1.
When Customers
don’t act rationally
Applying
Behavioural
Economics
Paul Laughlin, Managing Director, Laughlin Consultancy
© Laughlin Consultancy Ltd, not to be used without permission.

2.
My background
Customer Insight &
Behavioural
Economics
© Laughlin Consultancy Ltd, not to be used without permission.

3.
It’s not fair!

4.
Behavioural Economics (BE)

5.
A quick thought experiment
Would you rather…
A B
Take a 50% chance
of gaining £1,000 and
a 50% chance of
gaining nothing?
OR Gain £500 for certain?

6.
A quick thought experiment
Would you rather…
A B
Take a 50% chance
of losing £1,000 and
a 50% chance of
losing nothing?
OR Lose £500 for certain?

7.
10 irrational biases (FCA)

8.
Present Bias

9.
Reference Dependence
and Loss Aversion

10.
Emotional Drivers

11.
Overconfidence

12.
Over-extrapolation

13.
Projection Bias

14.
Framing, Salience & Limited Attention

15.
Mental Accounting & Narrow Framing

16.
Decision Making Rules of Thumb

17.
Persuasion and Social Influence

18.
Why is this relevant to you?
Even when you treat them as individuals & target them
accurately, your digital customers could be vulnerable to
making poor decisions due to these biases.
Do your customers…
1. …find your products complex & boring?
2. …need to make decisions based on assessing risk or uncertainty?
3. …need to make trade-offs between the present and the future?
4. …find these decisions emotional or fearful?
5. …lack opportunities to learn by making these decisions?

19.
Spotting the ‘Dark Side’
FCA have stated they will use these as early warnings:
• Rip-offs: Uncompetitively high margins
• Suckers: Concentrated profits in small customer
group
• Bargains: Innovative products that appear very
cheap
• Traps: Contract features that often target BE biases
• Regret: Reported or potential regret
• Folly: Choices out of line with common sense
• Confusion: Observed or likely confusion

20.
Start with customer insight
Customer
Data
Customer
Research
Customer
Analysis
Database
Marketing
Feel
Experiences
Test
Hypotheses
Converge
Evidence
© Laughlin Consultancy Ltd, not to be used without permission.

21.
The power of eye tracking research

22.
Generating & testing hypotheses
Rational Choice Bias 1?
Research Customer
Need
Analyse
Actual
Behaviour
Bias 3? Bias 2?
Test
Mitigations
Experimental
Design
Hypothesise
Biases at work
Hypothesise
Biases at work

23.
Can I help you?
customerinsightleader.co
m
laughlinconsultancy.com
@LaughlinPaul
linkedin.com/in/paullaughlin
paul@laughlinconsultancy.co
m
+44 (0)7446 958061
© Laughlin Consultancy Ltd, not to be used without permission.