Applying Behavioral Economics to Identify and Diagnose Problems and Design Tools

BE Scenario Planning
The recent news about the decision by Publicis and Omincom not to merge ten months after the announcement# last July might end up benefiting clients even as it is an example of what agencies typically counsel clients against: lack of meetings of the minds. 

Whether it was a battle for control#, settling the issue of appeasing clients#, a clashing of cultures#, or the realization that big is not the same as effective#, the different interpretations remind us that we constantly seek a better understanding of human decision making.

Everything would go according to plan, if it just weren't for the people. People are complex, and we live in complex times. Collaboration might be a desirable trait, it is however still an aspirational goal rather than a reality.

As behavioral economics teaches us, to design tools and programs that help them do what they already want to do, we need to deal with people (and organizations) as they are, rather than as we would like them to be.

Understanding how we make decisions

Is the domain of behavioral economists. A paper published by the Center for Global Development# clearly defines what this means and how it works. From the abstract:

Behavioral economics differs from standard economics in that it uses a more realistic (and more complicated) model for people; it differs from psychology in that it maintains the focus on institutions and the contexts in which decisions are made. Behavioral economists study how the context of decisions interacts with our expanded understanding of human psychology.

Many of the tools used by behavioral economists are about helping people make the choices they themselves want to make. A sample application we use ourselves to remember something: set a reminder, or a prompt of some kind. I send emails to myself with notes. From the hand raisers in a recent meeting it looks like many others do as well.

We should think of behavioral economics as the study of environments to identify, diagnose, and design tools to help with intention-action gaps.

Marketing in social

Marketers do use a similiar toolkit for persuasion and they are constantly trying to find new ways to answer: what really affects behavior?

Learning to create engines that close the gap between motivation, intention, and action by making tasks easier while taking into account the context in which those decisions are made is the new imperative.

While the answer today seems to be data, or big data, my money is on the smart application of analysis. In social, this is about analyzing language and uncovering the digital clues that signal intent. Why we call social networks intent engines and use content to both uncover and deliver opportunities.

Once we gain an understanding of how social currency influences behavior, we can expand our ability to close that intention-action gap in public and group settings, not by providing special treatment to customers in social (why customer service in social is not fair), or engaging in questionable brand behavior in social media, but by understanding customer behavior in a post advertising world and applying that understanding to design of tools that make tasks easier.

Here's how a company designs customer support emails for behavior change, or rather to help customers do what they set out or want to do.

Customer behavior is blurring the line between digital and in store experiences and brands have been experiencing the impact of reviews on buying behavior.

Responsive strategy and context

Applied behavioral economics is about identifying and diagnosing problems to design tools that help people close the intention-action gap.

Social influences like peer pressure and social exchange are amplified in public settings. It's like saying "watch this!" An organization and business is also a public setting that provides the context where interactions occur. This is not just about who we are — the environment around us may encourage certain behaviors and tacitly or openly discourage others.

Marketing used to be complicated. With consumer adoption of social media and the fragementation of attention away from a few uniform and somewhat predictable channels, results have also become more predictably irrational, and programs have become complex, just like the people they are designed to reach and affect.

This calls for responsive strategy. The concept borrows from responsive web design (RWD) — an approach aimed at crafting sites to provide an optimal reading and navigation experience across a wide range of devices by adapting the information to screen size and device characteristics. It combines the idea of adapting to the conditions in which experiences occur with that of designing to the way things are.

Sample applications vary from the placement of items in a store to affect its sales — groceries# are one example to move product, another are items placed on endcaps — to how behavioral science can lower your energy bill# and default opt-in to 401k plans can increase the odds people will save for their retirement.

Tweet: Behavioral economists study how the context of decisions interacts with our expanded understanding of human psychology.

This explains why Daniel Kahneman, a psychologist and author of Thinking Fast and Slow, won the Nobel prize in Economic Sciences.

[do your scenario planning here]


Valeria is an experienced listener. She designs service and product experiences to help businesses rediscover the value of promises and its effects on relationships and culture. She is also frequent speaker at conferences and companies on a variety of topics. Book her to speak here.

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