Yale University says you’re missing this marketing advantage

Australian CMOs are largely missing a strong competitive advantage that is helping the likes of Google, IBM and Visa, according to Yale University’s Centre for Customer Insights.

In late June, 40 executives from around the globe participated in a three-day course at Yale University to find out how consumers are most likely to act based on behavioural science. The participants were a mix of marking and insights leaders from around the globe. One international food company sent a delegation of 10 students, a hefty investment of around $100,000.

The team at Yale and the Centre for Customer Insights work with some of the world’s top companies, showing them how to influence (nudge) consumers using research-based behavioural insights.

One to two Australians make the trip to Yale each year to take the three-day Behavioural Economics ‘immersion’. In addition, the Federal Government has a Behavioural Economics Unit (BETA). However, scholars at Yale believe Australia businesses are falling behind in their take-up of the discipline.

Executive director of strategic partnerships and education at the Yale Centre for Customer Insights (YCCI), Gloria Tam, said Australia, like many other developed markets, has already made some headway leveraging behavioural science and economics to make the desired path the path of least resistance for people’s decisions. This can be seen in particular in the social and policy area.

“On the corporate side, however, behavioural science has been evolving at a much slower pace,” she said.   “There are a lot of opportunities to embed behavioural science to understand consumer behaviours and make an impact. These approaches can make a huge impact to businesses from changing shopping and consumption patterns, to influencing suppliers to deliver, to getting stakeholders to support the business and collaborate.”

The insights students are learning today include the limitations of consumers brains when making decisions. For example, blind studies have shown if we think a wine costs $90, it will give us more pleasure than if we think it costs $10. That’s because what we experience is not just what we sense but also what we believe to be true.

According to director of YCCI, Professor Ravi Dhar, beliefs and goals can be overlooked by companies but are important drivers of consumers’ evaluations and experience. What marketers need to do more of, he said, is activate the relevant beliefs in the moment a consumer makes decisions about products. This means CMOs should spend as much time thinking about beliefs and goals as they think about product benefits and attributes.

But consumer beliefs and goals are difficult to uncover. They often contradict consumers stated beliefs and goals because they can be unconscious, emotional, irrational and changed by circumstances. This means surveys asking consumers what they believe or, how they may behave, can have limited use. The weather, for example, can be a strong driver of purchasing decisions, but people are very unlikely to admit or even realise that they are more likely to buy a sports car when the sun is out.

A recent and painful example of incorrect consumer insights is from ticket seller, StubHub. It surveyed customers over several years and found their main stated problem was hidden fees that unexpectedly increased ticket sales at checkout. As a result, StubHub promised full transparency and listed all the fees on each ticket, including facility charges, convenience charges and taxes.

Sales dropped by an estimated 20 per cent (the company never disclosed the actual amount) because seeing a long list of fees made people irrationally think the tickets were more expensive than elsewhere. StubHub changed its policy.

So, what can Australian CMOs do to take more advantage of behavioural insights? Professor Dhar said CMOs need to become detectives and study consumer behaviour, then test and learn.

Tam recommended companies work closely with academic partners. “We work with our partners via a Corporate Affiliate Program, designed to promote innovative research and collaboration between the corporate community and members of the University," she said. "The collaborative relationships and on-going dialogue with market practitioners are critical to the Centre’s success and help bring diverse thinking and new knowledge to business practice.”

Senior associate dean for Executive Education, Molly Nagler, added the intensive three-day course can be game changing.

“The faculty teach tools and frameworks that participants can apply immediately. Participants tell us that they have spent their whole career in, for example, CPG, and they come out of our program with an entirely new approach. The exercises we do in the program allow everyone a chance to apply the lessons and get input from peers and faculty, before they go back and try them on their own at the office.” 

But, as Behavioural Economics teaches us, when you’re at a world-famous institution such as Yale, it’s easy to believe you’re learning something very special indeed - just like that person drinking a $90 bottle of wine.


About the author: Belinda Noble is a communications and management consultant and the former head of media and communications at the Australian Red Cross. @BeNoblePR

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