INTERVIEW: How behavioural science can nudge people into better financial decisions

Behavioural science can offer a powerful way for marketers to push customers towards better financial outcomes, according to the author of a new book.

‘Using Behavioral Science in Marketing’ by Nancy Harhut, Chief Creative Officer at consultancy HBT Marketing, is essentially a distillation of the principles of behavioural science in an accessible format.

Behavioural science shows that humans tend to default to hardwired behaviours, which represents a “huge opportunity” for marketers.

“All of us – men, women, young, old, rich, poor, very educated, not as educated, B2B, B2C – all of us rely on decision making shortcuts,” Nancy tells the Financial Services Forum. “It’s a way for people to conserve mental energy because we couldn’t possibly weigh every bit of information before making a decision or we’d never get around to making any.”

As marketers, “if we can build into our strategies and creative executions the triggers or prompts that will get people to take these automatic behaviours, then we can increase the likelihood that people will engage with our content and respond to it.”

The book is split into 17 chapters covering 25 behavioural science principles. The book focuses on explaining principles, backed up with just enough science to help people understand while spending longer on case studies and how marketers can apply the principles.

Some examples are the information gap theory, formulated by George Lowenstein. This postulates that if there is a gap between what you know and what you want to know, people will take action to close that gap. She says that offering simple answers to who, what, when, where, why can pull people in.

One example she gives is from her experience marketing fixed index annuities.

“It’s not a checking account, so it requires a bit of thought. We were going round and round on how to market it and didn’t want to scare people away.”

The solution they found was crafting the headline around a simple question – “could you earn even better returns than a CD (retirement account) and still protect your retirement money?”

Streamlining email

Another area covered is emails, which often suffers from low engagement rates due to people being bombarded with marketing.

“A lot of it happens between the sender line, the subject line and then the pre header.”

She talks about the Von Restorff effect, where humans tend to notice things that are different from their surroundings.

“You want your subject line to look different to everyone else’s,” Nancy says, citing the inclusion of emojis and rarely used keyboard symbols in the subject line as giving a double-digit lift in open rates.

There are nuances to be applied here – for example, capitalising words offers differentiation, but only if it is fewer than 50% of the words in the subject line.

Marketers may also want to consider how they present information. Another example she gives is a campaign to get people to save more for their retirement, where the company tested three different approaches using three different behavioural science principles.

One of these was social proof: “when people aren’t sure of what to do and they look at others, particularly others like themselves, and they follow their lead.”

Another was scarcity, where people value something more because it is harder to get or running low in stock. Nancy says that this also applies to information.

“If there is information you can tap into that is not widely known, for example by saying ‘not everyone knows this secret’.”

Another piece of behavioural science used was loss aversion – the concept that people are twice as motivated to avoid the pain of loss than the pleasure of gain.

“[Marketers] can tend to double down on the gains and talk about benefits and advantages,” Nancy says.

In this test the email that got the most opens was centred around loss aversion.

Essentially she argues that marketers need to look for the things that will trigger automatic responses, from the comfort of knowing other people are doing something to the satisfaction of having information others don’t have.

Making the right decisions easy

Some marketers may feel uncomfortable consciously using techniques that tap into such innate human psychology. Nancy says that it is important to behave responsibly and ethically when using these techniques – “you don’t want to go for the short term win that has long-term consequences.”

But ultimately she views behavioural science as just one more tool in the marketer’s inventory.

“If you’re sending out email advertising, you would choose the media list that is most favourable. The same thing applies here.”

She says that in general an audience can be split into three groups – firstly, the people looking for something and secondly the ‘hard nos’.

The third and largest group are “busy and cruising along on autopilot”. This is where behavioural science comes in, she says, delivering messages in a brain-friendly way that helps them to get noticed.

This ties into the notion of cognitive fluency: people feel more confident in their ability to make decisions if things are easier to understand.

This means not just using uncomplicated language and writing in language people understand, but even the font the text is written in.

Financial services examples

Nancy says that financial services marketers can “absolutely” benefit from behavioural science.

“People don’t always make the best money decisions. It can be a complicated topic – as financial services marketers we want to help people make good decisions.”

She argues that behavioural science can provide prompts that send people in the right direction, whether this is saving more, thinking about retirement or thinking about education. In other words, it is about making it “as easy as possible to do the things they should be, and a bit harder to do the things they shouldn’t be.”

“You can use everything from cognitive fluency, which makes things easier to understand, to the idea of commitment and consistency, where scientists have found that if you can get someone to say yes once, they’re more likely to say yes a second time, a third time, a fourth time. It’s particularly true if your first ask is relatively small.”

An example in the US was a smaller bank trying to increase checking account customers by taking advantages of larger banks that were raising fees. The prompt used was: “with all the news of banks raising their rates, you’re probably looking to join other customers in search for a new place for your checking account.”

This was a combination of a reason why and social proof, offering a 31% lift over the control.

Continuing with the example of checking accounts, she noted that US banks want checking account customers as they are sticky, often offering bonuses if people open an account.

One bank ran a campaign reframing this around the idea of finding $300 in one’s pocket.

“It broke out of the mould and got people to think about opening it and getting the money. Everyone else was talking about it the same way – it’s getting them to pay attention to the message.”

Nancy also highlights choice architecture: the way choices are presented influences decisions.

“If there’s a choice based on data that is particularly good for someone we can influence how they engage.”

People often default to the middle option, assuming the first and third are going to be “too extreme”. Using data, companies can put the best option for a customer in the middle.

“People are looking for a decision-making shortcut,” says Nancy.

“So there are things like that which marketers can do to help guide people to decisions that will be good for them.”

Using Behavioral Science in Marketing by Nancy Harhut is available now from Kogan Page.