Why Behavioural Science is Good for Your Business

By Supriya Syal, PhD

Scientists are doing it. Big tech giants like Facebook and Snapchat are doing it. Mom and pop businesses are doing it. Even Governments are doing it. I’m going to suggest that you should be doing it too. Why? Because if you’re reading a marketing research blog, chances are you’re in the business of influencing human behaviour. And behavioural science – which, by the way, is what everyone is doing – is the study of how humans behave, and why they do what they do.

Behavioural science (or behavioural insights) is an interdisciplinary field that draws from insights in psychology, economics, sociology, marketing and other related fields. The private or public sector application of behavioural science involves using the knowledge derived from these fields to inform and influence the behaviour of people in order to help them make better decisions.

Apple iOS 11 enabled phones can detect when you’re driving and automatically turn off mobile notifications for you.[1]

Instead of thinking of humans as fully rational economic actors, behavioural science acknowledges that our time and attention are limited, and we don’t have the mental resources to process all the information around us at all times. So in order to make efficient decisions, we use heuristics, or mental shortcuts, which can lead us to decisions that deviate from the predictions of rationality. While this can sometimes be useful and adaptive from an evolutionary standpoint, at other times it can lead us astray. For instance, overt optimism about our own likelihood of finding love, joy and meaning in life can be an enduring shelter in the face of a cruel and unfair world. It might help us triumph in contexts in which we otherwise wouldn’t even try, such as launching a new entrepreneurial venture, despite stats suggesting that only 35% of new small businesses survive their first five years (i.e. more than half of all new businesses fail). But the same over-optimism can also can lead to overconfidence in our own abilities that can be detrimental, such as when we underweight the risks associated with our actions. For example, 1 in 2 Americans (and 61% of drivers under the age of 24 years) believe that using a mobile phone has no impact on our driving performance[2], whereas research indicates that the ability to detect road signs or passers-by is reduced by 30% in drivers distracted by mobile phone conversations[3], and texting while driving impairs reaction times by over a third (35% slower). To put the extent of that overconfidence in perspective, alcohol consumption to the legal limit slows reaction times by 12%.

Keeping such biases in judgement and decision-making in mind, behavioural science approaches to influencing consumer decision-making are based in hypotheses or predictions about which biases might impact a decision and how we might leverage or combat them to drive better choices. Innovation based in these ideas and methods is increasingly taking root in diverse areas of business ranging from marketing to behavioural design of products and services and organizational decision-making within businesses.

For example, building on the behavioural insight that people have a tendency to not want to alter the current state of affairs (i.e. status quo bias), the majority of companies in the US now default or automatically enrol their employees into 401K or similar retirement savings plans. Around 57.5% of employee savings plans now have an automatic enrolment feature, compared to 8% in 2000 (2016 Plan Sponsor Council of America survey). Since employees seldom change the status quo to opt-out, they accumulate retirement savings automatically. What is more, building on a classic experiment in the behavioural sciences, a majority of companies also offer automatic escalation. Automatic escalation boosts how much people are saving by a small amount in each future year that they stay enrolled. This enables employees to save more for retirement from future increases in income rather than their current income. Thus, an aversion to any loss of current income does not prevent them from saving. According to a recent estimate, these interventions or “nudges” may have helped employees save an additional $29.6 billion in the last decade, besides winning Richard Thaler the Nobel Prize in Economics in 2017!

Using the same principle, the latest version of the Apple iOS defaults people into not receiving notifications when the phone’s accelerometer senses that they are driving. You can always opt-out and say you’re not driving, but instead of requiring you to remember to set the phone to not receive notifications before driving, or resist the temptation to respond to a text message or phone call while driving, the phone automatically does the job for you, in what could be a life-saving intervention! And in a different kind of life-altering intervention, this is also why, when you get to the end of your episode of Black Mirror on Netflix, the next show will play automatically unless you ask it to stop. In fact, you have to actively opt-out by preventing the next episode from playing – the default and easiest option is to let the show go on.

Likewise, building on the behavioural insight that people care a whole lot about what others similar to them (or around them) are doing, OPower, a customer engagement platform for energy utilities, has been driving residential energy conservation by sending consumers home energy reports that provide a comparison of their energy use, relative to that of their neighbours. The company announced last year that across its 100 partners, it had delivered 11 terawatt-hours of energy savings, representing $1.1 billion of savings for energy customers.

Indeed, social or peer-to-peer comparisons can impact and influence consumer behaviour across a number of domains. For example, missed medical appointments due to patients not showing up are a significant problem in the healthcare sector, costing many hundreds of millions of dollars each year; but telling people about how many other patients show up for their appointments makes them more likely to attend.

In the financial sector, HelloWallet is a personal finance app that helps its users make smart financial decisions like diverting more of their earnings towards savings. Recently, users of this app were given a personalized financial wellness score (based on account balances, income, spending and profile information) as well as scores of their financial peers to serve as a form of social comparison – an intervention that led to people with scores lower than their peers adding an average of $600 to their savings accounts to bring themselves up to par.

On the operational/HR side, health insurers such as Blue Cross Blue Shield of Massachusetts are using behavioural science interventions to drive performance improvement and cost savings among participating provider groups. Another example is Applied, a behavioural science web platform developed by the UK Behavioural Insights Team to help employers hire the best talent while counteracting hiring biases based in gender, race, and socioeconomic status.

There are two core components of the “behavioural science for business” value proposition.  First, behavioural science offers a realistic understanding of human behaviour derived from decades of scientific research that measures how people actually behave. So the insights used to change or influence consumer behaviour – for instance, increase customer engagement – are much more likely to be valid and actionable, and lead to the desired behaviour change. Second, behavioural science is an inherently empirical pursuit – using behavioural science methods means doing rigorous, iterative experiments to generate real, quantitative evidence in favour of something, say a version of a product, or against something else, say another version of the same product. Gathering such empirical evidence prior to the launch of that product or service or program has enormous risk mitigation potential.

Overall, behavioural science is full of cool (and real!) insights about human behaviour, and has the potential to fundamentally change how we design consumer journeys and user-experiences. Businesses that are willing and able to leverage behavioural science for innovation stand to benefit from a distinct competitive advantage. And as we move into a world that is progressively digital, understanding the human decision-making part of human-computer interactions will only become increasingly valuable to creating meaningful products, services and experiences.

Supriya Syal, PhD., is the former Chief Behavioural Scientist of the Privy Council Office of Canada’s Impact and Innovation Unit, and is the former Vice-President of Research and Innovation at BEworks Inc., presently involved in a few different R&D ventures.

[2] Tison, J., Chaudhary, N., & Cosgrove, L. (2011, December). National phone survey on distracted driving attitudes and behaviors. (Report No. DOT HS 811 555). Washington, DC: National Highway Traffic Safety Administration.

[3] Recarte Goldarecena, M. A. & Nunes González, L. M. (2003). Mental workload while driving: Effects on visual search, discrimination and decision making. Journal of Experimental Psychology: Applied, 9(2)

Also Published on Green Book Blog here.

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