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Behavioural economics
in digital marketing
What is behavioural
economics?
Versus
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.

Rory Sutherland, Vice Chairman, Ogilvy Group
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.
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
Behavioural economics in digital marketing



Choices can be
designed.
Behavioural economics in a nutshell:

Employing hidden forces
to shape decisions
In making decisions about life and what we buy and do, the
context, framework, interface, medium and pathways through which
we reach decisions may have a greater influence on the decisions we
take than the long-term consequences of the decision.
Behavioural economics in digital marketing:

Engineering the smoothest
path to conversion
                          High
                                                                           Triggers
                                                                        succeed here




                         Motivation
                                                                         B=MAT




                                        Triggers
                                        fail here
                           Low
                                      Hard to do                             Easy to do
                                                            Ability
                                                    BJ Foggs’ Behavioural Model
The Art of
             Choosing
             Sheena Iyengar


Mental jam
Paradox of
choice
Too much choice leads to decision paralysis.
Limiting choice online

   Increase click throughs by
focussing on one or two choices.
Limiting choice online

Increase social sharing by giving
  salience to the key channels.
The best guide to Singapore shopping and dining:

Go where the queues are.
Social proof
People assume the actions of others reflect correct
behaviour for a given situation.
Social proofing online

Instill trust, reassurance and respect
Social proofing online

Drive adoption
Social proofing online

Make an idea travel
Social proofing online

Increase desirability
578 Christmas
cards to perfect
strangers.

117 responses
received.
Theory of
reciprocity
An inherent human need to return a favour that was done for us.
Reciprocation online

Generate awareness and buzz
  through social payment
Reciprocation online

Create advocates by starting with:
       “what can I give?”
Reciprocation online

Build mutually beneficial communities
    by enabling mutual admiration
Absence makes the heart
grow fonder
Scarcity
creates value.
Using the scarcity principle online

Drive traffic to your stores
Using the scarcity principle online

Target hot prospects and
 lost carts to bite the bait
Using the scarcity principle online

Stoke the fire closer
to conversion points
Unfamiliarity
breeds contempt.
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          3
Default position:                        Default position:
You are not a willing                    You are a willing
donor                                    donor
1


    2



    3


              Setting the default position

Set the default, but ease the adoptive
process by providing pre-launch opt-ins
Set the context.
Framing
People are strongly influenced by the way choices are framed
(i.e., presented).




                               90% lean             10% fat
Framing in digital marketing

Create desirability around price
     by using an anchor
The Goldilocks Effect




                Framing in digital marketing

 Create desirability around the
option that’s right for the business.
The power of the (publicly) written word.
Commitment
People like to believe that their behaviour is consistent with their
beliefs.
Leveraging commitment in digital marketing

Guide future behaviour by
getting people to publicly
  commit to something
Leveraging commitment in digital marketing

Create advocates by actively
encouraging content sharing
Progress report cards for everyone
Feedback loops
Create pathways of desired behaviour by making behaviour visual in
the form of personal informatics
Feedback loops in digital marketing

    Encourage consumers to
 reveal more information about
themselves for a relevant benefit.
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 providing
visual progress reports against set goals
Loss aversion /
Prospect
Theory
Consumers feel a bigger absolute impact Losses hurt more than
gains feel good.
                                            #youprefer
                                          Income
                                            Tax    VS      VAT
Drive adoption by giving out
      limited free trials
Symbolic non-solution?
data             FRAMING              mobile


SOCIAL PROOF          purchase        FEEDBACK LOOP


     apps          LOSS AVERSION            social


                                        PARADOX OF
STATUS QUO BIAS      crm / loyalty
                                          CHOICE


 click throughs     COMMITMENT          website design


   SCARCITY              edm             RECIPROCITY


 Clearly understood principles for driving conversions
Recommended:

     http://www.behaviormodel.org/
Q&A

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Behavioural economics and digital marketing