Behavioural Economics: red hot or red herring?

The principles of Behavioural Economics can make communications work harder says Janet Hull, consultant head of marketing at the IPA…

Last Wednesday morning, the hallowed halls of the RSA in John Adam Street were animated with adfolk of all hues and creeds.  It was the inaugural event of the new IPA President Rory Sutherland for senior members of the membership and it was a sell-out.

Although Rory himself is, of course, a big draw, he wasn’t the main reason that people had found the time in their busy schedules to turn up.  More, it was the subject matter.  Behavioural Economics. A hot topic in adland because Rory has been promising, since his maiden speech, that it will take the industry to new heights.  So the purpose of the day was to put Behavioural Economics to the test.

First came the boffins; doctor of philosophy Matt Grist from the RSA and lead on the RSA’s Social Brain project; and Professor Nick Chater, an expert in social psychology from UCL. They represented the pure science of Behavioural Economics.  Then came the IPA champions; Rory himself and Nick Southgate, former planning partner at Grey and now contracted to the IPA as its resident Behavioural Economics expert. Their job was to apply theory to practice.

In the panel discussion that followed, Mark Lund, CEO of the COI, and Kate Waters, Planning Head at Partners Andrews Aldridge and Chair of the IPA’s Professional Development Group, led their weight to the argument.

For many in the audience it was a first chance to familiarise themselves with the subject matter.  They learnt how Behavioural Economics had arisen as a challenge to the ‘rational man’ view of classical economics; and in the process had devised all sorts of observational experiments to prove the point that people were people, not algorithms or machines, that were guided by a mix of, seemingly irrational, learned behaviours or intuitions.

These findings, catalogued and collated in worthy tomes, have been popularised in recent years in Sunstein and Thaler’s ‘Nudge’, Dan Ariely’s’ ‘Predictably Irrational’, and Schwartz’s ‘The Paradox of Choice’, among others.

Among them are principles such as Chunking, Loss Aversion, Choice Architecture, Goal Dilution, Price Perception, Scarcity Value and the Power of Now.  While radical to classical economists, they are meat and drink to an industry focused on turning human insight into business advantage.

Behavioural Economics provides a frame of reference and scientific evidence for many of the qualitative judgements about people that our industry has already proved adept in.  It elevates our game because it gives new credibility to our powers of observation, provides a new language for engaging with opinion formers about ‘marketing’ and ‘consumer’ issues, and teaches us new methods and techniques for improving our own performance.

It’s as relevant to media planning as it is to creative planning and briefing and creative execution. It’s particularly applicable to digital, because it demonstrates how interface design and order affect impact on choice. Even more important, it helps us understand how each element of the jigsaw in an integrated comms campaign can best work together.

What evidence is there that it makes a difference?  Rory Sutherland reported that the Tories had pledged to disinvest in speed cameras which penalise you for going over the limit, in favour of smiley faces which congratulate you for staying within the law, on the strength of Behavioural Economics theory. The latter have been proved to be twice as effective. He also recounted how the simple act of changing the mechanic for donations from online to via text message had increased charitable giving from young people for Oxfam. Nick Southgate reflected on how behavioural economics had helped him understand, in hindsight, why teenage girls can’t choose between different styles of jeans, but prefer to go for both.

So used appropriately, the principles of Behavioural Economics can make communications work harder, and for social good.  Where did this leave the central debate? Red hot or red herring? Not surprisingly, from the feedback on the day and the twitterati since, the overriding view is that behavioural economics is red hot.

So what next?  Over the course of the next three months the IPA will be immersing its members in Behavioural Economics theory and practice through seminars and workshops.  In the first half of next year it will be moving into training and development. The IPA is committed to leading industry R&D in this area.  Watch this space.

A new IPA publication; Behavioural Economics: red hot or red herring? is available from www.ipa.co.uk priced at £25 to non-members