Behavioral Science Series No. 2: Applying Behavioral Economics to Marketing

Apply Behavioral Economics to reduce the risk of eliciting irrational behavior in your patients/customers.

To understand behavioral economics, here are some examples of how we can explain why your business is underperforming or reveal an opportunity to boost performance.

In health care, educating patients as a means to encourage their compliance to therapy seems like a logical solution. People should do the right thing once they are educated, right? But unfortunately, the real world doesn't work that way. We see investments in education programs that simply have zero impact. Educational efforts that focus on heightening perception of risk actually elicit irrational behavior. Patients are actually less likely to act rationally. People at risk of a life-threatening allergy are more likely to live in denial when exposed to messages that try to scare them into compliance with all of the available knowledge about dietary habits. Type 2 Diabetes should be easy to manage. Yet control remains elusive.

In consumer goods, the context in which a decision is made makes a huge difference. If you go grocery shopping when you're hungry, you're going to make a very different decisions—much less healthy choices—than if you shop after eating a meal. Consider the response to the price of a product. If there's only one option, we might deem it to be expensive or we might see it as cheap. But our perception would be quite different when it's positioned next to other products priced at either higher or lower prices. Suddenly, the same product in the middle of the pack is neither premium nor discount, which is why gasoline comes in three levels.

In financial services, the difference between how men and women invest in securities is an emerging field of study. Men tend to trade much more often than women, which they justify by their belief in their own abilities to analyze, assess the market, and make informed decisions. But there's evidence to suggest that women actually outperform these men over time because the cost to trade is incurred less often. And women's portfolio value actually grows faster.

A recent study, into charitable donations comparing the general population to the wealthy, busted the myth that wealthy people tend to be more stingy. The study revealed that the appeal for donations from the charity made the greatest difference, for wealthy donors, by framing the donation as an impact the individual donor would make. This was more effective than framing the donation as a collective impact.

To learn more about Behavioral Economics click here.

(Photo by Austin Chan on Unsplash)