Why We Need to Leverage Behavioral Design Early and Often
Whether it’s in response to dire ecological warnings, such as climate change, or the comparatively trivial pursuit of keeping New Year’s Resolutions, human behavior that influences action, or inaction, continually perplexes researchers.
In the case of base of the pyramid consumers, analysts with the World Bank have been similarly flummoxed on why some people refuse to “move” even when it is in their best interests. That can mean reluctance to change even small habits, such as hand washing. Despite increasing access to products and reducing their prices, many BoP ventures struggle to sell their goods and services. After all, selling a product successfully relies heavily on knowing how consumers will behave.
In their November 2012 Center for Global Development (CGD) policy paper Behavioral Design: A New Approach for Development Policy, Saugato Datta, vice president at ideas42, a design and research lab that uses behavioral economics to address social problems, and Harvard University Economist Sendhil Mullainathan provide suggestions for incorporating insights from behavioral economics’ into the design of development programs. The paper integrates these key observations into a simple framework and a set of principles that can be leveraged to increase reach and effectiveness of not only development programs, but also for BoP businesses.
We often make assumptions that overlook aspects of how people behave while developing BoP ventures. In the policy paper, Datta and Mullaninathan, who also serves as a CGD Non-Resident Fellow, and was the co-founder of ideas42 and the MIT Poverty Action Lab, discuss four limited “mental resources” to consider in addition to physical resources. These include: the scarcity of self-control, attention, cognitive capacity and understanding. For example, scarcity of cognitive capacity happens whenever you try to train someone to perform a new task or learn a new subject. Many teachers or instructors assume their students or trainees can quickly process large amounts of new and complex information. However, behavioral economists have found that individuals often use intuitive thinking or rules of thumb when making decisions. Therefore, more training programs should be built around such rules of thumb.
Consumers can also face a scarcity of cognitive capacity. Too many choices can overwhelm them and might reduce uptake and/or cause people to attach more weight to features regarding how the information is presented – i.e. whether it is pitched as a loss or a gain. Once we recognize these scarcities, we can create better solutions that take them into account.
Leveraging behavioral economics in the design phase can increase our understanding of the BoP’s behavior, which can help us better diagnose problems and thus design better solutions. Datta and Mullaninathan share a framework (see Figure 1 below) with four ways to address behavioral design.
During diagnosis phase, the authors recommend using a systematic approach instead of relying on intuition, to identify bottlenecks. This process, called “behavioral mapping,” is to identify “behavioral stress points” – or possible intervention points. The process begins with identifying a problem followed by disassembling the behavior associated with the problem. Next questions are raised to diagnose the behavior, many of which are derived from the scarcity of mental resources discussed above. These questions can lead to qualitative and quantitative surveys. The findings from these surveys then guide further questions. Careful review of collected data and observation feed into a shortlist of the most important bottlenecks which lead to designs that can be tested.
The authors also discuss the design stage in their paper, this stage follows the diagnosis. In the paper Datta and Mullaninathan present a set of design principles accompanied by examples that can guide behavioral design:
- Principle 1: Facilitate self-control by employing commitment devices
- Principle 2: Reduce the need for self-control
- Principle 3: Remove snags to choosing
- Principle 4: Use micro-incentives
- Principle 5: Reduce inattention: Reminders and implementation intentions
- Principle 6: Maximize the impact of messaging: framing effects, social comparisons, norms
- Principle 7: Frame messages to match mental models
Datta and Mullaninathan conclude with a call for behavioral economic research to focus on achieving impact at scale – requiring a move away from pilots and projects that aim to identify a specific behavioral insight and a move towards focusing on existing projects and programs that address large development problems. They also call for an iterative process of design via embedding innovation throughout the life of a project or program, and in our case, a business.
So often it seems as though all the pieces are in place for a BoP venture to succeed but for some reason or another they don’t. One such example is Procter & Gamble’s PUR . Together with the Centers for Disease Control and Prevention, P&G created PUR, a chemical treatment to purify drinking water. The company did everything they were supposed to when entering a new market: conducted interviews with thousands of potential consumers, tested the product globally, and worked with local health workers. However, once the product was on the market, consumers didn’t buy it. In the end P&G turned PUR into a philanthropic product – something that happens too often in BoP ventures. One is left wondering why the consumers didn’t act – and if examining the problem via behavioral economics might have led to a different outcome for PUR. There are perhaps hundreds of less documented examples that make the case for BoP ventures to think more about behavioral economics, both early on in the design phase and throughout the life of the business, and especially when creating a new market.
With that being said, despite presenting a systematic framework (one that I imagine will continue to be revised and strengthened over time) for examining problems through a behavioral economics lens many BoP businesses will likely not have the resources to deeply explore the cause of behaviors and instead many will likely conduct ‘quick and dirty’ versions using the framework and guess which scarcities might apply – hopefully without applying any assumptions. Others might be able to go further and test behaviors by conducting small pilots.
What are your thoughts on using behavioral economics in BoP ventures? What do you think about the framework? Is it missing anything? How can BoP ventures leverage the framework? What might be some of the challenges of using the framework?
Note: Thanks to Genevieve Edens, of the Aspen Network of Development Entrepreneurs (ANDE), for sharing the World Bank and climate change links via ANDE’s Metrics and Research Working Group blog.