Bureau West

For several years now, I’ve been talking about how behavioral economics provides a perspective that can help companies better understand their customers.  I just came across two great examples that show how companies used behavioral economics principles to increase their profits:

Example #1: A newspaper had increased the cost of its subscriptions and they were getting calls from readers who wanted to cancel.  They retrained their call center employees to use behavioral economics techniques and were able to triple their retention rate.  In a typical call, where the subscriber said they weren’t utilizing the subscription and didn’t have time because they have kids, the call center rep would say:

“There are many people like you – who are very busy and have kids to take care of – use our offers on the ‘Times Plus’ to save money on cinema tickets or meals out and some exclusive events that we run and I wouldn’t want you to miss out on that if you canceled today.”

The above approach uses two behavioral economics mechanisms.  Social norming – “there are many people like you” – people tend to want to do what most people are doing.  It’s a mental shortcut: rather than having to evaluate the pros and cons of every action we take, it’s easier (and usually safe) to just do what most people are doing.  And the second mechanism is loss aversion – “I wouldn’t want you to miss out on…”  The pain of losing is greater than the pleasure of gaining, so people hesitate to give up an existing benefit.

Example #2: An auto insurance company found it could raise rates and increase profits by conducting online research where they showed participants quotes for ten different insurance companies and asked them to select they one they would buy.  They varied the quotes and found that where their price was in relation to the other quotes was more important than the price itself.  Based on the findings, they were able to calculate the price that would provide them with the maximum profit.

Most companies can benefit from the above two approaches: find out what your customers think “most people do” in your category.  Discover what people worry they might lose by not using your product.  And conduct a pricing exercise like in the example above to find your optimal price points.

We would be glad to help glean these insights from your customers and prospects.  Just give me a call at 818-752-7210 or email info at bureauwest.com.

Sources: “The Maddest Men of All,” Freakonomics Radio Podcast, 2/26/15; “Beyond Academia: How Psychology Has Been Adopted in Advertising and Communications,” The Behavioral Economics Guide 2014; “The Power of Rank: Behavioural Insights into Product Pricing,” The Behavioral Economics Guide 2014; Bureau West research

Online bulletin board focus groups have been around for years now; they are one of the original online alternatives to in-person focus groups.  With online bulletin boards, participants log in at their convenience over the course of several days (or several weeks or more, depending on the project), and provide their responses to questions, as well as comments to others’ responses.  They’re not interacting in real-time, so there’s less spontaneity, but online bulletin boards have some important advantages.  For example:

• Everyone gets to answer every question, and they have time to think about each question before answering.
• Online bulletin board discussion participants tend to be more candid and less influenced by others’ opinions.

The challenge is to make sure participants treat the online discussion like a focus group and engage in the conversation, rather than treating it like a survey, and provide very brief answers.  There are a variety of ways to ensure participant engagement; a recent presentation by my colleague Holly O’Neill included some great strategies for doing so.  (Fellow researchers: Holly shared her expertise at a Qualitative Research Consultants Association chapter meeting.  One of the many reasons to become a member!)  Here are some of my favorite strategies, from both Holly’s and my experience:

• When recruiting participants, make it clear the online discussion is not a survey and will require their active engagement.
• Be specific in your initial requests for engagement, e.g., “I’d like you to go back through this morning’s conversation and make at least three comments on others’ posts.”
• Use indirect questioning techniques (such as projective techniques) early and often.  These techniques aren’t just for in-person focus groups, they can provide great value in online bulletin board discussions.  We’ve learned from the field of behavioral economics that people assume their decisions are based on logic only, when in reality, emotions and context play an important role.  Indirect questioning techniques give participants permission to consider factors beyond logic.  For example, we might ask participants to find images on the web that illustrate what they think of a product or service.  Or we might ask participants to tell us what people say about a certain topic, and then tell us what people really think about that topic.

To find the best ways to learn about your customers and prospects, give me a call at 818-752-7210 or email info at bureauwest.com.

Sources: “Turbo Charge Your Online Qualitative With Online Projectives & Exercises,” Holly O’Neill, QRCA So. Cal. Chapter, 3/14/15; Bureau West research

I frequently talk about how behavioral economics provides an important perspective we can use to obtain more accurate results when we conduct market research.  For marketers, one of the most important mechanisms of behavioral economics is called “frame of reference,” which refers to the context in which people make choices.  We commonly ask research participants how likely they would be to buy an item; behavioral economics shows us the answer to that question varies widely based on the other choices available.

But how do people make the choice among the options available to them?  I recently attended a great presentation given by a colleague of mine, Tom Rich, at the Qualitative Research Consultants Association annual conference in New Orleans.  He talked about how we make trade-offs to arrive at a decision.  We do it all the time: for example, is it worth paying an extra $50 for a non-stop flight or should I save the money and make the stop?  Tom says there are five different factors people consider when they make trade-offs:

• Time
• Energy (e.g., the hassle involved)
• Money
• Performance (quality)
• Self-esteem

When we conduct market research, we can ask questions to find out which of the above factors play a role in a given decision and then discuss how the different choices are perceived with regard to the relevant factors.

For example, in buying a car, all five factors may come into play, but especially money, performance and self-esteem.  Is it worth paying more for a prestigious car?  We may persuade ourselves we’re really paying extra for the vehicle’s performance, rather than admit that driving that car adds to our self-esteem!  Tom recommends uncovering the hierarchy of factors: determine which are the most important for a given decision and focus on how people make trade-offs with regard to those factors.  We may also be able to define different segments based on the different ways that people make trade-offs for a specific decision.

Want to find out how your customers make trade-offs?  Give me a call at 818-752-7210 or email info at bureauwest.com.

Source: “Leave the Gun. Take the Cannoli. Consumer Trade-Off Analysis,” QRCA 2014

My colleague Joe Sharlip just wrote an interesting piece about how friction uncovers insights when he conducts workshops with management teams to develop brand strategies.  This got me thinking: the same thing happens when conducting focus groups and other market research: some of the most valuable insights are uncovered when participants contradict themselves or disagree with each other.

Some examples:

• During a focus group, I asked a customer to explain to a non-customer what they like about the product being discussed.  When the customer described a specific feature of the product, the non-customer said, “when you put it that way, of course I’d be interested.”  We thus uncovered an important marketing angle for the product.

• I find that research participants tend to initially give “politically correct” answers to questions, but when given the opportunity, they will later contradict themselves and tell the truth.  For example, in an interview about retirement investing; the participant initially said he had put money aside for retirement every month for decades.  Later in the interview, when I mentioned “other people” who had difficulties saving consistently, he admitted to having the same challenge and we had a discussion about the barriers to saving on a regular basis.  That interview not only provided valuable information about the challenges of disciplined savings; it also gave us insight into some people’s attitudes that they should be saving and their embarrassment when they don’t.

In general, we always try to notice discrepancies, and then (politely) delve into them.  Do people say they love a commercial but they can’t remember the product being advertised?  Why is that?  Did people like a product at the beginning of the discussion and dislike it later (or vice versa)?  What made them change their minds?

To uncover insights about your customers, give us a call at 818-752-7210 or email info at bureauwest.com.

Sources: “Want to Uncover Hidden Brand Insights? Create Some FRICTION!” Mothership blog, 11/5/14; Bureau West research