The Social Versus Individual Debate Misses the Point about Behavioural Economics

Crawford Hollingworth, founder of The Behavioural Architects

Behavioural Economics (BE) is inspiring considerable debate and discussion amongst academics, policymakers, think tanks and industries, not least the marketing industry. One strand of thought is that BE is individualistic in its approach and lacking social insight. For example, in October’s Admap Mark Earls and Alex Bentley positioned behavioural economics as follows:

“The newer approaches, such as neuromarketing or behavioural economics, are also essentially individualist - merely new flavours of an old recipe.”

However, the RSA’s 2011 report ‘Transforming Behaviour Change’ seeks to show how behavioural economics allows us to approach behavioural understanding and behavioural change in a holistic way, embracing both social and individual contexts and influences equally

“We cannot change ourselves without changing each other: Most behaviour change does not occur at the level of the individual alone. Not only do we rely on other people to achieve the changes we seek to make, but such behaviours spread through social diffusion,”

BE frameworks and constructs embrace the importance of social influence

Behavioural economists have identified a raft of cognitive biases that drive consumer behaviour within a given choice architecture or situation. Biases can be further grouped into different categories:

Memory biases: such as peak end rule, recognition bias, self-serving bias.

Decision-making biases: such as framing, loss aversion, hyperbolic discounting, endowment effect.

Probability / belief biases: such as availability bias, primacy effect, optimism bias.

Social biases: social conformity bias, status quo bias, in-group bias, authority bias, projection bias, to name but a few.

Some biases fall into more than one camp – for example commitment bias may sometimes act through social networks and peer pressure, while on other occasions it may act on an individual level via technology or via a sense of who we want to be as a person.

There are many great examples of behavioural economics thinking leveraging the power of social influence, and examples of where BE has focused primarily on the individual.  The power of BE is its inclusive conceptual foundation – examining the complete choice architecture in operation.

The Cabinet Office ‘Mindspace’ report suggests BE influences can be differentiated into those that are social versus internal, or individual. According to Mindspace, approximately 50% of influences are socially grounded with the remaining 50% internally grounded. The report illustrates how varied and complex mapping these influences can be. Similarly, Professor Theresa Marteau, director of the Behaviour and Health Research Unit at the University of Cambridge and colleagues, recognise that a combination of different behaviour change strategies – from social norm feedback, to defaults to altering the physical environment are required to achieve success.

‘Individual’ applications of BE

‘Save More Tomorrow’ uses BE to increase retirement savings

In the early 2000s US employees tended to accept the default contribution rate for their retirement savings, which was often below the optimal level. So behavioural scientists Richard Thaler and Shlomo Benartzi looked at ways in which behavioural economics could be used to raise contribution rates. A number of BE concepts explain low contribution rates, among them procrastination and inertia but also loss aversion – people get used to a certain level of take-home pay and setting up pensions contributions means they face a reduced net income.

Thaler and Benartzi devised a way of allowing employees to pre-commit to increasing (or starting) their pension contributions at the advent of their next pay rise and tested it across different companies across the US. After 4 years, their results were incredibly positive:

(1) 78% of those offered the plan joined it; (2) 80% remained in it through the fourth pay raise; and (3) the average saving rates for program participants increased from 3.5% to 13.6% over the course of 40 months.

Subsequent implementations in 2001 and 2002 had comparable success rates and now over 50% of employers in the US offer what has now become known as auto-escalation.

Obama’s team used BE to encourage US citizens to spend their tax rebates!

Following the 2008 financial crisis, the Obama administration looked at how to boost consumer spending by leveraging BE. With this aim they designed two tax rebates totalling more than $235 billion in 2009. The rebates were delivered in small amounts through pay checks rather than in one large, separate rebate to take advantage of the fact that people tend not to notice or ‘mentally account’ for such small, almost token amounts of money. Policymakers deduced that more of it would be spent, and the economy would benefit. What’s the point in mentally accounting for effectively loose change? Rebates paid in one lump sum however, would be far more likely to be saved.

UK Government using BE to increase ‘truthfulness’.

The HMRC are experimenting with priming techniques to see whether signing a tax form at the start as opposed to the end may make a difference to honesty on tax returns and benefit claims. A field experiment in the US found that asking people to sign a declaration of truth at the beginning of their car insurance application led them to declare a 10% higher mileage. This may be because people feel more committed to telling the truth when answering subsequent questions. If we have to sign a form at the end, when we may have been only ‘partially accurate’ answering questions, correcting the form means admitting that we have been dishonest to start with.

Disney changed the choice architecture to encourage healthier eating

The Disney Corporation altered the children’s menus at its theme parks from 2006 so that healthy items were the default. Healthier choices, such as 100% juice, water and low fat milk, became the default beverages, and fruits and vegetables became the default side dishes with children’s meals instead of fries and soft drinks. These changes have been successful; the majority of families stick with the healthy children’s meal defaults (see figure below).

Source: “Walt Disney Company – 2008 Corporate Responsibility Report.” 2008.

‘Social’ applications of BE

Using BE concepts of framing and social norms to increase towel re-use

Cards were given to hotel guests asking them to reuse bath towels, either to “help save the environment”, “to partner with us to save the environment” or appealing to peer influence, as in, “Almost 75% of guests who stayed in this room reused their towels.”. The social norm based message resulted in a 34% higher rate of towel re-usage, compared to the messages about the environment.

RSA/Shell Smarter Cab Drivers use social norms and the authority bias to inspire greener driving

The RSA and Shell have launched a ‘Smarter Cab Driver’ campaign to raise awareness of the benefits of fuel efficient driving this year, encouraging cabbies to change their driving styles and drive more efficiently. The scheme recognises the importance of social norms and social contagion as cab drivers are strong influencers of driving styles on the roads. Not only might their driving influence their passenger, but the passenger’s subsequent driving behaviour may influence other drivers and so on.

Obama uses social norms to increase voter turn out

Another famous example is from the 2008 US election where two weeks before Election Day, Barack Obama’s campaign was mobilising millions of supporters; it was a bit late to start rewriting get-out-the-vote (GOTV) scripts. So an advisory group of 29 of the nation’s leading behavioural scientists recommended the script utilised a simple message: “A record turnout is expected.” Studies by psychologist Robert Cialdini and other group members had found that the most powerful motivator for citizens to vote is the suggestion that everyone is doing it. “People want to do what others will do,” says Cialdini,. “The Obama campaign really got that”

UK Government harnessing the power of social conformity

For the 2011 Census, UK citizens were posted letters chasing them to complete their census forms. Phrases such as: ‘As you are one of the last in your area…’ were included, suggesting the recipient’s failure to be a good citizen (completing the Census is a civic duty after all) and highlighting the fact that they were in a minority.

Further, a Behavioural Insight Team and HMRC trial to encourage tax debtors to pay up used a social norm statement to help the message hit home which could potentially save the government millions of pounds.

A Holistic BE framework: Contextual vantage points

As these case studies demonstrate, there is nothing inherently individualistic about behavioural economics. People draw on all sorts of short-cuts and rules of thumb when making decisions; from looking at what others are doing, or listening to an authority voice, to opting for the middle choice or just picking something they recognise. The concepts and frameworks inspired by BE can embrace multiple contexts and behavioural influences, both social and individual.

The Behavioural Architects (TBA) have developed a simple way of structuring and conceptualising different layers of consumer context. Imagine looking at the consumer from different vantage points—from really close and from further away. Think of Googlemaps and the way you can zoom in and out of your target. You need the big picture view of the map to get the general sense of where you are at the beginning and the up-close perspective at the final stage of your journey. This is an analogy for how to think about consumer context—we need to look at context on different levels—from the macro all the way down to the micro.

Cultural Context: We are influenced by the society we belong to: our cultural values and societal pressures impact the way we think and behave. Understanding the cultural context and the changing dynamics within it is a critical starting point for understanding consumer behaviour. It is also a perfect starting point for understanding cross-cultural differences.

Social Context: The social groups we belong to or connect with expose us to social norms and pressure points that impact on our behaviour and our willingness to change. Most people are influenced by more than one social group, be they friends (and peer groups), work colleagues and clients, or family. Understanding the relative importance of social groups within the choice architecture and potential points of conflict is vital to understanding the range of behavioural drivers.

Situational Context: Where you are, in a store, at a train station, at home, and so on, has a major impact on choice and behaviour. What you did, heard, saw, or even smelt prior to that and what you are going to do next also affects your behaviour in the present. The situational context exposes you to a range of conscious and unconscious influences that may play a critical role in tipping behaviour one way or another. As researchers, we need to identify and understand the contextual differences between different behavioural situations.

Brand and Competitive Context: Finally, there is the immediate competitive context surrounding a brand at point of sale or in the moment of consumption. In this ‘micro’ level of context a combination of verbal and visual cues may sway choice and shape behaviours. Here brand and packaging design, communications and point of sale promotion and pricing are key levers to influence choice.

Contextual Mapping

Fig 1: TBA’s Contextual vantage points

Connecting the different contextual layers together gives us a comprehensive map of the consumer choice architecture and the conscious and unconscious influences that guide behaviour.  The challenge for marketers is to identity and apply the full range of contextual BE influences – from cultural, social and situational influences all the way down to the minutiae of communications at the category and brand level.

In Summary:

The social versus individual debate misses the point about BE.

  • BE allows us to approach behavioural understanding and behavioural change in a holistic way, embracing both social and individual contexts and influences.
  • BE gives us new concepts and frameworks to think more deeply about behaviour and behavioural change.
  • BE has the power not only to shed light on why someone behaves in one way versus another but to also to generate a series of action-led behavioural hypotheses [at both an executional and strategic level] about how to create or change a particular behaviour.
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