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Behavioural economics & experimentation. Dr Robert Metcalfe University of Oxford robert.metcalfe@merton.ox.ac.uk. Theory v reality. Our choices should only be influenced by theoretically relevant factors (e.g. prices) BUT we are often remarkably inattentive
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Behavioural economics & experimentation Dr Robert Metcalfe University of Oxford robert.metcalfe@merton.ox.ac.uk
Theory v reality • Our choices should only be influenced by theoretically relevant factors (e.g. prices) BUT we are often remarkably inattentive • Our choices should not be influenced by theoretically irrelevant factors (e.g. contexts) BUT we are often remarkably malleable
Poor predictors • Humans poor at predicting the future • Consumer insight assumes a rational model of thought • ONLY ONE VALID method to show behaviour change: Field experimentation with randomisation
“Ask me my three main priorities for NPD and I tell you randomization, randomization, and randomization”
Advantages of experiments • Actually understand your customers and employees (i.e. behaviour) • Understand substitutes, complements and spillovers • Less subject to methodological debates and easier to convey • More likely to be convincing to CEOs, program funders, and policymakers
Think about MINDSPACE Messenger who communicates information Incentives shaped by mental shortcuts Norms influenced by what others do Defaultsgo with the flow of pre-set options Salienceattention drawn to relevant novelty Priminginfluenced by sub-conscious cues Affectemotional associations shape actions Commitmentconsistent promises and reciprocity Egoseek to feel better about ourselves
Defaults • Switching from opt-in to opt-out in a USA savings scheme led to • enrolments rising from 49% to 86% • savings rate rising from 3 to 11%
Salience Are Emily and Greg More Employable Than Lakisha and Jamal?
Summary • We all have our skin in the predicting behaviour game • Behaviour is driven and changed by heuristics and contexts • Intentions do not highly predict future behaviour (poor validity) • Best way to evaluate products is through: Field experimentation with randomization
Thank you robert.metcalfe@merton.ox.ac.uk