natalie horne - ote london - behavioural economics

30/09/2013

Copyright © 2013 PrimeDecisionCopyright © 2013 PrimeDecision

Behavioural Economics

Natalie Horne

Strategy Director, Prime Decision

natalie.horne@prime-decision.com

prime-decision.com | @natalie_horne

Who is Prime Decision?Marketing strategy with a behavioural edge

Copyright © 2012 PrimeDecisionCopyright © 2012 PrimeDecision

What is Behavioural Economics?

homo economicus

Optimal,Normative

Realistic,Descriptive

Get ready!

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

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 =

Get ready!

WINLOSS

LOSS

LOSS

LOSS

LOSS

LOSS

WINWINWIN

More wins or losses?

More wins or losses?

X 4

X 6

What did behavioural economists discover?

We are bad at judging probabilities We are good at judging frequencies

+ many other patterns

Primacy effect Defaults Endowment effect Framing Availability heuristic

Social norms/approval Anchors Priming Commitment devices Hyperbolic discounting

Codifying human tendencies

Availability heuristic

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%

Priming

Primacy effect Defaults Endowment effect Framing Availability heuristic

Social norms/approval Anchors Priming Commitment devices Hyperbolic discounting

Codifying human tendencies

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Applied BE

A creative approach to solving problems

Behavioural science:

Strategy

Tactics

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Prosecute criminals

Raise premiums

Typical approach:

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Target behaviour:

Get people to be more honest during the claim processes

Depletion

Moral reminders

Format

Proximity

Supervision

Experiment: Easter Bonus

I recognise that I have moral obligation to complete this task honestly.

Contro

l

Oppor

tunit

y

Hones

ty P

ledge

0%

2%

4%

6%

8%

75%decrease in high claims

95%Decrease in maximum

claims

Potential to scale

What would an insurance process look like that was designed to promote honesty?

Claims process

Marketing touch-pointsCustomer communications

There is a tremendous scope to apply psychological insights to reduce fraud

The Seven Lenses

Script

SocialStory

Sync

Sense Scenario

Structure

Our proprietary framework

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

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Typical approach:drive

more

traffic

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Target behaviour:

Get (more) people to donate (more)

during the online booking process

Script

SocialStory

Sync

Sense Scenario

Structure

“Just £1”

In summary:

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Define target behaviours

(measurable actions in specific contexts)

#1

Interrogate

(hypothesise, prioritise)

#2Script

SocialStory

Sync

Sense Scenario

Structure

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Experiment!

#3

30/09/2013

Copyright © 2013 PrimeDecisionCopyright © 2013 PrimeDecision

Get in touchNatalie Horne

Strategy Director

natalie.horne@prime-decision.com

prime-decision.com

@natalie_horne