How is Web Marketing being Influenced by Behavioural
Economics?
“Behavioural Economics explores why people sometimes make
irrational decisions, and why and how their behaviour does not follow the
predictions of economic models.”[1]
“Web marketing includes e-commerce web sites, affiliate
marketing web sites, promotional or informative websites, online advertising on
search engines, and organic search engine results via search engine
optimization (SEO).”[2]
…which together led
to behavioural (web) marketing…
“Behavioral marketing targets consumers based on their
behavior on Web sites, rather than purely by the content of pages they visit.
Behavioral marketers target consumers by serving ads to predefined segments or
categories. These are built with data compiled from clickstream data and IP
information.
A user visits several travel category pages on a particular
site, for example. She's then served airline ads. In most cases, the ads are
served through a run-of-site (ROS) placement. The user's behavior is the key,
not the placement.”[3
Behavioural Targeting
The advantage of using
behavioural marketing is that it provides marketers with the ability to reach
relevant customers outside of contextual areas (e.g. sell them books when
they’re not looking at amazon.com). Because this type of marketing can track
recent behaviour of the internet user, it can catch them as they enter a
specific consumption phase. For example, in the purchase of a car, the process
can take between 30 and 90 days and behavioural targeting can send the customer
target adverts at each stage of the purchasing cycle.[4]
This might look something like:
|
Period
|
Suggested
Advert
|
|
0-30 days: general research
|
TopGear.com
|
|
31-60 days: visiting garages, test-driving,
purchase.
|
Adverts for garages in vicinity
|
|
61-90 days: Insurance policies, etc.
|
Insurance firms, etc.
|
This type of marketing is
very much driven by “big data,” one of the prevalent trends in web marketing
today.
There isn’t a clear overlap
between big data and behavioural economics; remember that the data tracks
behaviour. Then we look at the data in the hope of being able to track future
behaviour (which would suggest that it is logical or follows a pattern) when
often it doesn’t. It can vary, depending on the mood of the consumer, etc.
Decision Shaping and Nudge
The biggest crossover area
in web marketing and behavioural economics happens in an area – or a theory –
known as “Nudge.” This is based on a book by Richard Thaler and Cass Sunstein.
The subtitle of the same book is, “improving decisions about health, wealth and
happiness.” That is to say, the book and the area, are about nudging (making
consumers take decisions through subtle, persuasive measures) and an area known
as choice architecture.
A good article on UX matters[5]
provides a few examples of where behavioural economics is affecting web
marketing:
-
Opt-in versus Opt-out questions in Web Forums: The example is given of rates of organ donation in
countries and the difference in how the question about organ donation is posed.
The difference between countries where the question is posed in different ways
is significant (i.e. 80% in one country and 20% in another).
-
Problems of Excessive Choice: In one experiment, purchasers were 10 times more
likely to make a purchase from 6 items rather than 24.
-
The Role of Context: People gain understanding through the actions of
other people, by “following the herd.” The social-content generated online is a
good case in point. For example: Amazon providing extensive user reviews (which
are sometimes abused by the companies/authors themselves) while Nike and others
allow users of their performance trackers to measure progress against other
users.
-
Value Judgements: The Economist magazine offers three different offers for subscribers.
These are as follows:
o
A web
subscription for $59.
o
A print
subscription for $125.
o
A print and web
subscription fo r $125.
Looking this
rationally, one might ask why they offer a print subscription at all? The
answer lies in how people make judgements on value. By anchoring the print
subscription to a value of $125, people are far more likely to think they are
getting a bargain with the print and web subscription at the same price, thus
encouraging them to purchase.
“Irrational” Decision Making
An article in the June 2013
Wired Magazine is covered by the Tomorrow Lab[6] provides an insightful interview with
the head of advertising agency Ogilvy, Rory Sutherland. It’s worthwhile
remembering that Sutherland is at the forefront of investigating where
behavioural economics crosses with web marketing, so his knowledge is valuable
for anyone looking for research in the area.
Sutherland covers four
areas:
The Mere Availability Effect , (aka: the Familiarity
Principle)[7]
Consumers make purchasing decisions
based on what’s available. A good example is how people buy books off-the-cuff
at an airport before getting on a plane, but will do some research when looking
on the internet. They’re also not going to spend too much time searching for a
website, so it’s important to be one of the first sites listed on Google
search.
Habituation and Defaults People aren’t informed shoppers. They will go to
Amazon again and again, as it requires less cognitive effort. It has less to do
with the reliability of the service than the fact that it requires less effort.
People won’t spend much time looking at websites if the interface doesn’t lend
itself to an easy purchase. Therefore, as the article states, “straightforward
layouts, simple
navigation, and a checkout process that’s as easy as possible, so as not to
place any further obstacles in the path of potential new customers” are all
paramount.
Social Proof and Contagion People will copy what others do. That’s why
testimonials and customer reviews are so important – these show that promises
have been delivered on for prior customers.
In
the article, Sutherland also talks about customer loyalty but I fail to see how
this is the intersection of behavioural economics and web marketing – rather it
is just good company practice.
 |
| Nudges: Pioneered by Monty Python. |
Appealing to Different
Generations
If
we accept that humans don’t behave as rationally as traditional models in
economics would have us believe, it follows that different generations of
consumer will also behave differently. In a paper entitled, “Marketing to the
Generations,”[8]
authors Kaylene Williams and Robert Page examine where different requirements
should tailor their offerings to consumers, depending on the generation, in
ways that we might not previously have considered. A breakdown of these
differences is provided below:
The Post-Depression
Generation
-
Avoid moving menus and use static navigational menus
instead.
-
Use large fonts.
-
Make results available without scrolling.
-
In search results, always clearly repeat the user’s query.
The Baby-Boomer Generation
-
Marketers should not use words like, “golden years,” “silver
years,” “mature” and “prime time of life.”
-
Use the internet especially for health information.
Generation X
-
“They like initiative that will make things more useful and
practical. Give them a lot of stimuli, a challenging environment, and
flexibility without long-term commitment. Give them opportunities to learn,
grow and improve. For example, ask them to volunteer on entrepreneurial
projects.”
-
Extremely disloyal to brands and websites.
-
Doesn’t mind giving feedback – approach them as a consultant
more than a seller.
Generation Y
-
“self-absorbed and self-reliant.”
-
8 key values have been described for this generation:
choice, customization, scrutiny, integrity, collaboration, speed, entertainment
and innovation.
-
Appeal to their belief that they can make the future better:
“be sure that they know that your organization speaks to a purpose greater than
the bottom line. E.g. global warming, globalization and the advent of the
global citizen.”
-
Honesty, humour, uniqueness and information are important.
-
Extremely driven by aesthetics.
-
Immensely untapped for NGOs and non-profit organizations.
-
They expect an internet experience to be interactive.
-
The ability to move content between platforms is essential.
Generation Z
-
Significantly shortened attention spans and respond more to
images than text.
-
Enjoys interactive content.
-
Brands must respond to requests within 24 hours
-
Enjoy interaction between mediums (television, internet,
SMS).
Beyond Nudges: Tools of a
Choice Architecture
A
2012 paper from the University of Ohio[9]
discusses some of the tools available to choice architects (i.e. for our
purposes, people working in the marketing industry). It divides the tools into
two: those used in structuring the choice task and those used in describing the
choice options. These are summarized below:
|
Problem
|
Choice-Architecture Tool
|
Examples
|
|
Alternative Overload
|
Reduced number of
alternatives
|
Medicare (Kling et al,
2011) and investments (Cronqvist and Thaler, 2004).
|
|
|
Technology and decision
aids
|
Sorting on attributes (Lynch
and Ariely, 2000), mobile devices and applications (Cook and Song, 2009),
Smart energy grids.
|
|
Decision inertia
|
Use defaults
|
Investments (Conqvist
and Thaler, 2004)(Madrian and Shea, 2001), Insurance (Johnson et al, 1993)
Organ donations (Johnson and Golstein, 2003).
|
|
Myopic Procrastination
|
Focusing on satisficing
|
Planning Errors (Weber
et al, 2007; Shu, 2008), job search (Lyengar et al, 2006)
|
|
|
Limited Time Windows
|
Gift certificates (Shu
and Gneezy, 2010), retirement planning (O’Donoghue and Rabin, 1999), tax
credits.
|
|
Long Search Process
|
Decision Staging
|
Automobile customization
(Levav et al, 2007), product evaluation (Haubl et al, 2010)
|
|
Describing the Options
|
||
|
Naïve allocation
|
Partitioning of options
|
Investments (Bardolet et
al, 2009), automobile attributes (Martin and Norton, 2009)
|
|
Attribute overload
|
Attribute parsimony and
labelling
|
Good/bad labels for
numeric information (Peters et al, 2009)
|
|
Non-linear attributes
|
Translate and rescale
for better evaluation
|
Credit card repayments
(Soll et al, 2011), gas mileage ratings (Larrick and Sol, 2008).
|
|
Implementation Issues
|
||
|
Individual differences
|
Customized information
|
Politics and energy
conservation (Hardisty et al, 2010), numeracy and decision making (Sagara,
2009).
|
|
Outcome valuation
|
Focus on experience
|
Focusing and
satisfaction, cooling-off periods.
|
[1]
http://www.investopedia.com/terms/b/behavioraleconomics.asp
[2]
http://www.webopedia.com/TERM/I/internet_marketing.html
[3]
http://www.clickz.com/clickz/column/1701431/behavioral-marketing-101-defining-terminology
[4]
http://www.clickz.com/clickz/column/1701431/behavioral-marketing-101-defining-terminology
[6]
http://www.thetomorrowlab.com/2013/05/digital-marketing-and-behavioural-economics/
[8]
http://www.www.aabri.com/manuscripts/10575.pdf
[9]
http://faculty.psy.ohio-state.edu/peters/lab/pubs/publications/InPress_JohnsonShuEtAl_MktLetters_Nudges.pdf
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