Most complex policy and business problems boil down to human behaviour. Ultimately, how people behave strongly influences how services, products and organisational processes are designed and how stakeholders embrace them.
As emerging threats and opportunities rapidly change the policy and business landscape, government agencies and organisations that truly understand what drives customers and employees to think or act the way they do will prevail.
Behavioural economics is at the centre of this. It shows we don’t always make decisions in a rational and calculated way. We often use thought processes that are intuitive and gut-driven rather than deliberative and planned, leading us to:
- misjudge important facts
- be inconsistent in our perception of events and judgment of alternatives
- miscalculate probabilities or the likelihood of an event occurring
- be influenced by decisions of those around us
- be sensitive to the way choices are framed and presented
- prefer smaller but immediate rewards over larger delayed ones
- attribute value in relative (rather than objective) terms
You can’t force people to be more rational, but by recognising and anticipating cognitive biases using behavioural science and data analytics, you can design targeted, cost-effective interventions that nudge people toward better decisions and behaviours. It’s about addressing the inefficiencies that stand between you and the best outcomes for your organisation and stakeholders.
Unlock value through behavioural interventions
Unlike traditional economics—which assumes people make decisions logically and rationally—behavioural economics merges human behaviour and economics to show how people really make decisions and why they behave the way they do. In essence, it’s about designing solutions that align with how people actually behave.
Personalisation
People are three times more likely to pay their vehicle tax if a photo of their vehicle was included in a letter with the request
Social norms
Informing debtors of prompt repayment norms in their town resulted in a 15% increase in payment rates
Framing
People would rather undergo a medical procedure if framed as having a 90% survival rate rather than a 10% mortality rate
Reduce frictions
Individuals were 10x more likely to purchase a product when fewer varieties of that product were on display
Why are our societal investments falling short?
Watch our “Designing for Humans” video to find out.
PwC Behavioural Economics - Designing for Humans
Why are our societal investments falling short? We need to design for humans not rational agents.
Steps to designing solutions
In the near future, government agencies and businesses will be looking at their strategies through a behavioural lens. Behavioural economics will be an essential part of all government and business problem-solving tool kits. Many policymakers and industry leaders are already using these analytical and behavioural methods to solve their challenges.
From the translation of the policy or business problem into a behavioural one to the design and implementation of interventions, we believe there are four phases that government agencies and organisations can move through to turn their understanding of their citizens and customers into action.
- Learn about your sore spots
Use qualitative research techniques, data and analytics and/ or customer journey maps, to fully understand the issues and inefficiencies underlying your policy or business problem.
- Identify the problem behaviours
Use the principles of behavioural economics and behavioural science to design targeted nudges that shift behaviour. - Test your interventions
Field test the prioritised interventions to understand the effectiveness and impact of the interventions.
- Enhance the stakeholder experience
Once you are confident about the intervention, then you are ready to scale it up. The ideal outcome is that your change helps your target audience make better choices, giving you a better policy outcome or sustained competitive advantage.
Opportunity awaits
Leading government agencies and organisations are already seeing the benefits of viewing their policy and business challenges through a behavioural lens and putting people at the centre of their strategy. From there, the applications—and opportunities—are almost endless.
Give us a call to learn more about how behavioural economics can help you turn your vision into a reality.
