Behavioral Economics at DMA2013

Dan Ariely is a professor of psychology and behavioral economics at Duke University, and also a consultant to the Wilde Agency. Yesterday he delivered an entertaining and eye-opening keynote called “Who Put the Monkey in the Driver’s Seat?” in which he documented irrational and yet predictable human behavior for the benefit of the direct marketers at DMA2013.

First example: statistics for organ donor signups in European nations. Organ donation doesn’t hit all the altruism hot buttons because it happens after you’re dead, and the recipient will never know who provided the life-saving transplant. So it’s not surprising that donations are close to zero in some countries, such as Germany. Yet in demographically similar nations, such as Austria, donations are close to 100%. The difference? In the high-donor nations people have to opt out at their DMV if they don’t want to donate and people will do almost anything to avoid doing something.

Moving on to direct marketing: a large insurance company wanted to improve response for its affinity accidental death offer. So a chart was added on a buckslip, showing people that although they are eligible for $3 million in coverage at present they are only at $800K. It’s obvious at a glance that the reader is missing out. Given a reference point, response increased from 0.34% to 2%.

Another example is a response form for The Economist. Given the choice of an online-only subscription for $59, print-only for $125, or online plus print for $125, 84% opted for the last option. Who wouldn’t—it’s like getting online for free! But in fact it’s a significant upsell for anyone who was considering an online-only subscription. And when the print-only option was removed the numbers reversed: 68% went for online-only, vs only 32% for the online plus print combo.

As a creative practitioner, I eat this up. It’s one thing to sell your prospects through a positive reception of your carefully presented benefits, but much better if you can cement the sale by making them feel like they’ve gotten a great deal or they aren’t missing out. As to that organ donor stat, most of us have found that negative option offers (in which you have to opt out to keep something from happening) lead to poor pay-up, conversions and renewals. But if the consumer is dead, I guess that isn’t a problem. Fascinating stuff.