Editorial Articles

How can behavioural economics help improve your digital marketing efforts?

What is the purpose of advertising? Dave Trott sums it up neatly, “All advertising can do is influence a consumer.” So despite all the advances in marketing sophistication and technological wizadry, we’re still in the persuasion business. It’s all about making a convincing case to choose our brand over another.

Understanding how people make choices is, therefore, central to what we do. But as Rory Sutherland points out, “given its obvious importance, the area of study has been dangerously overlooked by marketers so far.” And he continues, “...we have lazily adopted a model for consumer decision whereby brand preference is assumed to translate perfectly into purchase behaviour.”

Behavioural economics has a history that dates back to the 19th century, but many marketers are only now waking up to its potential. Its synthesis of psychology and cognitive theory with economics provides insights into human decision making processes and can help explain what classical economic theory would dismiss as irrational consumer behaviour. As President of the IPA, Rory Sutherland and a ‘behavioural economics taskforce’, of which 3Sixty is very much a part, are leading the charge.

As a digital agency we have taken a keen interest in the IPA initiative right from the start. The language of behavioural economics is very applicable to our area of the business. In particular, the concept of ‘choice architecture’ encapsulates and informs much of what we do day to day for clients.

“The way a choice is presented influences how it is made.” explains Dr Nick Southgate. “Given this, choices can be designed.” For example, studies have shown that when presented with a list of choices, such as a list of specials at a restaurant, people are more likely to choose the first or last options presented to them. Choice architecture also helps us understand the importance of context. This explains why restaurants have very expensive bottles of wine on their lists. It’s not because they expect to sell many bottles, but rather to make what otherwise might seem like extortionately priced wine seem relatively inexpensive.

Choice architecture is something that Marks & Spencer for one, knows only too well. Its creative execution for ‘M&S Food’ has been a great success, not least the ‘dine in for £10 deal’. This promotion was strategically positioned away from comparisons with other supermarket deals of a similar nature and instead, as an alternative to going out to a restaurant. At a time of economic downturn and the fact that M&S food products are of a high standard, meant that consumers understood the positioning in the context of restaurant quality food – as good as going out but cheaper. Had it been framed against other supermarket promotions, the success might not have been as good.

Digital agencies like ourselves have created user experience teams to work alongside planners, designers, copywriters and technologists to embed insight into the customer’s journey (or series of choices) as a central part of the value we provide our clients. We think that behavioural economics - and the notion of choice architecture in particular - give us some new tools to make us even more effective at designing choices. 

One of the insights from choice architecture research that we think is particularly helpful is the idea of limiting choice. The temptation on a home page is to put a link to every choice possible...partly because you can (scrolling means that there aren’t the same constraints as in print) and partly through fear of alienating an audience. In fact our experience has shown that a proliferation of choices can have a highly detrimental impact on the performance of a website. Overwhelmed with too many links, users tend to retreat back to Google straightaway, or get lost in a site and leave feeling frustrated. Choice architecture teaches us that less is more when it comes to website information design.

The notion of default choice is another concept that seems very useful. For example, we know that an e-newsletter gets a higher subscription rate if the default is set to ‘opt-in’ rather than ‘opt-out’. Using this example the concept could be dismissed by saying ‘people are lazy’. But it’s much more powerful than that. What it tells us is that when it comes to complex decision making processes (e.g. selecting a mortgage or buying a new computer) people are looking for cues – heuristics – to help them navigate. As Nick Southgate puts it, “People, not unfairly, feel that typical choices are more than likely good choices.” So rather than listing out all of the possible options on a web page, providing users with a default choice to begin with and then letting them modify the default if they want to may lead to higher conversion rates. Another way to express a default choice is to indicate the choices other customers have made. Amazon do this really well with their ““56% of people who browsed this product ended up buying this product”.

We think that behavioural economics gives us a rigorous framework to help improve our powers of persuasion and ability to influence choice i.e. to do what we get paid for! The next step for us is testing some of the theories with our own case-studies.

Chris Thurling & Laura Fletcher
3Sixty