APPLYING BEHAVIORAL ECONOMICS HOW SMALL NUDGES CAN HAVE A MAJOR IMPACT ON SHOPPERS

Transcription

1 APPLYING BEHAVIORAL ECONOMICS HOW SMALL NUDGES CAN HAVE A MAJOR IMPACT ON SHOPPERS 1

2 Perception Research Services (PRS) At PRS, our mission is to help our clients "win at retail" in the global marketplace. Since 1972, PRS Has Conducted Over 12,000 Studies to Help Clients Improve Their Packaging & Shopper Marketing 2

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5 PRS and IN VIVO Have a Shared Philosophy, Based on Our Collective Experience Real life purchase decisions are: Overwhelmingly behavioral, rather than rational. - We believe primarily in what people do, rather than what they say. Greatly influenced by competitive context. - To accurately gauge behavior, we need to place shoppers in realistic shopping contexts. Driven primarily by what is seen, understood and shop-able at shelf. - These behavioral measures are the most predictive of in-market performance. 5

6 What Shoppers Say My My purchases purchases are pre-planned are pre-planned. My purchases are driven by features, benefits & pricing. When Asked, Shoppers Typically Cite Rational Factors 6

7 What Shoppers See But at the Shelf, They Encounter Overwhelming Choice 7

8 and What Shoppers Do! and The Shopping Process is Largely About De-Selection. 8

9 To Navigate Complex Aisles & Shelves 9

10 or a Digital World of Overwhelming Choice 10

11 We Use Two Systems of Thinking. Autonomic, unconscious, lightening fast, leverages emotion and generates strong feelings of certainty. Rational, conscious, requires effort, works slowly, examines, calculates and weighs evidence = X 2? Shopping is Driven and Dominated by System 1 Thinking, but Research Often Focuses on System 2. 11

12 Which In-Store Message is Most Impactful? More than 80% Milk Greedy for Danette? +0% +35% 12

13 Sub-Conscious Factors Drive Our Decisions... We are not rational agents maximizing self-interest but humans driven by impulse, habits and context 13

14 These Implicit Forces & Biases are Consistent and Predictable 14

15 The Impact of Anchoring A Price Promotion for Soup ($0.79 instead of $0.89) Some stores had a sign: No More Than 12 Cans per Person and Some Stores Did Not. Purchase Rate Without the Sign: 3.3 units/shopper Purchase Rate With the Sign: 7.0 units/shopper 15

16 The Reciprocity Effect The Reciprocity Effect: A Gift Drives Loyalty SALES : + 79%! 16

17 The Decoy Effect 17

18 Decoy Effect: How Context Impacts Decisions With 3 Choices (Including the Decoy), 84% Chose the $125 Subscription. With 2 Choices (Without the Decoy), Only 32% Chose the $125 Subscription. 18

19 Why is Behavioral Economics So Powerful? A New Way to Think About Shopping Behavior Direct Tactical Implications for Influencing Decisions + More Effective Promotions Better Pricing Strategies Improved Store Traffic & Category Management 19

20 STICKK: Helping People Achieve Goals Applying Social Norms, Priming & Loss Aversion 20

21 Behavioral Economics: Key Implications for Shopper & NPD Research The Need to Emphasize Behavior (visibility, recognition, engagement & conversion) - And to Acknowledge the Limitations of PI The Importance of Developing & Screening New Products within Competitive Context -Developing New Products from the Outside-In The Need for More Holistic Approaches -Testing Choice Architectures at Shelf 21

22 Nudge is Rooted in the Work of Nobel-Prize Winning Economists 22

23 and It is About Leveraging Human Biases & Implicit Forces Beyond Conscious Rationality. Reciprocity Priming Anchoring Decoy Effects Salience 23

24 It is not a fly it is a NUDGE 24

25 that helped reduce cleaning expenditure by 80% in Amsterdam Schipol Airport! 25

26 So What is a Nudge? An Effective Little Help That Leads People to Adopt a Desired Behavior, Either Consciously or Subconsciously. 26

27 This Small Nudge Had a Big Impact on Littering 27

28 This Nudge Dramatically Increased Energy Efficiency A Change in the Bill Led to Millions in Savings! (By Applying Social Norms) 28

29 Why is Nudge So Successful? Efficacy in Changing Behavior At Minimum Cost + 29

30 Small Changes Can Make a Big Difference! Prof. Dan Ariely (Duke University) When we think about what drives human behavior, we typically think in terms of objectives, goals & aspirations. The reality is that most behavior is driven by small things in the environment. 30

31 The Nudge Revolution in Public Policy 31

32 Applying Nudge to Consumer Goods Eric Singler of PRS IN VIVO Has Pioneered the Adoption of Nudge to Consumer Marketing. His Team Has Conducted 40+ Nudge Studies with Consumer Marketers. 32

33 Applying Nudge to Consumer Goods Adopting a New Product Form Encouraging New Usage Occasions Linking Digital & Physical Shopping Encouraging Healthier or More Earth-Friendly Behaviors Nudge is Essentially About Changing People s Habits 33

34 The Vittel Refresh Cap Increasing Saliency to Promote Water Consumption 34

35 Nudge is a Complement to More Traditional Approaches to Marketing. RATIONAL PERSUASION NUDGE Situational drivers Information Feature/Benefit System 1 goals Reason-to-Believe Choice architecture Social influences SELLING EDUCATING ENCOURAGING 35

36 Is a Topic Right for Nudge? Nudge is a Relevant & Recommended Approach When The goal is BEHAVIORAL CHANGE The business question is STRATEGIC Traditional approaches have proven LIMITS The desired behavior is GOOD FOR THE CONSUMER (A Win-Win situation) 36

37 Nudge is Not Just About Selling More Candy But It Can Be About Nudging Shoppers Down Center Aisles. 37

38 Nudging for Good & Long Term Success What we firmly believe is that if we focus our company on improving the lives of the world's citizens and come up with genuine sustainable solutions, we are more in synch with consumers and society and ultimately this will result in good shareholder returns Paul Polman Unilever Global CEO 38

39 The Lifebuoy Hands Campaign in India 39

40 Smarties Pack Innovation Encouraging Mindful Snacking Through Portion Control 40

41 The NudgeLab Process A Proven & Proprietary 4-Step Nudge Methodology, Which Has Won Several ESOMAR Awards. 41

42 Step #1: Uncovering Triggers & Micro-Barriers Uncovering the Subconscious Factors That Drive (or Impede) The Desired Behavior 42

43 Uncovering Micro-Barriers for Packed Salad Image of an industrial product Poor Appearance on Shelf A Bad smell when opening = Difficulty of preservation 43

44 Step #2: NudgeLab Workshop An Immersive Workshop, with Ideation Driven By Behavioral Science Principles & Learnings (With Client teams, Nudge unit experts, Sector experts, Consumers, Creative People, Designers, etc.) Activating Levers of Influence to Develop 100+ Potential Nudges 44

45 Framing Packed Salad as a Natural Product at the 1st Moment of Truth TOUCHPOINT BEHAVIORAL INSIGHT DRIVER OF INFLUENCE Poor appearance on shelf NUDGE IDEAS WOOD CRATE SRPs STAND DISPLAY CHALKBOARD SIGNAGE NAME OF PRODUCER 45

46 Step #3: Pre-Selection Workshop To Optimize Nudges, Gauge Feasibility and Rank the Best Ideas to Test or Apply 46

47 The Final Nudgebook as a Guide to Action 47

48 Step #4: Testing & Tracking Impact We can t do evidence-based policy without evidence. Without evidence, they are just ideas - Richard Thaler 48

49 PRS IN VIVO Shopper Labs Mini-Store Environments for Screening & Assessing New Products, Packs & Shopper Marketing Efforts 49

50 New Nudges In Market 50

51 A Final Example of Nudging for Good 51

52 And a Final Nudge from Me. Most people think of at least 3 potential applications for Nudge soon after reviewing this deck. And they contact me to discuss them! Scott Young Global CEO PRS IN VIVO T: Scott.Young@prs-invivo.com 52

53 Please Visit prs-invivo.com for More Learnings.. Linking Digital & Physical Shopping Gauging Emotion in Pack & Shopper Research Thinking from the Outside-In to Drive New Product Success Balancing Global Design & Local Customization Conveying Real at the Shelf Connecting with Hispanic Shoppers 53