Who is using behavioural economics?

A question I am often asked is "who is using behavioural economics?".  The question is not surprising given we tend look to what others are doing to help decide what we should do, so rather than publish my client list I thought I'd provide a brief run down on some businesses who have been publicly acknowledged to have utilised strategies from the behavioural economics playbook.  




Lloyds and Barclays banks

With the guidance of Procter research, the bank call centers were behaviourally tweaked through scripting and call pathways. Result?  Sales increase of 20%, satisfaction up 7%, conversion growth of almost 12% and staff confidence up nearly 18%. More on Procter's trial 

Westpac NZ

Used the behavioural insight that we spend on impulse to create a new App that allows impulsive saving.  Unfortunately the money still needs to be yours, but you can't have everything!  More on Westpac's App

IKEA
Always an adventure to shop in this monolithic retailer, the floor plan is crafted to disorient and stimulate purchase by weakening your sense of externally anchored prices.   More on Ikea


Hyundai
Overcoming our dislike of risk and ambiguity when buying a car extends to what the re-sale value is likely to be. Hyundai tell their customers so that their fear of the unknown is eliminated.  More on Hyundai 

Domino's Pizza

Is a 2-for-1 offer better at driving behaviour than a free bottle of soft drink?  Domino's in the UK have engaged their media agency to use behavioural economics in the planning process to optimise customer incentives. More on Domino's

Birmingham Airport

Turned an airport website from a cost centre to profit centre by simplifying the decision making process for customers. As a result, traffic and conversion for Parking, Travel and Newsletter sign ups were all impressively improved.  More on Birmingham Airport

Google

Celebrated for their use of behavioural economics to influence healthier eating by staff.  How? Healthier foods were easier to get to, smaller plates were provided and food choices were colour coded to indicate their nutritional credentials.  More on Google's cafeteria

US Cellular
Holes punched in the wall of an outlet by an angry customer triggered an overhaul of US Cellular's customer loyalty program using behavioural economics. More on US Cellular via Tibco (video)

Amp Financial Advisors

Teamed with the great Dan Ariely of Duke University (and author of the best selling "Predictably Irrational"), Amp's App for financial advisors used behavioural economics in its design to gain an average 76% conversion. More on Amp

But that's not all.  Given marketing is really about behavioural change, behavioural economics is also being utilised extensively by advertising agencies. Some of the leading agencies include Ogilvy UK, M&C Saatchi, BBDO, Draft FCB and Naked Communications.

From this quick run down you can see that behavioural economics has been applied across various industries and for a range of purposes; interface design, customer service, sales conversion and customer engagement, so the field offers great flexibility and delivers great results.  Sounds like a great opportunity for your business!

Find out more by emailing bri@peoplepatterns.com.au.

Unblocking the sale

One of the biggest barriers to purchase is fear that you are going to miss out on a better deal.  As consumers we sweat the price, wondering whether we should hold off and wait for the item to go on special. But as businesses, we want to lock in the sale today so how can you unblock your customers to get them to buy?

What's blocking the sale?
A recurring theme in my posts has been how loss aversion shapes a lot of our behaviour. It's where the fear of what we may lose is stronger than our motivation to gain. In this case, it's our fear that we buy the product today and it goes on sale tomorrow.  I know this sounds fairly innocuous, but we are psychologically tormented if we realise we have missed out on a better price. The extent of torment is of course commensurate with the value of the product - buying apples today when they will be cheaper tomorrow won't keep me up at night. But buying a new computer and seeing the same model for $500 less the next week will hurt.


Intensifying the sense of loss aversion is the availability of pricing information.  Thanks to the digital age, consumers have more pricing data available than ever before to ingest before transacting.  Whilst in general terms this is a good thing for the consumer, it can also mean they are so trapped by the search phase that they don't get around to making the purchase.

Unblocking the sale
As a result of information overload, search intermediaries like getprice.com.au, dealsdirect.com.au and myshopping.com.au have popped up to aggregate product pricing and feature information for consumers.  But that is just the start. To move customers into the decision making phase, US based e-commerce startup Decide uses a pricing prediction model to power its "Buy" or "Wait" app that helps consumers know when the product they want is worth acting on. This is a perfect example of how to overcome loss aversion.


However, whilst Decide might be great for them as an intermediary and great for the customer, as a business you want to overcome "wait" and get them to buy today.  Knowing that your customers are armed with lots of pricing data but still prone to inertia, you need to employ tactics to unblock the sale.  Here are three options to consider;

Price guarantees - providing the customer a guarantee that you will match or beat the price of a competitor even after the sale has been made is a very effective way of unblocking the sale.  The customer has nothing to fear and everything to gain by dealing with you because they get the goods today and can enjoy them without continuing to price hunt after the purchase.

Don't ever discount - this depends on your competitive situation, but if you have a product or service that is clearly differentiated you should consider a policy of no discount, ever!  Why? Your customers will never have to worry about which day they shop with you because there is no risk they will miss out on a better deal.  I can buy a product from Apple today knowing that it won't be on special tomorrow.

Trade-in guarantees - a clever tactic to stimulate sales today by guaranteeing future value has been introduced by car maker Hyundai in the US.  The Assurance Trade-in Value Guarantee has been launched to overcome customer fear of what they 'lose' on car depreciation.  According to the press release;


"Purchasing a new vehicle is one of life’s big events. You want to know everything you can about the true value of your options. But at the time of purchase, how can you know the future trade-in value of the vehicle you are considering?


Introducing the Hyundai Assurance Trade-In Value Guarantee. A program that future-proofs the value of your new Hyundai by guaranteeing today exactly how much it will be worth, two, three, or four years from now.


Hyundai: Impressive value today. Guaranteed value down the road." 

Hopefully you are now looking at your business a little differently.  Whilst a lot of our time and thinking as businesses is on how the customer will benefit from our products and services, a big part of our sales process actually needs to be dedicated to overcoming our customer's fear of what they may lose. Tackle that and the sale will follow.


Image from http://www.hsptravel.com.au/uploads/pics/price_guarantee.jpg