Archive for September, 2009
September 30th, 2009 by Bob Nease
Bob Nease, PhD — Chief Scientist; Express Scripts — is a leader in the convergence of behavioral economics and healthcare; at Express Scripts, he is responsible for advancing the understanding of consumer behavior. To this end, he closely follows emerging science around human behavior and decision making, then works to develop tools and communications that help plan sponsors enable better health and value.
The Nudge blog updates readers on a pilot project that seeks to reduce the carbon footprint in the United Kingdom:
The residents are asked to make pledges in a face-to-face conversation with one of the canvassers who have been going door-to-door in this area.
They are only asked to make some limited pledges - to choose three out of nine options on the pledge card they are shown.
And posters on lampposts proclaim the number of households in that street who have agreed to participate.
There are a couple interesting aspects of social norming and persuasion at work here. First, residents know that someone is paying attention to the decisions they make. If they say no, they must turn away a person, not hang up a phone or delete an e-mail. Second, people know whether their neighbors are participating from the lamppost signs. If many others are joining in, there’s increasing pressure to say yes when a volunteer knocks on your door.
Tags: Behavioral Economics, Nudge, Social Norms
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September 29th, 2009 by Bob Nease
Bob Nease, PhD — Chief Scientist; Express Scripts — is a leader in the convergence of behavioral economics and healthcare; at Express Scripts, he is responsible for advancing the understanding of consumer behavior. To this end, he closely follows emerging science around human behavior and decision making, then works to develop tools and communications that help plan sponsors enable better health and value.
Richard Thaler, co-author of Nudge, writes an interesting piece about the behavioral economics of organ donation for The New York Times. Research has long shown that opt-in donor registration programs result in low rates of sign-up, while opt-out programs result in high rates of sign-up. But many object to the opt-out programs, believing organ donation should require explicit consent.
Fortunately, there is another possibility, called “mandated choice,” under which people must indicate their preference. In Illinois, where I live, this system has been in use since 2006 and doesn’t seem to have ruffled many feathers.
Here is how it works: When you go to renew your driver’s license and update your photograph, you are required to answer this question: “Do you wish to be an organ donor?” The state now has a 60 percent donor signup rate, according to Donate Life Illinois, a coalition of agencies. That is much higher than the national rate of 38 percent reported by Donate Life America.
What does this mean? It indicates a large degree of latent support for organ donation. That is, these results are consistent with the idea that many people want to register for organ donation but don’t because of the hassle required to do so. And this is exactly what we saw with Select Home Delivery: roughly half of people getting their maintenance medication in retail moved to Home Delivery when required to make an explicit choice (and offered assistance with the move).
Tags: Behavioral Economics, Choice Architecture, Hyperbolic Discounting, Procrastination
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September 28th, 2009 by Eric Ferguson
As an editor for the Corporate Database team, Eric Ferguson is responsible for writing and editing strategic language for Express Scripts' Sales & Marketing department.
I visited my nephew’s second-grade class last week to show them the devastating real-world consequences of coloring outside the lines. After my horrifying presentation, the teacher shifted gears to discuss their “school bucks.”
This was a foreign concept to me, so I’ll briefly explain. It seems that the students can accrue school bucks — think Disney Dollars — through good behavior. Twice a semester, they get to exchange their ducats for goods (e.g., stickers) or privileges (e.g., a pass to the front of the line).
With the first shopping spree still a month away, the teacher gave the class the option of moving it up to next Monday. She wrote “Shop next Monday” and “Wait until October 31” on the dry-erase board and then had the students tally their choice one at a time.
So, we have posed 25 impulsive, live-in-the-now second graders with the choice of shopping soon or shopping later. The teacher even stacked the deck with her verbs — would you rather “shop” or “wait?” Waiting does sound awfully fun, but …
It appears that someone forgot to explain hyperbolic discounting to these seven-year-olds (surely an indictment of our nation’s public school system). Overwhelmingly — like 24-to-1 overwhelmingly — the students chose to wait until October 31.*
Flabbergasted, I asked the class why they chose to wait a whole month before getting their consumption on. “BECAUSE WE’LL HAVE MORE MONEY!” they shouted.
Second graders: Unpredictably rational.
* Perhaps the public voting system had something to do with this result? My guess is the kids knew what the teacher would want them to pick. Once the vote started to lean toward waiting, it would take quite the free-thinker to vote the other way. Plus, October 31 is Halloween. Did the waiting option benefit from this association? More research is required …
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September 24th, 2009 by Bob Nease
Bob Nease, PhD — Chief Scientist; Express Scripts — is a leader in the convergence of behavioral economics and healthcare; at Express Scripts, he is responsible for advancing the understanding of consumer behavior. To this end, he closely follows emerging science around human behavior and decision making, then works to develop tools and communications that help plan sponsors enable better health and value.
Social norms trump market norms, so is it any surprise that new research finds unhappy customers prefer an apology to financial compensation?
“You might think that if the apology is costless then customers would ignore it as nothing but cheap talk – which is what it is. But this research shows apologies really do influence customers’ behaviour – surprisingly, much more so than a cash sweetener. …
“It might be that saying sorry triggers in the customer an instinct to forgive, an instinct that’s hard to overcome rationally.”
The researchers also found that the effectiveness of a fixed financial offer decreased as the size of the purchase increased, but that apologies – even those offered by professional apologists – worked equally well regardless of the purchase price.
Tags: Behavioral Economics, Social Norms
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September 23rd, 2009 by Eric Ferguson
As an editor for the Corporate Database team, Eric Ferguson is responsible for writing and editing strategic language for Express Scripts' Sales & Marketing department.
As an English major who somehow managed to find gainful employment, it’s my job to consider the consequences of word choice and connotation — how different phrases meant to convey the same meaning generate varying reactions. Consider, if you will, the following passage from an episode of “The Simpsons” in which Marge learns to become a real estate agent with the crafty* guidance of Lionel Hutz:
[Lionel shows Marge a realty catalog. The first featured house is extremely small.]
Marge: It’s awfully small…
Lionel: I’d say it’s awfully…cozy!
Marge: That one’s dilapidated…
Lionel: Rustic!
Marge: That house is on fire!
Lionel: Motivated seller!
You read and hear this kind of framing every day. What one political party calls a “strategy,” the other will call an “agenda” — and an agenda sounds 10 times more evil. When a television network tries to entice me to watch “classic” episodes, I write them off as “re-runs.” Even a seemingly straightforward phrase like “fair and balanced” sends some people scrambling for their spin repellant.
Express Scripts incorporates the power of framing and word choice in our member communications. For instance, playing on the principle of loss aversion, we have found that a message of “stop wasting your money” is more effective than saying “save precious time and money.”
You can call it “psychological judo” if you like. I’d prefer to think of it as “linguistic massage.”
* See, I called him “crafty,” which is a nicer way of saying “shady.” Also, my apologies for all the quotation marks — especially if you read this aloud and had to use more air quotes than Dr. Evil.
Tags: Behavioral Economics, Framing
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September 22nd, 2009 by Julie Adelsberger
Julie Adelsberger — Senior Manager; Express Scripts — As senior manager of knowledge management, Julie Adelsberger is responsible for translating scientific research into accessible communications for plan sponsors and other healthcare stakeholders.
The New York Times reports on T-Mobile’s stick approach to converting customers to paperless billing. The wireless company had previously taken a carrot approach, persuading customers to ditch paper via a green campaign that included a promise to plant a tree on behalf of each person who made the change. Last month the company took a more aggressive tack, implementing a $1.50 fee for those who continue to receive paper bills.
When the $1.50 fee was added to the bills that went out in August, the number jumped to 33,000 a day, according to a spokesman. This was even before the charge really bit: for August, T-Mobile also added a matching $1.50 credit to every bill for the initial month, to give customers more time to decide whether to opt for paperless.
The company sends out 16.5 million invoices each month, but the accelerated rate of signups in August made it possible to imagine converting the entire customer base to paperless in only 15 months – and fully realize the potential annual savings of 10.8 million pounds of paper, equivalent to 13,500 trees (T-Mobile will talk only of trees to be saved, not dollars). …
T-Mobile had concluded that the “voluntary approach” was “not something that would get the majority of our customers to paperless,” said Glenn A. Zaccara, a T-Mobile spokesman. I spoke with Mr. Zaccara and David Beigie, the company’s vice president for corporate communications, on Sept. 1, when enough time had elapsed for the company to see that the paper bill fee was having the desired effect of “putting a spotlight on the costs of preparing paper bills.”
Although T-Mobile enjoyed the fee’s short-term success in converting customers to paperless billing, this mandatory approach rubbed many customers the wrong way. Complaints mounted, and a class-action lawsuit was filed in a Missouri district court. As a result, T-Mobile dropped the fee in mid-September and returned to the significantly less effective voluntary approach.
This experience shows again the challenge companies face choosing between mandatory programs that achieve results and voluntary programs that don’t disrupt customers. One of the benefits of behavioral economics is achieving those mandatory-like results without disruption. For example, wireless companies could consider an opt-out or active choice model for paperless billing to increase its use without disrupting customers who prefer to keep traditional paper bills.
Tags: Behavioral Economics, Choice Architecture, Design
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September 21st, 2009 by Julie Adelsberger
Julie Adelsberger — Senior Manager; Express Scripts — As senior manager of knowledge management, Julie Adelsberger is responsible for translating scientific research into accessible communications for plan sponsors and other healthcare stakeholders.
A key reason classical economics fails to fully account for our behavior is because it fails to fully account for our history. It assumes a rational self-interest, while thousands of years of evolution has taught us to cooperate and ensure survival of the group. Now a growing body of research shows that simple bacteria follow complex rules of social behavior, just like humans do. Bacteria are self-aware, altruistic to their kin, even cooperative in order to reach common goals. Take infecting a host, for example:
Bacterial society is based on a chemical language called quorum sensing. To detect how many of its own species, or members of another bacterial species, are in the immediate vicinity, each bacterium secretes a certain molecule into the environment. The greater the number of molecules it can sense, the more fellow bacteria it knows are out there.
This is often a trigger to act. Some bacteria will attack a person or any other host only after establishing that there is a quorum — a large-enough army to overcome the host’s immune defenses. The strategy helps explain the virulence of a number of human ailments, including cholera, pneumonia and food poisoning.
For more on the secret lives of bacteria, and how scientists are leveraging this to improve human health, click here.
Tags: Behavioral Economics
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September 17th, 2009 by Julie Adelsberger
Julie Adelsberger — Senior Manager; Express Scripts — As senior manager of knowledge management, Julie Adelsberger is responsible for translating scientific research into accessible communications for plan sponsors and other healthcare stakeholders.
From Sunday’s New York Times Magazine, an intriguing article about nature vs. nurture when it comes to our health and happiness:
By analyzing the Framingham data, [researchers] say, they have for the first time found some solid basis for a potentially powerful theory in epidemiology: that good behaviors — like quitting smoking or staying slender or being happy – pass from friend to friend almost as if they were contagious viruses. The Framingham participants, the data suggested, influenced one another’s health just by socializing. And the same was true of bad behaviors – clusters of friends appeared to “infect” each other with obesity, unhappiness and smoking. Staying healthy isn’t just a matter of your genes and your diet, it seems. Good health is also a product, in part, of your sheer proximity to other healthy people.
For the full article, click here.
Tags: Behavioral Economics, Happiness, Social Norms
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September 16th, 2009 by Julie Adelsberger
Julie Adelsberger — Senior Manager; Express Scripts — As senior manager of knowledge management, Julie Adelsberger is responsible for translating scientific research into accessible communications for plan sponsors and other healthcare stakeholders.
Last week, I’m awake at 2 a.m. puzzling over the intricacies of American Psychological Association in-line citations as I work on a paper for graduate school. It’s a work night, and I can’t imagine how charming I’m going to be at the office in six or so hours. When my colleagues inquire about my stupor, I’ll shrug: “I work best under pressure.” But I don’t work best under pressure. At 2 a.m. I’m crabby, my eyes are gritty, and I’m envious of the dog who’s been sleeping for the past three hours.
So if I know my last-minute work isn’t my best, why do I procrastinate paper after paper, project after project? Blame my new favorite whipping boy, hyperbolic discounting.
A quick review: The principle of hyperbolic discounting tells us that people steeply discount future events relative to those in the present. This psychological force causes present costs or hassles to loom surprisingly large relative to future benefits, and can therefore lead to procrastination.
There are college campuses and office buildings full of people like me, who say they need pressure to spur their best work. What most of them mean is that they need a looming deadline to prompt any work at all. Without it, those present hassles (that is, the effort) often far outweigh the benefits (such as knowing the paper is done, and done well). When we say we need pressure, though, we don’t intend to lie. All we know is that we don’t produce much without it, and we’re trying to rationalize the behavior that keeps us up all hours poring over APA guidelines.
If this seems like an unattractive portrait of our motivation, consider that most of us don’t need any prompting at all when we’re working on a project that excites us. And when we’re not? Well, now we can tell the truth: Hyperbolic discounting ate my homework.
Tags: Behavioral Economics, Hyperbolic Discounting, Procrastination
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September 15th, 2009 by Julie Adelsberger
Julie Adelsberger — Senior Manager; Express Scripts — As senior manager of knowledge management, Julie Adelsberger is responsible for translating scientific research into accessible communications for plan sponsors and other healthcare stakeholders.
In a Harvard Business blog posting, John Sviokla explores the growing popularity of behavioral economics and discusses how choice architecture enables companies to drive desired behavior. He is particularly interested in how design can counter information overload. He writes:
Every manager should remember that in a world of excess choice, an easy place to differentiate is in the careful design of the decision process itself. It is especially powerful in the ever-increasing realm of e-commerce. Few companies have optimized their customer choice process to make the most of the web. Fewer still do regular experiments to find out how their customers really act instead of how they are supposed to act, and they are leaving money on the table because of it. So ask yourself: is your company’s choice process optimal – and do you have data to prove it?
For the full post, click here.
Tags: Behavioral Economics, Choice Architecture, Design
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