This is the second in a series of posts about the growing influence of behavioral economics in understanding consumer behavior. Behavioral economics is a separate branch of economics that integrates insights from psychology and social sciences with economic theory to better understand how economic decisions are made by consumers.
In this post, we explore what it takes to actually motivate behavior and empower people to make a choice.
For many years, social scientists have been studying what it takes to motivate people to change their behavior—follow a diet, quit smoking, exercise more, save more, etc. Most recently, social scientists have successfully focused on a theory called The Self-Determination Theory.
In the Self-Determination Theory, people are believed to be naturally motivated to learn and to grow. It is the social structures around people that determine whether this natural motivation will be supported or thwarted. At its core, there are three innate needs that must be met in order to promote self-determination:
- Competence: People must have the ability to easily understand the situation. The material must be presented in a way they can comprehend.
- Autonomy: People must be able to make independent choices. The choice can't be motivated by nagging, for instance.
- Relatedness: People must feel that the choices they make will be supported by those who matter in their lives.
Ultimately, these needs are met across a continuum from non-self-determined to fully self-determined. At the non-self-determined end of the continuum, people are unlikely to make a change in their behavior because they feel either too much control by others, they don’t feel competent enough in their understanding of the situation to make the change, or they don’t feel supported by those around them. On the other end of the extreme—where they are most likely to succeed in making a change in their behavior—they feel that the desired change is challenging, but achievable. The control over making a decision is up to them, and they have the support of those around them.
This learning theory closely parallels several of the key principles of Behavioral Economics as defined by the New Economics Foundation in the UK:
People are motivated to "do the right thing." They want to make decisions that are consistent with their value systems. There are cases in which money is de-motivating, as it undermines people's intrinsic motivation. For example, you would quickly stop inviting friends to dinner if they insisted on paying for you.
People are bad at computation when making decisions. They put undue weight on recent events and too little on far-off ones. They cannot calculate probabilities well, worry too much about unlikely events, and are strongly influenced by the way the problem/information is presented to them. And, too much information will ultimately result in no choice being made at all.
Other people’s behavior matters. People do many things by observing others and copying. They are encouraged to continue to do things when they feel other people approve of their behavior.
People need to feel involved and effective to make a change. Simply providing the incentives and information is not necessarily enough.
One critical area where this understanding of behavioral economics can be thoughtfully applied is in the design and architecture of websites. Historically, through the first several generations of website development, the goal for clients and developers was to load up the website with as much information as possible. The theory was that the more information available on the site, the more time people would spend. However, often the opposite turns out to be true.
In a world where we are measuring the results of our efforts—including how far into a web experience the consumer actually gets—we find we are considerably more successful when we give people control over their experience. Yet, at each step, we must provide them manageable amounts of information that are responsiveto the requests or decisions they have already made. It is a balance between helping them to feel involved by controlling their own experience, and competent by not overwhelming them with choices. This ultimately motivates people to take the route through the website that you want them to take.MORE FROM AJ ON BEHAVIORAL ECONOMICS >>
IMAGE: Direction Signs/Emreterok