Lecture Masters Behavioural Economics - cases

Master specialisationBehavioural Economics

Cases that go with the lecture on

19 november 2012

Erasmus University Rotterdam

Remko Herremans

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Strategy in 5

1. Define the behavioural goal.

2. Paint a vivid picture of your target group.

3. Formulate the key insight.

4. Present the idea.

5. Sell the idea. Tell me why it will work.

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

1. Define the behavioural goal

Thoughtstarters

− What behaviour exactly do you want to change?

− Is it a new behaviour? Trial?

− Do you want to increase or stop existing behaviour?

− Is it a slight change in behaviour or major turn around?

− Is it for once, daily, for ever, …

− Make sure you get focus here!

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

2. Paint a vivid picture of your target group

Thoughtstarters:

− Who are they?

− What role do they play in relation to this subject?

− What is on their mind?

− What is their (expected) attitude towards the subject and the desired behaviour?

− Make them as real as possible!

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

3. Formulate the key insight.

Thoughtstarters:

− What keeps them from doing it now?

− What do they get out of the present behaviour?

− What triggers the behaviour?

− Is there a behavioural pattern? Are there any habits you can work with?

− Be as concrete as possible!

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

4. Present the idea!

Thoughtstarters:

− What is the essence of the solution?

− How is it going to work?

− Can you show it?

− Does it look and feel smart?

− Make it inspiring and emotionally convincing

− It can be anything, not just communication

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

4. Sell the idea!

Thoughtstarters:

− Why will it work?

− What behavioural rational is there? Use of habits, automation, social pressure, commitment, loss aversion, …

− Make it rationally compelling!

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

My Checklist

−Coherence and Cognitive ease: − is there an inevitable logic between the 5 steps?

−Behavioural mechanism−Does it tap into an effective behavioural insight?

−Imaginative and inspiring:− Is there an original thought, made concrete and triggering?

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

For Example: ‘Slowdown app’ (in short)

1. Define the behavioural goal− Make people stick to the speed limit

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Example in short: ‘Slowdown app’

2. Paint a vivid picture of your target group− Young drivers, not open to be ‘responsible’

− Pretty fearless and get carried away easily

− Speeding is often automatic.

− They live with music. Certainly in the car

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Example in short: ‘Slowdown app’

3. Formulate the key insight.− Playing music influences their driving speed.

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Example in short: ‘Slowdown app’

4. Present the idea, the solution. − The slow down app.

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Example in short: ‘Slowdown app’

5. Sell the idea, Tell me why it will work. − It works automatically.

− It uses early commitment

− It builds on an existing habit/conditioned behaviour

− It’s for free

− It’s kind of cool.

− It has high talkability: viral.

1 Wasting Food

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Case 1 Wasting Food

− Dutch households throw away 8% of their food. That is: not counting the peels and bones. We’re talking of food that is still edible: left-overs, groceries we bought but don’t use, and so on. What a waste!

The Challenge:

− How could you help the Dutch Government to reduce the amount of edible food Dutch households throw in the bin, on a daily basis.

Note:

− Don’t bother about the restaurants, catering and hotels

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Case 1 Wasting Food (additional information)

− Per person we waste over 40 kilo of food per year, that’s 135 Euro per person, or: more than 300 Euro per household.

− Besides a waste of money it’s also a waste of energy. The energy it took to get the food on your plate.

− Mostly it concerns: milk and dairy-products, bread and pastry, vegetables and fruit.

− Reasons? We buy too much, we don’t store it well enough, we don’t know what to do with left-overs, we think left-overs are not healthy,…

2 Lazy Money

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Case 2 Lazy Money

− Interest rates are low, our financial futures are uncertain. Stock markets feel like casino’s and banks are after your money to pay their bonuses. Not the ideal climate to ask people to put more money into their saving accounts. Or is it? A lot of households do have quite some money on their current accounts at an interest rate of 0%!

The Challenge:

− Advice your client (a bank) how to make their customers transfer their balance surplus at their current account to their saving account.

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Case 2 Lazy Money (additional information)

− Focus on existing clients (or a smaller segment within).

− On average their current account balance grows with 150 Euro at the end of every following month, not including the extra holiday money in May and the ’13th month-salary’.

− The clientbase is around 5 million.

− They are rather conservative in taking risks.

3 The Art of Car Maintenance

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Case 3 Car Maintenance

− Peugeot wants to increase the number of visits to the Peugeot-garage. It’s strengthens the relationship with the client, it’s good for the car an it’s an opportunity to make money. But people tend to postpone maintenance to their car: it ‘s a lot of trouble, the costs you will feel directly in your wallet, but you’ll never know how much money you did safe. So, we rather wait until it breaks down.

The Challenge:

− How to get (more) Peugeot drivers to the Peugeot-maintenance service more often?

Master Behavioural EconomicsErasmus University Rotterdam 19 november 2012

Case 3 Car Maintenance (additional info)

− Like other car brands, Peugeot has introduced the Summer- and Wintercheck. People want to leave well-prepared on their 1000+km trip on the route Soleil and don’t want to have their holidays spoiled because of car problems. Furthermore, by positioning this check-up as part of the holiday preparation it could fall into another ‘mental account’. It’s up to you if you want to build further on these existing holiday-checks or come up with something entirely different.

− A typical maintenance service checks the car on 28 points and will cost you 19 Euro.

− Owners of a 4+ year old Peugeot are the main target group

− There is a database of their addresses.

GOOD LUCK AND HAVE FUN

Remko Herremans