Behavioural economics and digital marketing


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Applying the principles of behavioural economics to digital strategy

Published in: Business, Technology

Behavioural economics and digital marketing

  1. 1. Behavioural economicsin digital marketing
  2. 2. What is behaviouraleconomics?
  3. 3. Versus
  4. 4. The great issue in our industry over the last 15years is that, while there has been an explosionin the technologies and media available tomarketers, our models and metrics describinghuman behaviour and decision-making haveoften been left stuck in the 70s.Rory Sutherland, Vice Chairman, Ogilvy Group
  5. 5. Quit smoking BEHAVIOURAL CLASSICAL PSYCHOLOGY/ ECONOMICS ECONOMICS ADVERTISING Humans are Consumers are Humans are “predictably rational emotional irrational” Induce fear or guilt Pre-commitment: via anti-smoking Pledge to give up Prohibitive pricing for campaigns smoking in a public cigarettes forum like Facebook that Deter using will help people control grotesque images future behaviour.
  6. 6. Ease traffic congestion in Singapore BEHAVIOURAL CLASSICAL PSYCHOLOGY/ ECONOMICS ECONOMICS ADVERTISING Humans are Consumers are Humans are “predictably rational emotional irrational” Fixed fee ($60 per It’s cool to cycle to ERP: Institute a month) to drive in work. variable “pay for Feel the pinch! “restricted zones”. usage” system, Prohibitive pricing for Make friends by where loss incurred is car ownership carpooling. made visible every Increased parking time the option is charges used. Increased vehicle taxes
  7. 7. Behavioural economics in digital marketingChoices can bedesigned.
  8. 8. Behavioural economics in a nutshell:Employing hidden forcesto shape decisionsIn making decisions about life and what we buy and do, thecontext, framework, interface, medium and pathways through whichwe reach decisions may have a greater influence on the decisions wetake than the long-term consequences of the decision.
  9. 9. Behavioural economics in digital marketing:Engineering the smoothestpath to conversion High Triggers succeed here Motivation B=MAT Triggers fail here Low Hard to do Easy to do Ability BJ Foggs’ Behavioural Model
  10. 10. The Art of Choosing Sheena IyengarMental jam
  11. 11. Paradox ofchoiceToo much choice leads to decision paralysis.
  12. 12. Limiting choice online Increase click throughs byfocussing on one or two choices.
  13. 13. Limiting choice onlineIncrease social sharing by giving salience to the key channels.
  14. 14. The best guide to Singapore shopping and dining:Go where the queues are.
  15. 15. Social proofPeople assume the actions of others reflect correctbehaviour for a given situation.
  16. 16. Social proofing onlineInstill trust, reassurance and respect
  17. 17. Social proofing onlineDrive adoption
  18. 18. Social proofing onlineMake an idea travel
  19. 19. Social proofing onlineIncrease desirability
  20. 20. 578 Christmascards to perfectstrangers.117 responsesreceived.
  21. 21. Theory ofreciprocityAn inherent human need to return a favour that was done for us.
  22. 22. Reciprocation onlineGenerate awareness and buzz through social payment
  23. 23. Reciprocation onlineCreate advocates by starting with: “what can I give?”
  24. 24. Reciprocation onlineBuild mutually beneficial communities by enabling mutual admiration
  25. 25. Absence makes the heartgrow fonder
  26. 26. Scarcitycreates value.
  27. 27. Using the scarcity principle onlineDrive traffic to your stores
  28. 28. Using the scarcity principle onlineTarget hot prospects and lost carts to bite the bait
  29. 29. Using the scarcity principle onlineStoke the fire closerto conversion points
  30. 30. Unfamiliaritybreeds contempt.
  31. 31. Status quo bias People will usually follow the path of least resistance when given options.• I’d like to register as an organ • I do not wish to register for organ donor donation 2• I’d like to skip this question 1 • I’d like to register • I’d like to defer my decision • I’m already registered 3Default position: Default position:You are not a willing You are a willingdonor donor
  32. 32. 1 2 3 Setting the default positionSet the default, but ease the adoptiveprocess by providing pre-launch opt-ins
  33. 33. Set the context.
  34. 34. FramingPeople are strongly influenced by the way choices are framed(i.e., presented). 90% lean 10% fat
  35. 35. Framing in digital marketingCreate desirability around price by using an anchor
  36. 36. The Goldilocks Effect Framing in digital marketing Create desirability around theoption that’s right for the business.
  37. 37. The power of the (publicly) written word.
  38. 38. CommitmentPeople like to believe that their behaviour is consistent with theirbeliefs.
  39. 39. Leveraging commitment in digital marketingGuide future behaviour bygetting people to publicly commit to something
  40. 40. Leveraging commitment in digital marketingCreate advocates by activelyencouraging content sharing
  41. 41. Progress report cards for everyone
  42. 42. Feedback loopsCreate pathways of desired behaviour by making behaviour visual inthe form of personal informatics
  43. 43. Feedback loops in digital marketing Encourage consumers to reveal more information aboutthemselves for a relevant benefit.
  44. 44. How many more miles do I need to achieve PPS membership? Loyalty Am I on my way to retaining or losing my Elite status? Feedback loops in digital marketing Compel loyalty by providingvisual progress reports against set goals
  45. 45. Loss aversion /ProspectTheoryConsumers feel a bigger absolute impact Losses hurt more thangains feel good. #youprefer Income Tax VS VAT
  46. 46. Drive adoption by giving out limited free trials
  47. 47. Symbolic non-solution?
  48. 48. data FRAMING mobileSOCIAL PROOF purchase FEEDBACK LOOP apps LOSS AVERSION social PARADOX OFSTATUS QUO BIAS crm / loyalty CHOICE click throughs COMMITMENT website design SCARCITY edm RECIPROCITY Clearly understood principles for driving conversions
  49. 49. Recommended:
  50. 50. Q&A