up to us to support our customers going from one state to another.  What better guide than Behavioural Economics?


PS Why not join the People Patterns mailing list?  Every month you'll receive a short wrap-up of top news from the behavioural sciences and other nuggets of goodness from me. Click here to sign-up.

PPS A short presentation I have put together on why every business should know about behavioural economics is available on this website and has been viewed over 1,200 times since being posted.

"From-To" image from http://www.rachel-levy.com/wp-includes/wp-content/uploads/From_To.jpg

Money jars of the mind

Does the money you put aside for bills have the same value as money you spend on fun and entertainment?  Behavioural Economics would say no because we tend to think differently about money depending on its context.  It's called "mental accounting", and whilst it has nothing to do with the mental health of your CPA it is very important to know about if you are running a business.


How ING Direct are using mental accounting
ING Direct in the US have cleverly designed savings accounts that can be split out into mental bank accounts.  ING customers can create as many sub-account buckets as they want and call them by a nickname (for example 'Trip to Australia', 'New car', 'Rainy Day' and so on).  According to the article in The New York Times, ING have introduced the tool to help people reach their savings goals but this is really about good business because in order to acquire funds through personal savings accounts ING (and all banks) have to overcome some behavioural blockers.

ING Direct My Savings Goal

Behavioural blockers
To get us to save more, banks have to overcome our

1. tendency to think short-term (ie I'll buy smaller items now rather than save towards a bigger goal) 
2. laziness (ie it's too hard to save so I won't bother) and
3. 'bunny in the headlights' inertia when overwhelmed by choice (ie I get confused by which bank and which accounts I should have so I'll just stick to what I have)

Behavioural enablers

ING's new savings site overcomes the behavioural blockers by using the following techniques;

• Vividness - we are more likely to act if we can readily comprehend the outcome.  By graphically representing the savings goal and allowing the customer to use personal and meaningful descriptors for the sub-accounts, ING are helping make the savings goals come alive.  Just think how much more likely you are to save towards "ski trip $2000", "emergency fund $500" and "new car $25,000" than leaving it all lumped into a generic account.
• Hedonic framing - we get a bigger buzz out of separate gains than a single one of equal value.  By splitting the accounts into specific goals, ING is improving the customer's willingness to save because there is simply more opportunity to attain success.
• Hyperbolic discounting - our impatience means we tend to like gains that we get now more than waiting for larger gains later.  This means we risk whittling away at smaller balances rather than building towards the larger target that might feel too far away. By breaking the goals into specific accounts, we can concentrate on a mix of shorter and longer term objectives and control our impatience without jeopardising the collective savings target. 

Business applications of mental accounting

There is an opportunity for every business to map out the 'mental accounting' that applies to their industry in order to look for behavioural blockers and enablers.  In short, it's about making the purchase decision easy for your customer.  Your customer will more readily spend money with you if they feel comfortable about justifying it to the bank manager in their head, so using the same principles that ING are using to motivate spending rather than saving, consider making the benefits of purchase to the customer vivid, encourage payment by credit rather than cash because it separates the pain of cost from the joy of purchase and if your product or service delivers a longer term payoff, bring some of the benefits forward to ensure the customer gets gains in the shorter term.

Images
ING from http://www.mybanktracker.com/bank-news/2012/05/17/ing-direct-tool-helps-set-savings-goals/
Money jar from http://totalwealthcoaching.com/wp/wp-content/uploads/2009/03/moneyjars1.jpg

The sweaty business of behavioural change

Imagine you are watching a focus group.  The topic is hygiene and in particular, how your gym can get people to wipe their sweat off the equipment. Low adherence to the policy has been causing complaints and some health issues around the club.  The discussion goes as expected with everyone agreeing they would feel revolted if they unknowingly use a machine that has not been wiped down, and all agreeing that they, of course, always wipe theirs off as long as it was easy to do so.  You watch as the group brainstorms some signs that can be placed to remind people of the policy and also where and how many hygiene-spray stations should be positioned in the gym. A few months after you've implemented the findings of the focus group and behaviour hasn't changed. Why?  

Awareness is not enough

This is the scenario my local gym is facing. Despite signs on every piece of gym equipment reminding clients to "Take your sweat home", "You have a towel - use it", and "Please wipe your sweat off",  and despite multiple convenient hygiene stations I reckon about one in seven people actually takes heed (and that one is, of course, virtuous me for a reason I'll come to).

So what's happening here?  Sure we all get grossed out by a stranger's sweaty trail, but when it comes to our own behaviour, could it be we don't think our sweat is offensive enough to mop up?

Give those doctors a hand

In a case well documented by Stephen Dubner and Steven Levitt of Freakonomics fame, Cedars-Sinai Medical Centre in the US decided to tackle a slightly more important issue of hygiene; hand-washing by doctors.  Did the medical staff know the importance of washing their hands? Of course.  But almost 4/10 failed to.   And this was contributing to bacterial infections sometimes leading to patient death.  So why were the doctors not washing their hands?  Ego was thought to play a big role.  The sense that "it's not my germs that harm people - it's those of my colleagues".  And before we shrug ego off as symptom of the profession, I think that's the same factor at play in the gym. 

Cedars-Sinai's aim was to get compliance up from 65% to 90% to meet required standards. They made some progress by running an awareness campaign by email and posters, providing bottles of disinfectant, and awarding spot coffee vouchers to those who washed their hands and this got them to 8/10.  For my gym, having staff parade the equipment and reward compliant clients might help, but seems like a lot of effort!

Why Cedars-Sinai Medical Centre has become a favourite case study is what they did next which saw compliance rocket to almost 100%.  One day after a typical lunch, a number of doctors were asked to take a culture of their palm, pressing it into a petri dish.  The results were striking, with the hidden to the eye bacteria seen vividly crawling around the flesh. Revolting. In a moment of brilliance the hospital then used one of these provocative petri images as a screen saver and watched as compliance rates soared.  Suddenly there was indisputable proof that it is you, me and everyone that carries germs, and simple actions can rid our hands of their bacterial dangers.  (And yes, this is why I am so vigilant when it comes to wiping off sweat.)

What it took for behavioural change

In the case of Cedars-Sinai Medical Centre, developing an awareness campaign was not enough.  And for my gym, whilst it is great to promote the expectation of hygiene on posters, it is not enough in itself to change people who intend-but-don't to intend-and-do.  As Dan and Chip Health cover in their book "Switch: How to Change When Change is Hard", use of negative emotion (like disgust) is great when people know intellectually they need to change. 

Cedars-Sinai made the issue personally confronting, overcoming the tendency we have through what is known as the Fundamental Attribution Error to rationalise our own behaviour due to the situation (I don't have time to wash my hands, I need to get on the bike before someone takes it) but judge the behaviour of others on the basis of character (I can't believe they are so irresponsible, how can they be so lazy?).   Cedars-Sinai levelled the playing field by demonstrating that all are equally impacted by germs. 

The lessons from Behavioural Economics

Let's look back to our focus group.  After the experience of the gym, we now know that there is a gap between what people say they'll do and what they actually will.  So what are some tips from Behavioural Economics that all businesses can use to help close this gap?

Vividness - a surprising and evocative image - like a hand in a petri dish - can shock us into new thinking.  Imagine if the gym had posters of bacteria on un-sanitised equipment?  Would it risk putting people off? Not if they are committed to exercise, and it would definitely get people to cleanse their machines before and after exercise.  

Herding - it is difficult to go against the herd because you risk being socially shunned. Even amongst a group of gym strangers, the more people you see wiping their machines, the more likely others are to.  Just like night clubs who pay cool people to show up, the gym could enrol and reward some clients for modelling correct behaviour.

Heuristics - we operate by rules of thumb, and are most likely to accept a new behaviour (wiping down) if it is connected to an existing one (exercising).  Imagine if the machine would not give you your work-out results unless you wipe it down first?  Or you needed to swipe a card to start the equipment, but the swipe card would only activate if it had been swiped first at a hygiene station?

Changing behaviour at the gym, at the hospital, in your line of work is tough, but it's also the reason why we are in business. After all, business is about moving people from an intended to actual purchase.  Here's the big tip; spend more time on what influences the actual behaviour and less on what people say they will do and you'll see your results flow. Happy changing.

PS If you like my blog, I'd love you to consider supporting my fundraising trek of the Larapinta trail. Every bit helps so to find out more, visit https://www.gofundraise.com.au/page/BriforICV  Thank you!

 Image from http://talktowarren.wordpress.com/tag/patient-safety/