What makes today’s consumers tick? Behavioural Economics can explain

A seismic shift in consumer behaviour and emotions is currently occurring.  The events of 2020 will permanently alter people’s beliefs, experiences and feelings. Deeply ingrained consumer behaviours and habits have been altered in response to the COVID pandemic. For Australian brands to stay relevant and understand what makes their target consumers tick – they must act now!

Australian companies can successfully adapt to these changes as well as shape future consumer behaviour by adopting and applying the principles behind behavioural economics to their marketing and customer experience strategies. The application and embedding of behavioural economic practices presents an enormous opportunity for organisations looking to thrive now and into the future.

Behavioural Economics (BE) is a science and practice whose time has well and truly arrived.

The ‘new’ normal

The pandemic and government lockdowns have disrupted every aspect of people’s lives.  Driven by our emotional responses to the crisis and the various lockdown measures, this has meant dramatic changes in our habits and behaviour as consumers. What we buy, why we buy it and how we buy it has changed.

Sprout has been following the lives and livelihoods of Australians during the pandemic with deep immersive qualitative and large-scale quantitative research. This research has shown how the dramatic changes in people’s behaviour are driven by two things: 

• Firstly, there are the external factors such as business closures and lockdown restrictions imposed by government authorities
• Secondly, there are the internal factors which include our emotional responses to the crisis and the lockdowns. It’s these internal factors that will have the greatest long-term and permanent impact on consumer behaviour and decision-making processes

In the ‘new’ normal, brands have the potential to become very irrelevant, very quickly. Australian companies who want to get ahead of these changes and better position their products post pandemic, need to meet consumers where they are today and into the future – at both a rational and emotional level.

Understanding and shaping customer behaviour

BE studies the influence of psychological and behavioural factors on human decision-making. Applying BE means identifying why we fail to make decisions methodically and rationally. It identifies the biases and motivations that lead people to make what appear to be irrational and sub-optimal decisions.

As such, a customer’s perception of value is not formed, exclusively, as a result of rational reasoning. Value for customers is shaped by worldview, social context, comparisons and unconscious biases that they are not even aware of. In order to tap into this value stream and alter their perception in favour of your brand and products, you must apply behavioural principles.

BE, however, is not just about identifying the biases or heuristics in human decision-making processes. It’s also about creating and using behavioural change frameworks to design programs that result in new behaviours. Once you have a sound understanding of the psychological and emotional factors driving consumer behaviour, you can use behavioural change strategies to hack or harness these factors to bring about new and desirable behaviours.

COVID and beyond

As people’s behaviour and habits are changing so dramatically, it becomes a major challenge for companies to stay relevant to their target consumer. But that challenge is also an opportunity. The disruption to consumer habits and behaviours, which are difficult to change in normal times, is an opening for companies to engage consumers in the ‘new normal’ and be able to shape their future behaviour.

Australian companies that can develop deep insights into the emotions and behaviours of consumers and can adjust their products and communications accordingly, will succeed during COVID-19 and beyond. To be successful, however, they need to learn how to:

1. Identify the current beliefs and emotions of consumers.
2. Identify the new habits and behaviour drivers.
3. Identify and optimise peak moments in the consumer journey.
4. Align current messaging to consumer needs.
5. Design new offers and products to meet merging habits.
6. Establish new habit loops in the customer experience.

BE can be used for anything that requires behaviour change.  It can be used to obtain short-term, quick wins as well as long-term strategic opportunties. Like any new skill though, it takes time and experience to get it right and it’s not a “bolt on” …it has to be integrated into the existing ways of working…into CX management, insight development, design practices, communications development…the list is endless.