Where behavioural economics tells us to look
I love behavioural economics it looks beyond what people say they will do and why they will do it, which is normally rational but often not true, to what they do and the context of why they do it.
Working with behavioural economics demands the skill of moving from observation to insight. Using these insights our clients can find new ways to nudge customers to create big differences in customers’ behaviours or interactions.
Why context is king:
People have a whole series of biases and heuristics that drive behaviour independently of their personal preference. For example:
They might just do what everyone else does (or what they think everyone else does) – this is especially prevalent in high risk markets such as finance or mobile phones.
They might just do what they did last time – which is very prevalent in low interest categories such as groceries
They might do whatever is easiest – going to a comparison site is a good example of this – trusting someone else to do the research for you
They might just be buying what is offered (or what they can see is offered), not what they really want.
Because of this context people’s predictions of their own behaviour or even stated reasons for their behaviour are prone to error. In these cases the context of the decision is far more important than its content as once we know this, we can influence it.
How we use context to get to great insight:
Thankfully, behavioural economics allows us to ask better questions.
We can understand people’s biases because people feel comfortable doing what they feel is ‘normal’ and usefully they can tell us what they feel is normal which enables us to understand the context in which they make decisions. How these norms are formed and how they are influenced is where true insights are found because once you change norms you can change behaviour. An example that illustrates this is how it used to be ‘normal’ to use cheques and there is still a generation who feel that this is the most normal way to transfer money securely, talking to someone who is over 70 about moving to contactless payments disrupts their view of what is normal in banking it is this perception of lack of normalness that makes them resist the change.
We can also understand how to change behaviours by combining this context with an understanding of what people prefer. When someone tells us what they prefer we get an insight into their ‘aspirational persona’, the person that a brand should help the person to be (if context were different). So, using the above example many over 70s want to be as financially secure as possible so contactless would need to lead on this as a benefit rather than convenience.
Behavioural economics tells us to take context seriously and this combined with understanding aspirational personas can lead us to stronger insights.