Can Behavioural Economics Save Marketing?
Marketing is a Discipline!
In a recent podcast, Rory Sutherland, of Ogilvy and Mather UK, said that the second client marketing departments are “reduced to ‘MarComs’ marketing is almost lost”. So why do organisations think marketing is solely about communications and not about behavioural change?
Marketing communications is of course a fundamental element of the marketing mix, but marketing is a discipline and a way of thinking. Communications should be an integral element of the four P’s, not a separate silo. Turning marketing into MarComs inevitably changes the relationship between areas that were once part of the marketing department.
They establish their own priorities and see communications as a service rather than part of the same discipline. This risks turning marketing into a process rather than a creative discipline. Once this happens MarComs is in danger of becoming a factory that churns out content that follows the set templates and adheres to the brand guidelines but is unlikely to take risks or inspire customers.
Creativity is at the heart of the marketing discipline and it should be applied across all areas of the function to have maximum impact. A fragmented marketing function also encourages a tactical approach to marketing as MarComs have to respond to what product, pricing and the sales channels decide to do, often with little planning or discussion beforehand.
Marketing and Behavioural Change?
Rory also mentioned how behavioural economics (BE) has the potential to allow creative people, like marketers and market researchers, to get involved in other areas of organisational management. It won’t solve the organisational problems of marketing, but BE can provide a valuable framework and language to create strategies for behavioural change. This would involve coming up with ideas for better choice architecture or nudges to influence the decisions people make. Marketers could be well suited to this role because behavioural change requires a creative and analytical approach to problem solving.
Neither is this about persuading people to do things they don’t want to do or selling them unsuitable products. Behavioural change has failed if this happens as people soon get wise to such unethical behaviour. It would not be sustainable either as companies would not want to risk damaging their brand’s reputation. Behavioural change is about understanding how and why people make the choices they do, but not just limiting ourselves to the marketing products and services.
Humans do not seek a perfect solution:
One of the most fundamental insights that BE gives us is that people seek to satisfy rather than maximise as we live in world of imperfect information and trust. Our goal with most decisions is to avoid a disaster rather than seeking a perfect solution. If this is the case then it should not be a surprise that messages often used in promotional material that refers to an “ideal” or “perfect” solution to “fully” meet your needs misses the mark?
Evolution has slowly created and shaped human decision making processes and so our cognitive machinery is little changed from when we first formed early civilised societies thousands of years ago. As a result we still rely on many of the same strategies for determining who we should buy from and what to do in new and uncertain situations. Behavioural change can use this insight to employ strategies that tap into our herd instinct.
People follow the crowd because it reduces the chance of a decision being a disaster. If the seller is aware they could lose social capital if they sell something unsuitable they are likely to avoid doing so. If, however, it leads to a satisfactory outcomes we may create a habit as we have learned to trust the person or brand concerned. Much of what traditional marketing refers to as brand loyalty is in fact habits. The insight here is that behavioural change is most likely to be effective when it focuses on habit formation or piggy-backs off an existing habit. Disrupting a habit is more important than the message.
Brands are also framed by how people interact with them and the stories they tell each other about their experiences. Trust is strongest when we learn through experience and the actions of the brand that they can deliver on their promises. The key relationships with a brand are the interactions between customers and employees. These define the brand relationship much more strongly than any advertising or social media campaign ever can. Thus, behavioural change is likely to be most effective if it focuses on these interactions.
Brands are created from our experiences and this is nicely summed up by Dave Trott:
“The product creates the experience.
The experience creates the reputation.
The reputation creates the brand.”
The context of our decisions and our underling emotions are also crucial to behavioural change. We are much more willing to spend money and pay a premium price when we are searching for a last minute Christmas present that we promised to buy for our partner or children. We hate the feeling of regret and will seek to avoid it if we can. This is partly why scarcity is such a powerful motivator as people don’t like to feel they missed out on a bargain (i.e. loss aversion) because they were too slow to get to make a decision.
As a result communications that triggers an emotional response are often more effective at getting attention and influencing behaviour than a purely rational message.
“Showing personality in your app, website, or brand can be a very powerful way for your audience to identify and empathize with you. People want to connect with real people and too often we forget that businesses are just collections of people.” – Aarron Walter, Teamtreehouse.com
Other useful insights from behavioural economics include:
- We feel most comfortable when our behaviour conforms to recognised social norms relating to concepts such as fairness and social responsibility.
- Humans are not the selfish, independent thinking agents that economics would have us believe. We will often hold back from behaviour that we believes treats others unfairly or lacks respect for others.
- Although people usually have clear explicit goals when making a purchase (e.g. I want a new car), they do not have full access to their psychological (implicit) goals (e.g. belonging and certainty) that help drive brand choice. For this reason there is no point using direct questioning to try to uncover these implicit goals. Our preferences also change over time and so consumer demand is continuously shifting in response to many influences.
- The Beyond Reason model below shows eight overall implicit motivations and each of these is then broken down into a further four specific psychological goals. Marketers can use this model as a framework for discussing important psychological goals of their target audience. Rather than focusing on ’emotional responses’ marketers need to target relevant psychological goals to influence behavioural change.
- Intrinsic motivations, such as mastery and autonomy, can be more powerful at driving our behaviour than carrots and sticks, especially when the activity is not routine. Indeed, research has shown that extrinsic motivators, such as bonuses, often reduce motivation and performance when applied to creative tasks.
As you can imagine these insights can be employed in any environment where behavioural change is needed. This could be to tackle health and safety issues, reduce waste, improve compliance with good working practices, address employee motivation, or improve the effectiveness of communication.
So what next you might say. Well, Ogilvy and Mather, the global advertising and marketing agency, have already created a new business unit, Ogilvy Change, dedicated to the application of behavioural economics to deliver measurable changes in behaviour across a diverse range of environments. I recently attended the monthly London Behavioural Economics Network meeting where the team from Ogilvy Change discussed work they had conducted on behavioural change in a factory in South America for improving hygiene and the psychological optimising of a call centre in the UK. From small beginnings the team at Ogilvy Change are now working with a number of global businesses to press forward the application of behavioural science in the real world and maybe it is time we did the same.
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- About the author: Neal provides digital marketing optimisation consultancy services and has worked for brands such as Deezer.com, Foxybingo.com, Very.co.uk, partypoker.com and Bgo.com. He uses a variety of techniques, including web analytics, personas, customer journey analysis and customer feedback to improve a website’s conversion rate.
- Neal has had articles published on website optimisation on CXL and Usabilla.com. As an ex-market research and insight manager he also had posts published on the GreenBook Blog research website. If you wish to contact us send an email to firstname.lastname@example.org. You can follow us on Twitter @conversionupl, see Neal’s LinkedIn profile or connect on Facebook.