Category Archives: Loss aversion

donationsOur latest article ‘Five insights from behavioural sciences to nudge and steer charitable giving‘ was published last week by The Marketing Society.

In this article we look at different research findings and insights from the behavioural sciences around charitable giving, specifically five different ways in which a charity might be able to increase donations. Successfully trialled approaches include:

- creating an awareness of social and cultural norms to influence charitable giving in a will;
- how stating that ‘even a penny will help’ can boost donations; and
- equal matching of donations.

Click HERE to read the full article.

Posted in Anchors, Chunking, Commitment bias, Loss aversion, Our articles, Social norms | Leave a comment

The UK government’s Behavioural Insights Team – or ‘Nudge unit’ as it is often known – together with the Charities Aid Foundation have just published a new report on ‘Applying behavioural insights to charitable giving’.

The report looks at four different behavioural insights:

- ‘make it easy’ – using defaults and prompted choice to steer behaviour change
- ‘attract attention’ – eg personalisation, reciprocity and incentives
- ‘focus on the social’ – using social norms and peer networks
- ‘timing matters’ – using ways of discounting the future and social norms to make the most of timing charitable donations

It then goes on to look at five field experiments or randomised controlled trials to increase employee donations in the workplace. The trials involved companies or organisations in the UK such as the Home Retail Group, Zurich, Deutsche Bank and charitable organisations such as the Charities Trust and Remember a Charity. Many of these interventions were extremely effective and significantly raised donations.

To read the report, click here. If you want to read more on this topic, we also published an article ‘Playing on our behavioural heartstrings‘ in 2012 all about how behavioural sciences can be leveraged to increase charitable giving. 

Posted in BE coverage, Loss aversion, Public, Reports, Social norms | Leave a comment

Our latest article – Energy Scrooge – was published by the Marketing Society UK for Christmas. We take a look at how we can use insights from the ever widening field of the behavioural sciences to help us to save money on energy bills over Christmas and beyond, taking account of our habits, and tendencies toward loss aversion, status quo bias, effects of framing and many more behavioural economic concepts.

Click here to read more.

Posted in Framing, Loss aversion, Social norms, Status quo bias | Leave a comment

The Marketing Society – with their brilliant new design – published our latest article this week. “BE turns debt repayment on its head” looks at how insights from behavioural economics can sometimes challenge the standard, textbook approaches to paying off our debts and actually make it easier to achieve.

“Government advice centres like directgov and money management advisers like Alvin Hall advocate paying off debts by prioritising those which carry the highest interest rate. Other advice often suggests that you consolidate debt into a single low interest account and then make regular repayments to that. But many of us don’t follow the textbook! These strategies may make sense to those who think and behave very rationally and sensibly, but many of us struggle with the huge burden of debt repayment and find the task incredibly daunting.” This is where new insights into behavioural economics can help.

Click here to read and find out more.

Posted in Anchors, Chunking, Loss aversion | Leave a comment

Here is a great use of behavioural economics to sell instant noodles in Shanghai. The Behavioural Architects’ China office in Shanghai spotted this.

Zhang Junya instant noodles (Wei Lih group) market a 5-pack hanging product, but tag each pack with a unique message according to its number in the line such as “Only two packs left! You need to be fast!” for the penultimate pack, making the consumer anxious they might miss out (loss aversion and scarcity bias) and also more aware that the product must be quite popular with other people if the other packs have already gone (social norms and social validation).

Posted in Loss aversion, Power of now bias, Private, Social norms | Leave a comment

Carphone Warehouse has recently launched a series of ads (radio and print) which highlight how much money you might be losing on your phone tariff eg

“You could be wasting £194 a year on the wrong phone tariff.”

Due to status quo bias (which deters people from switching mobile operator) and possibly the fact that nowadays many bills are now by default electronic and paid by direct debit – which means you need to login in to an account to see what you are spending – many people may not be aware of what they are spending and how they might be able to save money on a better plan. So the ads make use of the BE concept of loss aversion by telling people how much money they are losing. Losses have been found to be more painful than a similar gain so communicating what a consumer is losing or will lose is often more powerful and effective than communicating what a consumer might save.

Carphone Warehouse says that £5 billion is being wasted by mobile phone users each year in the UK as a result of people not being on the deal that’s best for them. On average, being on the wrong tariff costs each person £194 a year, according to independent research. Carphone Warehouse argue that they have the means of analysis to find the best tariff, phone and network for you to optimise your money.

Posted in Biases, Loss aversion, Status quo bias | Leave a comment

One of the attractions of behavioural economics is how easy it is to identify with BE concepts and relate them to our day-to-day experience.  BE has a simple, ‘real’ quality to it – quite the opposite of the many ‘black box’ approaches found in market research.  But, BE is often at work under the radar.  If we think about it, we can identify biases in our behaviour, or how we use rules of thumb to help us make decisions, but much of the time these influences aren’t apparent… or are they?  BE is actually deeply ingrained in our culture and language, and BE concepts underpin many of the common idioms that we hear every day!  Here are a few examples:

“A bird in the hand is worth two in the bush” describes the ‘endowment effect’ whereby people place a higher value on objects they own than objects that they do not.

“Crying over spilt milk” illustrates ‘loss aversion’ or the tendency to dislike loss more than gain.

“If it ain’t broke, don’t fix it” and “being fixed in your ways” both illustrate the ‘status quo bias’, i.e. that people prefer things to remain the same.

“In the heat of the moment” describes how we do one thing in a low stimulus (reflective) context, but in a high-stimulus (tempting) context we act differently…

“Rule of thumb” is a simple way of describing ‘heuristics’ or the short cuts used in decision making.

“You can’t take it with you” is an example of ‘the power of now’ or the tendency to focus on today rather than think about what tomorrow might bring.

“Doing the right thing” describes the ‘fairness bias’ or that most people are instinctively motivated to do the right thing…

“Out of sight, out of mind” describes the availability bias, whereby we are influenced by how easily we can bring something to mind.

“Variety is the spice of life” describes ‘diversification bias’ - the more experiences you try the more exciting life can be!

We would love to hear of other examples of BE idioms. Let us know…

 

Posted in Availability bias, Biases, Diversification bias, Fairness bias, Heuristics, Hot & cold zones, Loss aversion, Power of now bias, Status quo bias, Uncategorized | Leave a comment