How behavioural economics can revolutionise your marketing strategy

How behavioural economics can revolutionise your marketing strategy

By Kizzie Burkett, AKA

SUMMARY

Kizzie Burkett, Account Manager at international arts and live entertainment marketing agency AKA looks at how we can apply behavioural economics to the arts and entertainment sector.

Two human figures with large, circle heads. Each head contains tens of differently coloured balls. A snooker cue is pointed at the balls.

© Jac Depczyk

As marketers, we are required to understand the way people act. This is more important than ever as people form new behaviours and habits in response to COVID. We can’t rest on our laurels to assume the same people will return, and we must ensure that our venues are not replaced indefinitely by the in-home forms of entertainment that have skyrocketed in the previous year.

Behavioural economics is a relatively new body of theory that looks to understand the actions people take, seeing them not as an output of rational and considered thinking, but a result of something much messier – informed by context, biases, emotions, and social and political influences that vary over time. Behavioural economics therefore has close relevance to marketing, but its application has primarily been within academia and to FMCG brands.

1. Make your cost less painful

People don’t like parting with their hard-earned money. In fact, we experience ‘pain of payment’ – spending money activates areas in our brain associated with physical pain, even though finding the product we want releases endorphins. So how can we help to balance these feelings as marketers?

  • Not all money is treated equally by consumers. When students were asked to bid for sold-out basketball tickets, those in the study permitted to pay by card were willing to pay nearly twice as much as the cash-paying students (Prelec and Simester, 2001). People have a different relationship with money when using a credit card; make sure you are able to take card payments for all products and services you offer – something particularly pertinent in this COVID-era. People also undertake ‘mental accounting’, setting aside different savings accounts for different purposes. Encouraging a culture of ‘family-fun savings’ or ‘date night’ funds may help your customer to feel they can afford this treat
  • People aren’t good at predicting their future emotions, and favour what they are feeling in the moment. They also get more pleasure from something they’ve purchased a long way in advance, as they feel they get it for free when the time comes to enjoy it. Offer your customers the opportunity to buy now and pay later, as well as the chance to pay in advance of their visit. Think about how they’re feeling now, and reach out to them when they’re riding on the high of a recent visit – can you entice them to return again?
  • Regular payments remind customers of your existence. Studies show that whilst paying a gym membership upfront eased the pain of payment, it also meant that users forgot about the cost and valued it less; members who paid a monthly fee had a regular reminder, used the gym more, and were more likely to renew their membership. Consider providing this option for annual memberships, as well as for big ticket purchases

2. Consider the choices that you offer

People are most likely to go for the default option. This is because the pain of potentially losing something is greater than the pain of paying for extras. Moreover, people can only select what they purchase based on the options presented to them – you can subtly guide their choices based on a desirable outcome (see Nudge theory by Thaler and Sunstein, 2008). This has several applications to our sector:

  • This fear of losing something was applied to donations to an art gallery by Lee, Fraser and Fillis (2001). They found that frequent attenders donated more when presented with the hypothetical scenario of losing an exhibition, whereas non-frequent attenders were motivated by the idea of gaining ‘one more event’. This needs to be treated carefully so as to not affect attendees’ trust, but considering how you frame the donation can affect success
  • What default ticket option are you presenting? Test the impact of including extras, such as a drink, guidebook or donation, always with a clear option to opt out
  • Consider setting the default ticket option at a mid-price where you have tested customers’ satisfaction and value, rather than the cheapest possible ticket
  • Too much choice is overwhelming. In fact, more choice can mean fewer purchases. One study looked at jam options in a supermarket. Whilst more people stopped to look when 24 different jams were available, ten times fewer purchases were made than when 6 were presented as people couldn’t evaluate all options – each different jam highlighted the shortcomings of another. Think about how many different ticket, time or date options you offer your consumers. Studies have suggested that 7 (+/- 2) is the magic number of options that we are able to compute
  • Focusing on a certain attribute makes it more desirable, and brings it front of mind in the decision-making process. For example, half of those buying a laptop were asked about their memory requirements, and the other half their processing requirements; the product each group bought reflected this, with the first group buying laptops with bigger memories, and the second higher processing capabilities. What attributes would it be beneficial for you to talk about, such as sightlines or frequency of visit?

 

3. Prices have meaning

Price shapes how the product is viewed by the consumer. It infers quality and value, both of which are relative to the consumer. However, context is important. People are unlikely to know your product, and so need a steer for what the right price is to pay:

  • The first price a consumer sees for your product or category (e.g. all theatre tickets) sets the context for the pricing they expect. Whilst important for accessibility, is leading with ‘tickets start from’ lowering the overall price that punters are willing to pay? Tests on a shampoo showed that where the initial price a consumer was presented was higher, they were willing to pay significantly more for the product
  • Combined package prices help to add context and value. Studies have shown that people’s preferences change if a third, less desirable option is presented. The Economist were selling significantly more online subscriptions ($56) than combined online and in-print subscriptions ($125). However, when they introduced a third ‘decoy’ option of an in-print only subscription of $125, most sales were then for the combined package due to the value inferred (Ariely, 2008). Consider whether offering a higher value package that gives a saving can boost your income. For example, a £50 ticket and £10 programme could be packaged up for £55
  • Value is inferred by the price someone has paid, and can actually shape someone’s experience. One study showed that when comparing wines, people gave the best review to the one they were told was the most expensive even when it was actually the cheapest, whilst another study saw students perform worse in a test when they paid less for an energy drink. Don’t undervalue what you are selling – people derive pleasure from value and quality
  • Things are more valuable when they are scarce, and less valuable when they are plentiful. Communicate the scarcity or time-bound nature of what you are offering, and consider dynamic pricing accordingly
  • People want to see something for their money. Treating donations as a commercial exchange that provides them with something tangible – such as a personalised message, content or a low-cost item – can help to boost overall donations
  • Anything that is free is irresistible. Consider reframing discounts offered; giving a potential customer a ‘free’ £10 voucher to use within a specific period is more appealing than a 10% discount. This could be delivered via a personalised email, social media, or after making a purchase online (e.g. £5 off the café/bar)

 

4. We live in a social world

All decisions we make are informed by the society we’re in, as well as the potential social capital they give us. This has only been heightened by the proliferation of social media platforms into our everyday lives:

  • People want validity and to trust that they are making the right decision, and turn to review sites like TripAdvisor, Twitter and influencers to get this. Consider using reviews in your marketing materials and on your website to show authentic reactions, and monitor review sites closely. Trust increases when the recommendation is perceived to be from someone in the same social group, so ensure your marketing materials are representative of those who you want to attend
  • People follow established patterns (such as an annual Christmas theatre trip) and what the majority are doing for fear of missing out. They therefore tend to lean towards the status quo or the popular thing to do. How can you tap into these habits or the mass trends of the moment to encourage consideration of your offering?
  • Find opportunities to deliver shareable content when someone is at your venue – such as face in the hole or step and repeat boards - to capitalise on people’s reliance on social media for recommendations and gratification. Help people to communicate to others that they are the first, or that the opportunity is exclusive and holds certain social or cultural cache, such as by communicating 50 years since an event or that it is the 200th performance

 

5. Keep your offering top of mind

In the 1990s, Kahneman developed dual-system theory, believing that humans have two types of thinking:

  • system 1 -  intuitive, automatic and experience-based
  • system 2 - more analytical, deliberate and considered

As marketers, we strive to move our product into system 1 thinking, whereby it is something that is immediately brought to mind when someone is planning their next day or evening out. This requires a few actions at the hands of marketers:

  • Recall is essential. The consumer needs to be able to recall your product at the moment that matters to make the decision instinctive. Recency of messaging – such as through an always on digital marketing strategy – is crucial, as is the frequency of messaging, meaning that you shouldn’t spread your marketing too thinly
  • Help to create shortcuts in consumers’ minds to your brand, and ensure that positive thoughts are developed in relation to it. A recognisable brand identity, a memorable strapline or a catchy jingle all assist in this
  • System 1 thinking creates habits, and habits aren’t changed unless someone is incentivised to do so. If people are in a habit of going to a competitor attraction, can you appeal directly to them with a special ticket offer? If they are in the habit of coming to your heritage venue but bringing a packed lunch, how can you incentivise them to purchase lunch from your café? Changing add-ons from opt-in to opt-out appeals back to people’s fear of loss and drastically shapes their actions, many of which are driven by inertia or procrastination; the government’s recent change of the workplace pension scheme to opt-out is a good example here
  • People act on information that stands out, is new or novel. Ensure that the one thing you want to communicate stands out on any marketing materials – remember that not everything can stand out. If you’re repeatedly reaching the same audience but not getting cut through, how can you vary up the messaging or creative to make them take note?

 

Behavioural economics is a wide-ranging and growing body of theory. This article has just scratched the surface on some of the most established theories, but introducing these ideas to how and why we speak to consumers in the field of arts and entertainment marketing - supported by rigorous testing for your particular attraction – has the potential to revolutionise your marketing strategy and help you to reap the benefits.


Kizzie Burkett, Account Manager AKA

Resource type: Articles | Published: 2021