Guest article from our partners at Signal: How to overcome the top 5 behavioural biases at play in Customer Communications
Whilst the human brain is a powerful thing, it is subject to limitations. Biases are often the result of our brains attempt to simplify things. Fundamentally, our brains have a 2-system approach to making decisions:
System 1 is our fast-acting instinctive thought – often referred to as ‘gut instinct’ – because it means making an impulsive decision, often based on first impressions and perceptions. This is great for helping us prioritise our immediate wants and needs – but it does lead us to favour the now over what we want and need in the long-term.
System 2 is our slow, measured thought. It takes more concentration and helps us examine detail and imagine consequences. It helps us value longer-term reward, rather than our immediate needs.
In the past, along with the FCA, FS brands thought they were doing the right thing by giving customers all the information possible – reams of the stuff. But this would only be right if people used System 2 every time they thought about money. And they don’t.
To truly support customers to get the best possible outcomes, we need to create and deliver customer communications in a way that works with both System 1 & 2 thinking.
Here are some practical ways to overcome the top 5 behavioural biases we see within Financial Services communications to customers.
1. Loss Aversion
This is the idea that we feel losses much more deeply than we do gains, so we work hard to avoid them. For example, taking out more insurance than we really need. The actual risk is very low – but we’d rather pay than face regret.
Get over it by:
· Making it clear when they could lose out, and by how much. Customers are more likely to avoid a loss if they understand how much it is. Show them the cost of making the wrong decision – using personalise data where you can.
· Understanding that people can feel anxious about money. This can lead them to avoid communications. We should write in a factual but human way, avoiding judgemental language and clearly explaining all routes to support.
2. Present Bias
We prioritise our immediate wants and needs over our future ones. For example, not putting any money into a pension because we have immediate costs to cover, like childcare.
Get over it by:
· Keeping information concise and relevant. Finances are a low-interest subject so writing on the customer’s agenda, not the Bank’s, will make it more appealing to read ‘right now’.
· Making it easy to do right now. Breaking down tasks into easy steps, making choices clear and simple, and making it easy to act on a positive decision makes it much more likely people will ‘get it over and done with’ straightaway.
3. Limited Attention
We only pay attention when it’s grabbed, or if we force ourselves to concentrate. For example, buying an item on eBay without noticing the delivery costs,
sending you over your original budget.
Get over it by:
· Helping them to understand what’s going on at a glance. Create a clear scan story between any Headlines, Subheads or Boxed Content and highlight any call to actions.
· Using visual aids. Complex detail is easier to understand in visual form and long complex information is easier to navigate with visual prompts and direction.
4. Framing
We react differently to the same scenario if it’s presented to us in a different way. For example, choosing a packaged bank account with a monthly fee without
considering if the package of benefits is right for our needs.
Get over it by:
· Thinking about how the customer might feel about what we’re saying. What will they care most about? What would we like them to feel by the end of it? Using the right language can help customers to feel the way we’d like them to.
· Categorising messages or choices so they’re easy to understand. Put options/messages in the order that’s most relevant to the customer or delivers the best outcome for them – change this by segment.
5. Procrastination
We can be very short-sighted and often put off decisions. For example, not checking if our existing products are still right for us, or not switching to a better deal.
Get over it by:
· Getting the customer started. Reduce feelings of being overwhelming by using ‘goal gradient’. The closer we get to achieving a goal, the more effort we’ll put in to reach it. Use progress bars and encouraging feedback early on.
· Using scarcity. Providing an option/offer for a limited time window makes customers more likely to act. And avoid choice overload and complex decision-making.
Applying Behavioural Science to customer communications is key to meeting both customer and regulator expectations, as well as reaching your own business performance goals.
Click here to tell us more about your current communication challenges and we’ll get back to you with our take on them.
This could be anything from individual communications that could benefit from the application of behavioural science, a comms journey that needs reimagining to deliver better customer outcomes, new toolkits and training to help you embed best practice across your organisation, or support in the transformation of the processes and systems that deliver your communications to customers.