Behavioural economics sounds like something reserved for the scientists and mathematicians amongst us. But its proven techniques can help employers connect with employees no matter which industry they find themselves in.
So, what is behavioural economics?
The standard definition is the study of psychological, cognitive, emotional, cultural and social factors on the economic decisions of individuals. It’s the theory behind how our brains work and how certain techniques influence how we make choices and interact with information.
It’s something that we can all relate to, and is impacting you already, whether you know it or not.
How will this benefit employers?
Engagement and wellbeing trends continue to dominate the headlines. Yet companies still struggle with employee engagement and encouraging employees to take positive action towards their physical, mental and financial wellbeing. This isn’t a result of a lack of trying, but difficulty relaying the right message, in the right way, to the right people.
Intensive research gives us a huge range of techniques that employers can use in their communication strategies, to drive positive action amongst employees and pension members.
In this article I have identified three key techniques that can upgrade your communications right away.
Technique #1: Loss aversion
A human’s desire to avoid loss is more powerful than their desire to realise a gain.
Employers can take advantage of this by showing their employees the potential risk of failing to act. When it comes to their pension contributions and benefit selections, showing what can be lost rather than gained can trigger a greater response from employees. They typically prefer to stop the loss from happening.
Employers can detail a figure that a member may lose out on at retirement if they don’t maximise the employer’s contribution.
Here’s a pension example:
Jack, you’re going to lose out on £45,000 at retirement!
You’re losing a 5% employer pension contribution because you are not paying an additional 1%. You are losing that every year. All you have to do is log in here [hyperlink] and edit your contribution rates to avoid missing out on all this money!
Similarly, when working on a benefits campaign, employers can show employees what they will lose by not re-selecting a benefit, or not selecting a benefit in the first place. This message can outweigh the effect of only boasting about its perks.
Here’s a re-selection benefits example:
Jim, you’re about to lose £500 to put towards your healthcare!
The Healthcare Cash Plan benefit you selected is about to expire. To avoid losing £500 towards this year’s eye tests, dental bills, glasses and more, make sure you re-select this benefit before 31 January! You can click here [hyperlink] to ensure you don’t lose this free cash!
It’s important not to try and scare employees or pension members. The aim is to emphasise a negative result that might occur if actions aren’t taken (think “once it’s gone, it’s gone!” type of messaging). Something too daunting or complex can cause worry and ultimately deter any action.
Technique #2: Peer influence and injunctive social norms
Peer influence
In all walks of life, when we are uncertain or unconfident about what to do, we often look to our peers or influencers to guide us. We value their opinions and then emulate their behaviours.
This behaviour is hardwired into us. However, with the rise of e-commerce and social media, we can obtain more peer guidance without the need for awkward or personal conversations. After all, it can be a little inappropriate to quiz your work buddy on healthcare and salary-related matters!
So, how can employers provide peer-related guidance without rounding up all the people their employees trust? Start by simply highlighting key peer-related stats in benefit and pension communications.
Using benefit and contribution take-up rates and compiling it in conjunction with wider demographic and employee data and trends, employers can personalise communications by promoting benefits that colleagues ‘like them’ have selected. Benefit providers will have much larger data sets available that can help with this, such as country-wide and industry-wide stats.
Here’s a simple benefits example:
Gymflex *Bestseller*
Don’t waste money on full-priced gym memberships – save yourself up to 42%!
Take control of your fitness and finances this year. Access corporate rate memberships to over 1,500 gyms in the UK.
Click here to see how much you can save.
*75% of your [peers/colleagues/people like you] have selected this benefit
Social norms
Social norms are the perception of behaviours that we are expected to carry out in society. These include both positive behaviours that are encouraged (being honest) and negative behaviours that aren’t condoned (littering, cheating, etc.).
Like peer influence, abiding with social norms has been part of the human psyche for thousands of years. It is coded in us to help us stick together and survive. It’s fair to say it’s quite a powerful trait. Therefore, it can play a powerful part in delivering engaging communications.
By connecting a proposed action with a positive social norm, employers can help employees see information, or choices, in a new way – almost like a ‘penny-drop’ moment.
For example, society encourages parents to take care of their children. Therefore, employers can encourage their staff or members to fill out their Expression of Wish forms, or use a will writing service, by targeting communications to those with children and using language focused on the relevant social norm.
Here’s a benefit-related example:
Not only are our children the future, but they’re our everything right now.
Company X have put together a list of benefits specifically designed to help protect your children today, and if the worst were to happen to you tomorrow.
Log in to the benefits platform and click ‘Protect your family’ to do so before the window closes this Friday.
Technique #3: Framing using outcome-based communications
Framing is the cognitive bias in which the brain makes decisions depending on how information is presented.
Therefore, the language used, design and placement of information within communications greatly impacts the actions employees or pension members may take as a result.
Outcome-based communications frame benefits or pension information to relate to employees’ values and life goals. Designing communications this way limits the jargon and ‘extra noise’ that can confuse employees. Reorganising the available information into easy-to-understand, value-lead categories increases cognitive ease (another behavioural economic term you can have for free) and enables employees to align benefits with their values and goals.
For example, you might find that you fall into one or more of the following categories:
- I want to protect my family
- I want to make my money go further
- I want to get fitter
- I want to look after my health
- I want a comfortable retirement
Individual benefits on offer may help achieve one or more of the goals above. But linking benefits to goals can encourage employees to select all the benefits within a category and ‘complete the list’ to achieve their goal.
Apple use this with their ‘Today’ section on the App Store. Every day, Apple feature a short guide entitled, ‘How to [insert any objective here].’ There you will find a list of apps designed to help you achieve the objective. By simply downloading these apps from the instructional guide, users feel empowered knowing they are taking positive steps towards achieving an important goal.
Apple implement this technique to give their customers a sense of achievement and pride.
Employers can help their employees and members feel the same way.
In summary
Implementing behavioural economics into your communications is both easy and effective. This article has focused on three of the most common techniques that you can implement, on any scale, immediately.
You’ve had the idea. You’ve launched a new project. Now you must engage your employees. Try throwing the above techniques into your communications and see if they work for you!