Happy New Gym Membership

This is the week that gym memberships swell to match our post-Christmas waistlines. Filled with mince pies and good intention thousands of guilt ridden folk sign on the dotted line for a year of spinning, rowing and swimming. Come February, an inch thinner and over the guilt, these same people begin to conveniently forget their gym kit in the morning and slowly drift from a life of peddling to one of pizza.

So it is with great timing that gym-pact.com launch a service that offers to ‘incentivise your exercise’ (their words not ours). The service operates via iPhone and lets you set a financial stake for going to the gym. If you fail to make it to the gym you pay out real money via your credit card. But you can also earn real cash for every workout you do - courtesy of the other users who didn't manage to make it to the gym! The idea came after Yifan Zhang, an economics major, took a class in behavioral economics and noted the power of loss aversion (that losing money is a stronger motivator than winning money) and decided to put it into practice.

We have also seen an anti-smoking initiative based on the same principle, in which aspiring quitters commit to make financial payments over a period of months. For them, a nicotine test at the end determines whether or not they get to keep their money.

These approaches are exciting because they recognise that cost - and financial value - is not fixed, but experienced highly subjectively. There is a keen psychological difference between gaining a reward from a third party, paying a ‘sunk cost’ like gym membership and experiencing the ongoing risk of financial loss. If the concept works as a motivator for the gym, how can the same thinking be used to encourage other positive behaviours?

The lost donation

It’s crazy that having successfully inspired someone to give to charity, you’d sacrifice their donation to shoddy user experience. But according to UX specialist Nomensa, 47% of people who visit a website intending to make a donation don’t get to the end of the process.

Why is it that such abysmal conversion rates are so readily tolerated? It may be lack of understanding about UX or digital, limited focus on measurement and analytics, or perhaps a cultural tendency to invest in 'visible' fundraising activities versus supposedly frivolous spending on a website.

But perhaps we also overestimate the power of our own intentions.

It is an uncomfortable fact that having felt a rush of empathy for someone suffering and made the decision to give, a few extra clicks of the mouse can be enough to prevent us. Thinking about it rationally, there’s no way the mental effort caused by unintuitive design, for example, should figure. Yet our response isn’t a conscious, deliberate one – it’s the result of mental processes beneath our awareness.


On the flip-side, SMS shows the benefits of a behaviour-led approach. Not only does it allow instant, spontaneous donation in any context and without the need for registration, but it relies on a habitual process that comes effortlessly to most people. During the Haiti crisis, one in five American donors gave via text, as did 20% of Comic Relief supporters in 2011 – and an increasing number of charities have followed suit.


Removing barriers to action through better websites and other mediums makes intuitive sense. But the insights of behavioural economics go far beyond this – and uncover just how surprising and fluid human altruism can be.

Charities who wake up to the potential of fields like JDM (Judgement and Decision-Making) will take donors' psychological and behavioural needs as seriously as their heartfelt intentions.

Taking glucose seriously

People sometimes talk about lacking the ‘mental energy’ to complete a certain task. But relatively few professionals – or their employers – probably give it further consideration.
Yet when it comes to our ability to make decisions, mental ‘depletion’ is a more serious issue than we might imagine. Our brains are energy-efficient machines, which, when low on glucose, limit our expenditure by avoiding effortful mental computations. Cognitive tasks and logical decision-making, such as complex product purchases, consume a lot of energy, so can cause depletion. But they are also the tasks most affected by it.

A powerful example of this is shared by Daniel Kahneman in his new book ‘Thinking, fast and slow’, which relates to the performance of eight parole judges in Israel. These experienced judges have the task of reviewing parole cases and deciding whether to grant freedom from imprisonment. Each case takes just a matter of minutes, with around 35% of requests being approved on average. The researchers found compelling evidence of ego depletion when tracking the correlation between the judges’ decisions and their food breaks:

‘The proportion [of approved parole requests] spikes after each meal, when about 65% of requests are granted. During the two hours or so until the judges’ next feeding, the approval rate drops steadily, to about zero just before the meal.’

Besides being a cautionary tale about the impact of depletion, it’s also an interesting perceptive on the role of defaults: the judges defer to the default of denying parole when lacking in energy, but go the other way when fuelled-up. Defaults are one of the most accessible behavioural economics principles – that humans are prone to ‘going with the flow’ of what’s already in place. But this case is a reminder neither to see defaults in a vacuum, nor to view behavioural economics as a silver bullet.


At the same time, studies like this prompt us to question long-held assumptions about the ability of humans to make rational decisions – particularly in a professional context. It's certain that behavioural economics equips us with useful tools with which to better analyse these choices. For disciplines like B2B marketing, where a model of rational decision-making is still often assumed, this should be valuable food for thought.

Rory Sutherland on BE - part 2

Listening to Rory Sutherland’s comical and pithy oratory, it is easy to find yourself nodding along in a happy, unquestioning manner. It reminded us of belief bias, where a conclusion seems so plausible that the logical basis of the argument isn’t fully analysed!

That said, there were some lovely nuggets in Rory’s talk last week – and although we can't do him justice here, we’re delighted to share a few notes:

A double-standard. In a Midwestern office block, the slow lifts were causing frustration. A complex engineering solution would improve the speed of the lifts – but the cost would be significant. One bright spark came up with an alternative: putting big mirrors on each floor. This induced grooming and mild voyeurism, and consequently people didn’t mind waiting for the lifts anymore. A fantastic, counterintuitive solution. But it points to a double-standard. Why is creativity policed by logic, but not the other way around? Creativity is judged by the standards and metrics of accountants. Yet engineers implementing a costly technical solution don’t get penalised from not coming up with a creative, cheaper alternative! Why is no-one is fired for being unimaginative?

Time. The lift example also points to the subjective nature of time. Time is not fixed but experienced according to our context, emotional state and so on. Psychology provides us a different way of viewing problems – and so leads to some simple and economical solutions. Why spend a load of money improving the speed of trains in the UK? Just give people Angry Birds and time loses all meaning! What’s an extra few minutes with comfy seats and free wifi?!

Language. Talking about marketing is a bit like talking about astrology. You’re fine doing it with a fellow believer. But talking to finance guys about brand iconography is like going to a physician and talking about crystal healing. With BE, we can challenge existing financial models, while speaking in a language that comes much more naturally to the finance guys. BE provides a cogent model and language.

Rory Sutherland on BE

We're excited to be hearing from Rory Sutherland again this week. Rory is Vice Chairman of the Ogilvy Group and a long-time advocate of behavioural economics (BE).

 

In past years, Rory has given some classic speeches on the topic - with his words ringing out from the heartland of UK advertising. Championing BE also characterised his Presidency of the Institute of Practitioners in Advertising (the IPA) in 2009.

 

He once stated:

“The great issue in our industry over the last 15 years is that, while there has been an explosion in the technologies and media available to marketers, our models and metrics describing human behaviour and decision-making have often been left stuck in the 70s. The emergence of behavioural economics changes that and at last provides the marketing industry with a framework fit for purpose for the next century”

 

Now that perspective resonates strongly with us - not least with respect to B2B Marketing.

For those of you who haven't seen Rory's TED Talk, 'Sweat the small stuff', we highly recommend it!

 

 

 

Governing insights

‘The Nudge Unit’ has had a fair bit of press lately – including a recent review of its work on Radio 4 (worth a listen). Yet although this is good news for the public profile of behavioural economics (BE), it sometimes gives the impression that BE is the domain of a select few, not a practical option for local government.

With this in mind, we were interested to hear what would be said at the Institute for Public Policy Research (IPPR) event: ‘Behavioural economics and its role in policy making’. The seminar included a presentation from central government that made it clear how seriously they take BE.


Here are three key points that resonated with us:
1.    Prioritise insight
Understanding your audience through psychology is an important part of the equation. Many policymakers still rely on using surveys, despite the fact that they only measure explicit attitudes and are skewed by the environment in which the survey is taken, the person asking the questions and the way that questions are framed.

2.    Beyond government
The subject of behavioural economics is a hot topic that introduces a new system of thinking. The implications and uses for our society are widespread – certainly not limited to government.

3.    Nudge locally
The central government’s ‘nudge unit’ is doing some great work, from persuading people to pay taxes or donate organs through to getting people to complete forms properly (one pilot study found that asking for a signature at the top of a legal document rather than at the end made people less likely to make careless errors). Yet despite the importance of centralised work, the session really emphasised the role of local authorities in taking the lead.  They were described as being ‘better placed’ to understand and address the unique needs of their city – and thus to influence behaviour at a local level.

The fact that the event was heavily oversubscribed may well indicate an appetite within the localities to pick up the 'nudge baton'.

Getting energised about behaviour

Last week some of the PrimeDecision team attended Communicate 2011, the annual conference for environmental communicators. There we witnessed a real appetite among the attendees to understand the practical application of the psychology of behaviour. It was fantastic to see Professor Geoffrey Beattie, prolific psychologist at Manchester University, sharing some of his recent findings – and sparking more questions than any other speaker slot.

In a whistle-stop tour of recent research, Prof. Beattie tackled the distinction between implicit and explicit attitudes – and the gap between what people say and what they ultimately do. In one study his team had asked people questions about green purchases while tracking their body-language. Even though they all said positive things about making green choices, their hand gestures would betray the truth – and predictably confirm or contradict what they were saying. In another study the psychologists were able to predict which candidates people would choose from a selection of CVs, based on whether they were holding implicit racist attitudes. It's fascinating that such strong biases can exist in people who are not consciously aware of them. The team are also doing extensive work with eye-tracking to understand how people process environmental messages on product packaging. We'll definitely be keeping tabs on their progress.

Interestingly, over six thousand miles away, a roundtable organised by the Energy Studies Institute at Singapore International Energy Week was taking place and grappling with the same topic of irrational behaviour. The speakers there challenged the way energy is described, discussed green envy and explored the implications of behavioural economics for energy policy. A short summary from the session is available here. It’s reassuring to see such growing global recognition for the role of psychology in making green choices.

The language of sustainability

Recent contact with organisations like ThinkFutureNow and Bristol Green Capital has certainly helped to crystallise PrimeDecision’s commitment to sustainability. But although our intention to run a green business feels strong and genuine, we are conscious of how vulnerable we all are to contextual influence. Surrounded by sustainability professionals at an event like Communicate, it is easy to be swept along by others’ commitment and enthusiasm. But in everyday life, sometimes the smallest things can deter or drive sustainable behaviour. To create meaningful change, we need to use these factors to our advantage – and be honest about how fallible we humans are.


We found a lovely example of how language can impact green behaviour when visiting Schumacher College. Naturally they place a lot of emphasis on recycling – and have a range of bins for cardboard, cartons, glass, aluminium, compost etc. Now although few people would disagree overtly with the idea of recycling, in the midst of a busy day it can often seem easier to use the general rubbish bin instead. Throwing rubbish into a bin is such a familiar and automatic action. Yet instead of calling it ‘general waste’ or ‘the bin’, Schumacher bluntly labels their bins: ‘Landfill’. Through simple reframing, it disrupts that familiar action and makes the environmental impact so much more apparent. It seemed to us a fantastic antidote for everyday laziness.

We don’t currently have evidence quantifying the impact of this particular change, or the means to encourage the spread of this practice. But it is important that we, and other organisations, take the time to do so. For although seemingly minor, these little cues can have a huge impact on our ability to adopt the sustainable behaviours that we wish for.

Behavioural biases: a comprehensive list

‘Choice overload’, ‘placebo effect’ and ‘cognitive dissonance’ are just a few of the phrases used to describe behavioural biases. Terms like ‘choice overload’ are relatively easy to grasp: simply put, too much choice makes us indecisive. But how confident would you feel leading a conversation about ‘unit bias’?

With so much information about biases scattered across the internet it can seem impossible to find a definitive list. Yet psyfitec.com has come to the rescue by recently producing and publishing a single document that lists biases from A to Z. They have defined names and meaning, and in an additional act of heroism have linked to case studies and more insightful explanations of the terms. You can find this gem of a document here.

MINDSPACE: a behavioural checklist

How do you encourage public policy-makers to integrate behaviour into their thinking? Well one piece of the government’s answer is a simple mnemonic: ‘MINDSPACE’

This has been around a while, but has popped up a few times in conversation lately so we wanted to share it:

Messenger: we are heavily influenced by who communicates information

Incentives: our responses to incentives are shaped by predictable mental shortcuts such as strongly avoiding losses

Norms: we are strongly influenced by what others do

Defaults: we 'go with the flow' of pre-set options

Salience: our attention is drawn to what is novel and seems relevant to us

Priming: our acts are often influenced by sub-conscious cues

Affect: our emotional associations can powerfully shape our actions

Commitments: we seek to be consistent with our public promises, and reciprocate acts

Ego: we act in ways that make us feel better about ourselves

Now of course the full report recognises that the challenge is much greater than knowing about these biases in a general sense. Policy-makers must develop methodical, creative and measurable applications for them.

Check out the full report here. It includes some great nuggets across a range of policy areas – from obesity to crime prevention.