Natalie Horne - OTE London - Behavioural Economics

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Topic: Behavioural Economics

Key Takeaways:
How to hone in on human behaviour to market your product
Shaping communications to psychological decision-making tendencies
Improve ROI by becoming more effective at influencing choices to engage, act and buy

Published in: Economy & Finance, Technology
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  • People may judge the probabilities of future events based on how easy those events are to imagine or to retrieve from memory
  • People are generally attracted to options that dominate other options (Huber, Payne & Puto, 1982). They are also drawn disproportionately to "compromise" alternatives whose attribute values lie between those of other alternatives (Simonson & Tversky, 1992)
  • Forty-eight young adults completed a “language proficiency task” which would either activate a healthy lifestyle schema in the experimental condition or a neutral schema in the control condition. Participants in the experimental condition were more likely than the control group to use stairs, instead of elevators, to move up one floor to attend another unrelated study. 
  • Natalie Horne - OTE London - Behavioural Economics

    1. 1. 02/10/2013 Copyright © 2013 PrimeDecisionCopyright © 2013 PrimeDecision Behavioural Economics Natalie Horne Strategy Director, Prime Decision natalie.horne@prime-decision.com prime-decision.com | @natalie_horne
    2. 2. Who is Prime Decision? Marketing strategy with a behavioural edge
    3. 3. Copyright © 2012 PrimeDecisionCopyright © 2012 PrimeDecision What is Behavioural Economics?
    4. 4. homo economicus
    5. 5. Optimal, Normative Realistic, Descriptive
    6. 6. Get ready!
    7. 7. Which is the best option? a. 40% chance of winning £22.50 b. 5% chance of winning £180.00 c. 65% chance of winning £15.40 d. 25% chance of winning £36.00 e. 80% chance of winning £11.25
    8. 8. a. 40% chance of winning £22.50 £9 b. 5% chance of winning £180.00 £9 c. 65% chance of winning £15.40 £10 d. 25% chance of winning £36.00 £9 e. 80% chance of winning £11.25 £9 Correct =
    9. 9. Get ready!
    10. 10. More wins or losses?
    11. 11. More wins or losses? X 4 X 6
    12. 12. What did behavioural economists discover?  We are bad at judging probabilities  We are good at judging frequencies + many other patterns
    13. 13.  Primacy effect  Defaults  Endowment effect  Framing  Availability heuristic  Social norms/approval  Anchors  Priming  Commitment devices  Hyperbolic discounting Codifying human tendencies
    14. 14. Availability heuristic
    15. 15. Framing effects  Web subscription $59  Print plus web $125  Web subscription $59  Print only $125  Print plus web $125 52% increase 68% 32% 16% 0% 84%
    16. 16. Priming
    17. 17.  Primacy effect  Defaults  Endowment effect  Framing  Availability heuristic  Social norms/approval  Anchors  Priming  Commitment devices  Hyperbolic discounting Codifying human tendencies
    18. 18. Copyright © 2012 PrimeDecisionCopyright © 2012 PrimeDecision Applied BE
    19. 19. A creative approach to solving problems Behavioural science: Strategy Tactics
    20. 20. Copyright © 2012 PrimeDecisionCopyright © 2012 PrimeDecision Prosecute criminals Raise premiums Typical approach:
    21. 21. Copyright © 2012 PrimeDecisionCopyright © 2012 PrimeDecision Target behaviour: Get people to be more honest during the claim processes
    22. 22. Depletion Moral reminders Format Proximity Supervision
    23. 23. Experiment: Easter Bonus I recognise that I have moral obligation to complete this task honestly. 0% 1% 2% 3% 4% 5% 6% 7% 8% Control Opportunity Honesty Pledge 75% decrease in high claims 95% Decrease in maximum claims
    24. 24. Potential to scale  What would an insurance process look like that was designed to promote honesty? Claims process Marketing touch-points Customer communications There is a tremendous scope to apply psychological insights to reduce fraud
    25. 25. The Seven Lenses Script SocialStory Sync Sense Scenario Structure Our proprietary framework
    26. 26. Story:  What do people say?  What do they not say?  How do they justify their choices? Script:  What are the habits?  How could these be strengthened/ disrupted?  Which other scripts could be mimicked/leveraged? Social:  What are others doing?  Are they aware of this?  What form does/could this awareness take? Sense:  What are the stimuli?  How/are they perceived?  How does this affect their experience/choices? Structure:  Which choices are presented?  How are they framed?  What is the rationale for the order/defaults? Scenario:  Which external or emotional/personal factors could feature?  Is there scope to modify/personalise? Sync:  What are our own biases?  Have we tested our assumptions? Have we missed alternative contexts? Questions to ask: Script SocialStory Sync Sense Scenario Structure
    27. 27. Copyright © 2012 PrimeDecisionCopyright © 2012 PrimeDecision Typical approach: drive more traffic
    28. 28. Copyright © 2012 PrimeDecisionCopyright © 2012 PrimeDecision Target behaviour: Get (more) people to donate (more) during the online booking process
    29. 29. Script SocialStory Sync Sense Scenario Structure “Just £1”
    30. 30. In summary:
    31. 31. Copyright © 2012 PrimeDecisionCopyright © 2012 PrimeDecision Define target behaviours (measurable actions in specific contexts) #1
    32. 32. Interrogate (hypothesise, prioritise) #2 Script SocialStory Sync Sense Scenario Structure
    33. 33. Copyright © 2012 PrimeDecisionCopyright © 2012 PrimeDecision Experiment! #3
    34. 34. 02/10/2013 Copyright © 2013 PrimeDecisionCopyright © 2013 PrimeDecision Get in touch Natalie Horne Strategy Director natalie.horne@prime-decision.com prime-decision.com @natalie_horne

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