Behavioural economics: When push comes to nudge

A growing number of big brands and agencies are applying the principles of behavioural economics, or nudge theory, to great effect, writes Andrew McCormick.

TfL's Barclays Bike scheme enabled behavioural change rather than telling people to alter their habits
TfL's Barclays Bike scheme enabled behavioural change rather than telling people to alter their habits

Behavioural economics (BE), also known as nudge theory, has been kicking around the marketing industry for the past few years, with various debates on its merits but few practical examples of it in action.

Briefly, BE examines consumer activity through understanding social, cognitive and emotional factors behind purchase decisions. It then uses these insights to redefine the choices offered to customers.

It may have been gaining attention, but Stuart Bowden, deputy managing director of Vizeum, who sits on the IPA BE committee, says: 'It is clear that the IPA's focus on this area has resulted in a majority of brands being aware of the main themes and ideas of BE, especially choice architecture, but the chasm between knowledge and implementation remains significant for many.'

Insight gathered by Marketing shows that marketers prefer practice over theory. That is why here we refer to practical, big brand examples - to encourage the sharing of knowledge in BE. And examples are gradually coming through, with BT, IKEA, Lloyds TSB, Transport for London and Hyundai (see boxes, below) leading the way with integrated marketing strategies based on BE. Domino's Pizza has become the latest brand to integrate the discipline into its planning process (Marketing, 11 May).

Deeper insights

'The new planning process has helped us focus our minds,' says Simon Wallis, sales and marketing director at Domino's. 'Not only are the BE principles fascinating, but the strength of the insights across all audiences is really promising. The use of our data to direct consumer planning makes those insights more relevant than ever.'

While BE and choice architecture are new to integrated strategy, some argue that online is the place to look for the longest history of case studies.

'Digital has been forward in adopting BE because it applies to user experience and design,' says Andrew Pinkess, director of strategic services at digital agency LBi. 'It's about understanding why people click on one thing and not another and influencing that.'

Pinkess says behavioural economics is firmly embedded in LBi's planning and creative departments, which was evident in the agency's E.ON Energy Fit campaign.

'We wanted to encourage people to save energy and the planet,' he says. 'But it's one of those things that if nobody prompts you, you just don't do it. The idea was to use small nudges to get people to save energy.'

Instead of shouting the energy-saving message, LBi prompted consumers to go online to assess their 'energy fitness'. The results of the survey informed a series of recommendations about what they can do to save energy and money and provided help in that process.

This attempt to bridge the gap between attitude and action is one application of BE. Further, the realisation that the consumer is not always rational and that their decisions change based on how a question is framed has led many brands and agencies to examine the choice architecture they offer. The assumption that consumers' attitudes or opinions dictate their behaviour is also being questioned.

Meanwhile, the application of BE is growing, and often from unexpected sources.

'We are finding that it is the smaller businesses, those with a chief marketing officer on the board or those where marketing is recognised as a real engine for growth, that have been the first to seriously explore how to benefit from the application of BE theory,' says Bowden.

Others will follow, and the themes and ideas behind BE are likely to become a natural, everyday and almost invisible part of the marketing industry over time.


- How can we get people to manage their money better?

As people become better at managing their money, they become more prosperous and likely to purchase more financial products. That was the thinking behind the Money Manager tool Lloyds TSB built for customers. Instead of the bank repeatedly mailing its customers reminders that they need to plan their finances, or leaving them to log into their accounts and see a long list of numbers, Money Manager breaks down customers' expenditure into categories such as leisure or travel. It then presents the information in easily digestible formats such as pie charts and bar graphs. The bank encourages customers to look at these graphs and prompts them to consider saving money in specific areas, therefore making their financial planning easier. Money Manager also has the benefit of portraying Lloyds TSB as a responsible bank at a time when banks are under pressure to improve their corporate social responsibility.



- How can we get people to reduce carbon emissions and congestion?

There's a danger that companies can be overbearing in their messages on climate change and energy. Why are power and travel brands telling consumers to save energy when they are not good at doing so themselves? And, importantly, how can they encourage behavioural change without antagonising customers? With this in mind, Transport for London (TfL) came up with the Barclays Cycle Hire scheme. Having previously relied on unsubtle messages telling people that cycling to work was good for them and the environment, TfL changed its plan. Instead of spending millions on messaging, it invested in creating a scheme that enabled behavioural change rather than telling people to alter their habits. By providing bikes for people at convenient locations, TfL took the hassle out of cycling - buying a bike, maintenance, storage - and provided a compelling proposition for consumers. By securing Barclays as a sponsor of the scheme, it landed £25m, too.



- How can we help consumers make a sound financial choice?

The insight that consumers opt for second-hand cars rather than new ones due to price is a constant problem for car marketers. The idea that consumers risk losing thousands of pounds as soon as they drive a new car out of the showroom is a proven fear among consumers. Research suggests that people can afford new cars, but do not see it as the best choice. In the US, Hyundai worked to redefine the choice between new and second-hand cars by being open about how much people will lose when they drive the car away for the first time. Instead of framing the choice in these terms, however, the manufacturer gave customers a guaranteed buy-back price. Now, on buying a new Hyundai, customers are guaranteed a price for their car up to four years after purchase. With a recently launched TV campaign describing the deal, Hyundai is hoping that reframing the options for consumers will take the 'fear of the unknown' out of the decision-making process.


- How can we help people switch careers to teaching?

Insight taught the Training and Development Agency for Schools (TDA) that, although people like the idea of switching career to teaching, they often compared the process to emigrating or leaping out of a plane. The issue is that applying to be a teacher is a long, stop-start process that many consumers fail to complete. To encourage behavioural change and help those who already had the ambition to become teachers, the TDA changed its approach. The idea was that a small action can lead to a more meaningful consideration of the big idea. The TDA used these insights to switch from TV ads that encouraged people to think about teaching as a career to use video content, blogs, teacher diaries, web chats and Facebook to provide people with support in the application process. Mike Olson, head of marketing at the TDA, says that bringing behavioural economics into the planning process has resulted in a record year for teacher recruitment.