Can Behavioral Economics Help Agency Creative?
Anyone employed in the marketing world has felt the frustration of recommending an engaging idea to a client, only to encounter pressure to excessively justify its relevance. Behavioral Economics can help ease the pain of that conversation by providing a specific model, and increase the likelihood of selling a strong, engaging idea.
Behavioral Economics is an increasingly discussed topic in the agency community, for its application in influencing a consumer’s purchase decision by understanding what drives it. But perhaps more interesting than its ultimate application, is the role the discipline can play in the marketing and advertising realm by providing a common, agency and discipline-agnostic model for human persuasion. Anyone currently employed in the agency and marketing world has felt the frustration of recommending an engaging idea to a client, only to encounter pressure to excessively quantify or justify creativity before having the opportunity to place it in the marketplace. Behavioral Economics can help ease the pain of that conversation by providing a specific model and – and increase the likelihood of selling a strong, engaging idea.
Rory Sutherland, President of the Institute of Practitioners in Advertising (IPA) in the UK (and Vice Chairman of Ogilvy Group UK) and Dr. Nick Southgate, the IPA’s Consultant on Behavioral Economics, developed a piece for Campaign magazine contextualizing why and how the discipline should be adopted by agencies to develop more targeted ideas for clients.
As a theory, Behavioral Economics blends insights from psychology with classic economic theory to better understand consumers’ economic decisions. It seeks to understand and categorize the differences between actual human behavior (reality) and the behavior predicted by Classical Economic theory (i.e., why we pay upwards of $5 for movie theater popcorn, when we can get a week’s supply for $3 at the grocery store – or why we grab a $100 designer cotton t-shirt from Barney’s, but think twice about a $20 shirt from Target). In providing a model for what drives actual behavior vs. what is theoretically predicted, it can help contextualize what is most persuasive and engaging for a consumer – and thus drive more effective marketing initiatives.
To better demonstrate how Behavioral Economics can help agencies, Sutherland and Southgate highlight some of the key concepts behind the model – which we’ve in turn further digested. While adopting the discipline into an agency’s approach – and getting a client to adopt it – will require much more study and discussion than what this post can capture, the following concepts can at least serve as a foundation for further study – and to start sprinkling into strategy discussions and creative presentations.
If your agency or client has begun to use Behavioral Economics in its approach, we would love to hear from you in the comments about how it has helped your agency develop (and sell) more creative, engaging work – or not.
1. Loss aversion: We’re more eager to avoid a loss than to bank a gain. So communicating to customers that they’re losing $200 a year by not adding a certain level of coverage to their plan is more effective than telling them they can save $200 a year by adding it.
2. The Power of Channel Preference and Interface: People’s propensity to respond to marketing is hugely dependent on their individual channel preference—and the introduction of new channels attracts new customers. Take charitable giving via text message, for instance – younger people that don’t typically give much to charity are much more generous via the immediacy of text.
3. Goal dilution: You’re more convincing when you promise to do one thing well, vs. multiple benefits. People will assume you’re doing alot of things with mediocrity, and no single benefit especially well. For example, apps and widgets to one thing – so their specialized focus makes them seem more effective vs. mobile browsers that access all things.
4. Price perception: Contrary to theory, the price that is demanded for something makes us value it more – vs. the perceived value setting the price. Take the now infamous Joshua Bell example – a violinist who could sell out concert halls above ground struggled to gain attention playing underground in the subway. The context determined the value. Ultimately, price-cutting can and does reduce perceptions not just of product quality, but of experienced efficacy.
5. Choice architecture: ‘Choice architecture’ concerns itself with how people gather information when they choose and how absolute values are crowded out by other influences – in other words, why we choose to buy a product in one set of circumstances, but not in another. Why do we choose the second cheapest wine on the list, or decide to buy the $100 t-shirt at Barney’s, after seeing $1,000 plus dresses on the same floor? This is possibly one of the richest concepts for agencies, and the one Sutherland and Southgate believe should be investigated most urgently for its potential applications.