“If we don’t know what we should do, then we tend to do nothing” observes Nick Chater, Professor of Behavioural Science at Warwick Business School. It is having clarity on frequently unobserved but common behaviours such as this that has made Behavioural Science an increasingly valuable resource for all sectors of society.
Nick Chater will be leading Warwick Business School’s Behavioural Science in Practice program this May in collaboration with behavioural design expert Ed Gardiner, and leading figures in the Behavioural Insights Team.
Location: WBS London, The Shard │ Date: Wednesday 2 May - Friday 4 May
Perhaps not surprisingly, given the close historical links between psychology and clinical research, the medical sector has been among the greatest users of behavioural science, in trying to understand how and when patients are likely to take – or more significantly not take – medicines and other treatments. Over the last decade the application of behavioural science to other sectors has been spreading. Professor Chater is on the advisory board of the UK government’s Behavioural Insight Team (BIT), that has been creating new policy and tactics to create better outcomes for both government and society.
Famously, the UK tax collecting body, HMRC, started to change the wording of its letters to late payers on advice from BIT. Instead of the traditional increasing level of threat of fines and court action, a different tone was adopted, where it is pointed out to late and non-payers of tax how much of a minority they are in, with phrasing such as “the great majority of tax payers in [your region] pay their tax on time”, which is claimed to have increased the tax take by £210 million in its first year of operation.
Nick Chater explains that, as social animals, humans “want to be the same as others”, but more than that, people with “poor behaviour tend to underestimate” how unusual their behaviour often is. So, having your peculiarly bad behaviour highlighted as being unusual is a stimulus for improvement to a significant number of people. Chater accepts that this is not a silver bullet, “the tweaks to the letters resulted in 5-10% improvement in payment performance, but remember that they cost very little to implement”, and if that improvement results in £210 million a year benefit, then it is very powerful indeed.
More recently, the BIT has moved from one unenthralling area of finance, tax collection, to another, pensions. It is in the nature of behavioural science to explore behaviours that people normally give little attention to or get excited about. And pensions are rarely something people get excited about, at least not in a positive way. They are hugely complex and, by definition, bring no immediate benefit, but rather reduce individual’s current spending ability in favour of a benefit many years over the horizon. Given this scenario it is not surprising that many people never manage to get around to arranging their pensions. From a government standpoint, this is creating a huge future problem for society as a whole. One solution has been to realise that if inertia is most people’s default setting, then it is necessary to ensure that inertia results in getting a pension; “designing for default behaviour is crucial” says Chater.
It was these insights that led the UK government to launch its Workplace Pension Scheme, where all employers are required to provide their staff with a pension, in addition to the State pension. The default position is that anyone who is employed full-time, and that includes nannies and gardeners, will have money directed to a pension. The onus is on them to opt-out if they wish, not to opt-in. And any opt-out has to be re-confirmed every few years.
Nick Chater also points out that it was decided that in order that the negative impact of having money allocated to a pension was not so costly that it motivated people to opt-out; the scheme has been designed to start with a minimal amount of pension contribution and then increase those amounts as they get used to the scheme. “Understanding how much we can be put off any option which involves ‘immediate losses’ is a very significant factor in designing behaviourally effective policies” says Chater.
Nick Chater and his team at Warwick Business School work with a wide range of sectors, ranging from supermarkets to energy companies in helping them design and better understand their pricing strategies. What price levels are most attractive? What offers work best and why? And how should such sectors best be regulated? “The whole behavioural approach draws on psychological testing” says Chater, “we create virtual internet shops and do a lot of A/B testing; we also do randomised control field trials when budgets allow: they are expensive to conduct but influential” he explains.
Chater sees that business has been ‘product’ testing for functionality for many decades, but is only now beginning to explore the role of testing at the ‘user interface’. He notes that Apple products have been so successful because of the deep understanding of user behaviour that has been at the heart of their design process. That advantage is not accidental, and has been the result of decades of prior research. The same can be done across a huge range of commercial applications.
Nick Chater will be leading Warwick Business School’s Behavioural Science in Practice program in London this May in collaboration with behavioural design expert Ed Gardiner, and leading figures in the Behavioural Insights Team.