Marketing Lessons From Behavioural Economics.

Sell without telling them to buy.

I’m almost always talking about how people don’t exactly like being told what to buy (or even what to do); this is one of the reasons why I find behavioural economics very interesting. I like that it helps you err on the side of nudging users instead of outrightly telling them what to do.

What Is Behavioural Economics?

Behavioural economics combines psychology and economics to investigate why people make irrational decisions and why and how their behaviour differs from what classical economic models predict. Most people make decisions like what car to buy, whether to go for vacation, whether to maintain a healthy lifestyle, how much to contribute to retirement and so on at some point in their lives. Behavioural economics explains why a person chooses one option over the other.

How Does Behavioural Economics Aid Marketing Today?

Marketers sell to people; people are not always rational, self-interested decision-makers. We don't always aim to maximize benefits while lowering costs. We make decisions in the face of uncertainty, with limited information, feedback, and rationality. We all struggle with self-control at times. Our preferences shift depending on how decisions and options are presented. Humans are illogical. This is where behavioural economics comes into play.

What Marketers Can Glean From This

You often have all the factual reasons why you’re convinced that a user will buy a product or use a service. As crucial as these hard facts are, they sometimes aren’t enough. Things like the psychology of the user & how options are presented should also be considered.

A Few Examples

The Bolt Example

Recently, I noticed that Bolt drivers also work for other ride-hailing apps, so they can switch between apps and drive for different companies - this means that a bolt driver can also be an uber driver, depending on what app they're using per time. While this benefits the rider because they get to reduce their wait time by switching to other apps to get customers when there’s a downtime/wait period on one, it doesn’t help the company. They need as many drivers as possible to pick people so they don’t lose business to competitors.

There are a couple of things Bolt can do to ensure that drivers always stay on their app, one example is:

• They can make a rule that drivers should not switch apps at certain times to improve their rating.

This doesn’t make much sense, and I doubt many drivers would even comply, but it’s an option.

So how do they get them to stay on the app without outrightly making a rule that they should?

Currently, bolt drivers get offers for other rides just as they’re about to end their current trip. This is nudge marketing. With this, they have succeeded in reducing drivers wait time - drivers no longer need to consider switching to other apps to get customers. Everybody wins.

Ensuring that the user is satisfied is a good way to nudge them to do a particular thing. In this case, Bolt always has trips waiting for them - with this, they ensure that drivers stay on the platform.

The Lottery Example

How we frame things is important. Which sounds more appealing?

• 2 in ten people will win the lottery

• 8 people will lose the lottery

These statements mean the same thing, but people are more likely to participate in the lottery when framed in A than B.

How you frame/present options is important; while you may be communicating the same thing, always ask yourself if it can be presented better.

Always experiment with how you frame CTAs. A good way to do this is A/B testing. Sometimes, you won’t know from the get go what works till you try out different things then measure how users respond to each.

The Ice cream & Netflix Example

What’s your favourite ice cream flavour?

How can you conclude that it’s your favourite when you haven’t tried all the ice cream flavours in the world?

When you open Netflix, do you often search through the entire catalogue for a movie you might like, or do you go to the top 10 list people are watching? It’s mostly one of four things:

• You check out the top ten section and pick from there

• You check out one of Netflix’s suggestions for you

• You ask a friend what they’re watching

• In the absence of 1 - 3, you’re likely to log out and do something else.

We like making our own choices, but a cognitive impairment often comes with having too many options to pick from. The more variety there is, the harder it becomes to choose. Not only does this make the experience feel more draining, but it sometimes makes users more likely to choose nothing - to put off making a decision entirely because they feel overwhelmed.

Offering too many choices may be doing more harm than good depending on your kind of business.

What Next

List out the things you’d like users to do with your product and develop ways to nudge them to do it. The aim is to tell them to ‘buy’ or ‘do’ without telling them.
In the meantime, this course on behavioural economics and neuromarketing is a good place to start.

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Let me know if this was helpful.