Applying Behavioral Economics How Small “Nudges” Can Have a Big Impact on Behavior TMRE October 2016 1
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
PRS Eye-Tracking PRS Pioneered Eye-Tracking to Understand Shopper Behavior & Assess Marketing Communications 3
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IN VIVO Shopper Labs Mini-Store Environments for Developing, Screening & Assessing New Products, Packs & Shopper Marketing Efforts 5
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What Shoppers Say … My purchases My purchases are pre-planned are pre-planned. My purchases are driven by features, benefits & pricing. When Asked, Shoppers Typically Cite Rational Factors… 7
…What Shoppers See … …But at the Shelf, They Encounter Overwhelming Choice … 8
…and What Shoppers Do! …and The Shopping Process is Largely About De-Selection. 9
To Navigate Complex Aisles & Shelves… 10
…We Use Two Systems of Thinking. Rational, conscious, Autonomic, unconscious, requires effort, works lightening fast, leverages slowly, examines, calculates emotion and generates and weighs evidence. strong feelings of certainty. 3 2 + 4 2 = X 2 ? Shopping is Driven and Dominated by “System 1” Thinking, but Research Often Focuses on System 2. 11
…and Our Decisions are Heavily Influenced by Context. Prof. Dan Ariely (Duke University) “Most people don’t know what they want unless they see it in context. ” How Options are Framed (the “Choice Architecture”) Often Determines The Decisions We Make. 12
Sub-Conscious Factors Drive Our Decisions... … but humans driven by impulse, We are not rational agents habits and context… maximizing self- interest… 13
…These Implicit Forces & Biases are Consistent & Predictable 14
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
The “Reciprocity Effect” SALES : + 79% ! 16
Why is Behavioral Economics So Powerful? A New Way to Think About Tactical Implications for Shopping Behavior Influencing Decisions More Effective Promotions + Better Pricing Strategies Improved Store Traffic & Category Management 17
The Primary Implication for Shopper & NPD Research VS . The Need to Emphasize Purchase Behavior in Shelf Context (vs. Claimed PI in Isolation) 18
Nudge is Rooted in the Work of Nobel- Winning Economists… 19
…and The World of Public Policy. 20
It is About Leveraging Human Biases to Impact Behavior. 21
It is not a fly… …it is a NUDGE 22 22
…that helped reduce cleaning expenses by 80% in Amsterdam Schipol Airport! 23 23
So What is a Nudge? An Effective Little Help… … That Leads People to Adopt a Desired Behavior, Either Consciously or Subconsciously. 24
This Small Nudge Had a Big Impact on Littering 25
This Nudge Dramatically Increased Energy Efficiency A Change in the Utility Bill Led to Millions in Savings! (By Applying Social Norms) 26
Why is Nudge So Successful? Efficacy in At Minimum Cost Changing Behavior + 27
Applying “Nudge” to Consumer Goods Eric Singler of PRS IN VIVO Has Pioneered the Adoption of Nudge to Consumer Marketing. Eric, Pauline and the Nudge Unit Have Conducted 40+ Nudge Studies with Consumer Marketers. 28
Applying “Nudge” to Consumer Marketing Adopting a Encouraging New Usage Occasions New Product Form Encouraging Linking Healthier or More Digital & Physical Earth-Friendly Shopping Behaviors Nudge is Essentially About Changing People’s Habits 29
The Vittel Refresh Cap The Vittel Refresh Cap Increasing Saliency to Promote Water Consumption 30
When is a Topic Right for Nudge? The goal is BEHAVIORAL CHANGE The business question is STRATEGIC Rational approaches have PROVEN LIMITS The desired behavior is GOOD FOR THE CONSUMER (A Win-Win situation) 31
“Nudging for Good” “What we firmly believe is that if we focus our company on improving the lives of the world's citizens and come up with Paul Polman genuine sustainable Unilever solutions, we are more in Global CEO synch with consumers and society and ultimately this will result in good shareholder returns ” 32
The Lifebuoy Hands Campaign in India 33
Nivea’s Approach to Promoting Sun Care Compliance… 34
Nudge is a Complement to More Traditional Marketing. NUDGE RATIONAL PERSUASION Situational drivers Information System 1 goals Feature/Benefit Choice architecture Reason-to-Believe Social influences SELLING EDUCATING ENCOURAGING 35
Smarties Packaging Innovation Encouraging Mindful Snacking Through Portion Control 36
The NudgeLab Process A Proven & Proprietary 4-Step Nudge Methodology, Which Has Won Several ESOMAR Awards. 37
Step #1: Uncovering “Triggers” & “Micro - Barriers” Uncovering the Habits That Drive (or Impede) The Desired Behavior 38
Uncovering “Micro - Barriers” for Packed Salad Industrial A Bad Smell Poor On-Shelf Image when Opening Appearance (not fresh) = 39
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 40
“Framing” Packed Salad as a Natural Product DRIVER OF INFLUENCE TOUCHPOINT BEHAVIORAL INSIGHT Poor appearance on shelf 41
Step #3: Pre-Selection Workshop To Optimize Nudges, Gauge Feasibility and Rank the Best Ideas to Test or Apply 42
Step #4: Testing, Refining & Tracking Impact Leveraging ShopperLabs to Refine and Pre- Test “In - Store” Nudges 43
PRS IN VIVO Nudge Clinics A Workshop with PRS IN VIVO Nudge Specialists, Cross-Functional Client Teams & Creative Consumers • Review of Key Challenges at FMOT ◦ Behavioral Economics Framework • Brainstorming Sessions Facilitated by PRS IN VIVO Qualitative Professionals • Co-Creation of Nudge Concepts Identifying Opportunities to “Nudge” Shoppers 44
How Can We “Nudge” More Shoppers Down Center Aisles? 45
Some Other “Hot Topics” at PRS IN VIVO Optimizing Packaging for Online Shopping Gauging Emotion in Pack & Shopper Research Thinking from the “Outside - In” for NPD Success Making Packaging & POS Work Together Designing for the System 1 Shopper Connecting with Hispanic Shoppers 46
And a Final Nudge from Me… Most people ople think nk of at least t 3 poten tential tial Nudge dge application lications after er heari ring ng this presentation sentation! And nd they y cont ntact act me to dis iscuss uss them an and receive eive this is bo book ! Scott Young Global CEO T: 201.720.2701 Scott.Young@prs-invivo.com www.prs-invivo.com 47
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