Essay Part: An Exegetical Overview of the Behavioural Approach’s Psychological Assumptions

Introduction

Behavioural insights from the early 1900s are still extremely important in the understanding, predicting and changing of human behaviour. Behavioural economics is growing year on year, and it’s even considered by some as the mainstream way of thinking in economics. (Why Thaler and behavioural economics are so important, 2017). Richard Thaler, a behavioural economist won the Nobel Prize for economics in 2017, and Robert Cialdini describes behavioural science as ‘no temporary fling’ (Hollingworth and Barker, 2019). The UK and US governments alongside worldwide corporations such as Google and Barclays use insights from behavioural science (Hollingworth and Barker, n.d.). Behavioural insights are here to stay and are fundamental in the changing of human behaviour in modern day society (Harford, 2014; Halpern, 2015). The first part of this essay takes a broad exegetical overview of the behavioural assumptions of persuasion. Chronologically, the essay moves from the inception of behavioural psychology towards the insights of behaviourism in the most recent technique of nudge. The second part of the essay is an application of the model to Aldi’s ‘Like Brands. Only Cheaper’ campaign. It draws upon cognitive biases such as anchoring, the bizarreness effect and the availability heuristic. Aspects of nudge theory such as social proof and the ‘EAST’ framework are also drawn upon. The essay concludes that the original stimulus response model is still at the centre of the approach despite it being less reductionist and encompassing aspects of cognitive psychology.

Part 1

Before an exegetical overview of the behavioural technique of persuasion it seems a brief explanation of the technique is needed. The original behaviourist model of persuasion is simple and believes all behaviour can be reduced to a simple stimulus response model which can be used to predict behaviour (Watson, 1913). Insights from behaviourist psychology were key in the development of behavioural economics. Behavioural economics is less reductionist in the essence it combines aspects of behaviourist psychology and also cognitive psychology (Kahneman, 2011). Behavioural economics as a vehicle for persuasion sees irrational behaviour change through triggering cognitive biases via stimuli. Nudge sees an intervention in the choice architecture to trigger automatic cognitive processes in system 1 towards a desired outcome (Thaler and Sunstein, 2008).

Behavioural economic insights can be traced back to the late 1800s and early 1900s when psychology and particularly behaviourist psychology was first emerging. The behaviourist approach dominated psychology for the first half of the 20th century and was officially established by Watson in 1913 (Watson, 1913). Pavlov (1902) introduced classical conditioning, the theory of learning by association to a conditioned stimulus. Kahneman’s contribution to behavioural economics is influenced by Pavlov (Kahneman, 2011). Also, Skinner, a popular behaviourist took insight from Thorndike’s law of effect (Thorndike 1898, 1905) and popularised operant conditioning using reinforcement (feedback) (Skinner, 1938). Nudge theory builds on Skinner’s work and states the importance of giving feedback in learning and changing behaviour towards a desired outcome (Thaler and Sunstein, 2008).

Behavioural economics is based on bounded rationality and encompasses three main aspects cognitive bias theory, two system thinking and nudge theory. It’s already been established behavioural economic insights are rooted in the early 1900s. However, behavioural insights only entered the field of economics when there was frustration growing over rational models’ failings to explain irrational behaviour (Hollingworth and Barker, n.d.). Kahneman and Tversky introduced the concept of prospect theory encompassing behavioural insights in 1979, which explained irrational behaviour in some circumstances due to loss aversion (Kahneman and Tversky, 1979). As such,

Kahneman is credited with the formation of behavioural economics. On the other hand, Thaler, may also be credited with the founding of behavioural economics with his 1980 paper on consumer choice (Samson, 2014; Thaler, 1980). In this paper Thaler discusses how consumers should behave, but instead discusses how they actually behave in response to stimuli.

One of the key aspects of behavioural economics and the behavioural approach to persuasion is cognitive bias theory. Cognitive bias theory suggests that we act irrationally due to heuristics triggered by stimuli. As such, the behaviourist technique of persuasion suggests triggering these heuristics through stimuli to affect behaviour. Kahneman and Tversky introduced cognitive bias theory as an opposition to rational thinking (Kahneman and Tversky, 1974). They were interested in how people make decisions given bounded rationality. Kahneman and Tversky (1973) believed that when faced with a stimulus people employ a limited number of heuristics to make judgements simpler. Kahneman and Tversky’s cognitive bias theory builds on the concept of bounded rationality first introduced by Herbert Simon in 1957 (Barros, 2010). Dan Ariely’s book ‘Predictably Irrational’ takes insight from cognitive bias theory and Ariely believes that these cognitive biases are systematic. Therefore, behaviour can be predicted, thus having implications for persuasion (Ariely, 2009).

One of the most common cognitive biases is anchoring and there is 40 years of extensive research to support its robustness and practical applications in the business world (Furnham and Chu Boo, 2011). Anchoring was first introduced by Kahneman and is the tendency to rely disproportionately on the first piece of information offered when making a decision (Kahneman and Tversky, 1974). A meta-analysis found ‘the presence of a relatively large number of significant effects in reference pricing studies’ (Biswas et al. 1993 p.252). Ariely takes insight from anchoring as a cognitive bias in his work on ‘Coherent Arbitrariness’ (Ariely et al. 2003). Ariely states that choice context can be manipulated through anchoring to direct behaviour. Another common cognitive bias is the availability heuristic, the tendency to estimate the likelihood of something happening based on the number of examples that readily come to mind. Folkes (1988) shows that the availability heuristic can affect consumers judgement of product performance.

Arguably, the most influential text in the behaviourist approach to persuasion is Kahneman’s ‘Thinking Fast and Slow’. Kahneman believes 98% of our thinking occurs automatically in system 1, the other 2% accounts for effortful thinking in system 2 (Kahneman, 2011). System 1 protects system 2 from cognitive overload through heuristics which cause biases as explained earlier. The behavioural technique sees persuasion as the manipulation of the cues that affect system 1. Kahneman’s two system thinking is a summary of his work over his lifetime, as such he is influenced by his own work on heuristics and prospect theory (Kahneman, 1974, 1979). Kahneman also takes insights from Stanovich (Stanovich and West, 2000) who was the first to give name to system 1 and 2. Kahneman also credits Thaler in his 2011 work, whilst also stating in his 2003 work the value of Thaler’s insights (Kahneman 2003, 2011).

A variety of studies have used Kahneman’s two system thinking. Although, it must be made clear that the concepts outlined in Kahneman’s 2011 work were already being suggested by Kahneman before 2011 (Kahneman, 2003). Gigerenzer criticised the idea that system 2’s effortful thinking contributed to better responses suggesting slow thinking doesn’t lead to a more accurate response (Gigerenzer, 1991). In contrast, more recent work shows psychologists arriving at a consensus that consumers buy less at stores with more choice because the thinking becomes too effortful (Shotton, 2014). Kahneman’s also influences Thaler et al.’s work on choice architecture in ‘The Behavioral Foundations of Public Policy’. Thaler et al. concludes markets systematically overcome behavioural biases, thus meaning choice architecture design

must take this into account (Shafir, 2013). Thaler and Sunstein’s ‘Nudge’ builds on Kahneman’s two system thinking and cognitive biases (Thaler and Sustein, 2008).

Others might argue that ‘Nudge’ is the most influential text, Kahneman refers to it as the bible of behavioural economics (Kahneman 2011). Nudges are deliberate changes in the choice architecture to affect behaviour. There are 5 key elements outlined in nudge including default settings, incentives, understand mapping, give feedback and expect error (Thaler and Sunstein, 2008). Nudge is fundamentally based on Kahneman’s work on heuristics, a change in the choice architecture triggers a heuristic to use system 1 thus producing the desired behaviour (Kahneman, 1973,1974). Thaler and Sunstein credit the work of Kahneman and Tversky on how much it influenced their thought processes (Thaler and Sunstein, 2016). Nudge also takes insight from early behaviourism, give feedback closely links back to Skinner’s operant conditioning. Additionally, changing the context (choice architecture) is similar to Skinner’s ‘operant conditioning chamber’ (Skinner, 1938). David Halpern, a key advocate of Nudge also credits Kahneman’s work on heuristics as a foundation on which nudge was developed (Halpern, 2015). Halpern also credits Cialdini’s ‘Psychology of Persuasion’ as being an instrumental text in the developing of nudge (Halpern, 2015).

One of the core components of nudge is social pressure (Thaler and Sunstein, 2008). ‘We are incredibly influenced by what others are doing’ (London Business Forum, 2018, 2:31). The importance placed on social pressure in nudge stems again from Cialdini’s work on the ‘Psychology of Persuasion’. Thaler and Sunstein refer to him as ‘the great guru of social influence’ (Thaler and Sustein, 2008, p.67) whilst Halpern draws on Cialdini’s work on descriptive and declarative social norms (Halpern, 2015). Many studies have proved the value of social pressure as a nudge. The classic example used is the tax and pensions study which found that compliance to paying taxes simply went up when people were told on the form over 90% had already paid their taxes (Thaler and Sunstein, 2008). Another study found in the absence of clear preferences social proof as a nudge is effective at changing behaviour (Venema et al. 2020).

Nudge theory has developed quickly and become increasingly popular since its inception in 2008 (Chu, 2018). Nudge theory was used in Obamas presidential campaign (Hollingworth, n.d.; Kahneman, 2011) whilst Halpern was employed by the UK government to head up the behavioural insights team (BHI) (Halpern, 2015; Dr David Halpern, n.d.). The fact that both the UK and US governments quickly took up behavioural insights from nudge shows the value it has as a means of persuasion. The BHI builds on Thaler and Sunstein’s work and produced a framework known as ‘EAST’ (Halpern, 2015). ‘EAST’ closely links with all the elements of the acronym ‘Nudge’. For example, ‘Ease’ links with understand mapping and ‘attractive’ links with incentives. The BHI has had great success with nudge theory and through their ‘EAST’ framework. One highlight of their work is a 34% increase in acceptance of underrepresented schools to top universities (Quinn, 2018). Again, this shows the value of the behavioural technique of persuasion.

Part 2

Aldi, the choice architects are trying to overcome status quo bias which is associated with brands and easily exploited (Thaler and Sunstein, 2008). Aldi deploy a number of tools out of their behavioural repertoire to change customer behaviour and overcome status quo bias. The first tool Aldi are deploying is the use of anchoring bias. Anchoring bias falls within the ‘too much information’ category in the cognitive bias codex (Benson, 2016). As such, Aldi are presenting a large number of stimuli (statistics, strange characters, speech etc.) to trigger the anchoring heuristic in system 1. Aldi always present the price of the brand first before the price of the Aldi alternative. The stimuli presented by Aldi means that the consumer places a disproportionate value on the first price presented. As such, the consumer uses this as an anchor in their judgement on whether alternative Aldi product represents good value.

Aldi appeals to the bizarreness effect which is also part of the ‘too much information’ category in the cognitive bias codex (Benson, 2016). With this tool Aldi’s desired behaviour they are seeking is memory retention/recall. As previously established, there is a large number of stimuli present in the series of ads, but the focal point is the visually or audibly bizarre character in the middle. For example, the two men dressed as rabbits drinking a ‘pint’. Or the ‘attractive’ looking man who has a voice, stark in contrast to what you would normally associate with an ‘attractive’ man. The bizarre stimuli triggers system 1 and causes distortions in storing and retrieving which makes the consumer more likely to recall the ad (the desired behaviour). To link back to the behaviourist model, the stimuli is the bizarre character, this triggers system 1 thinking and cognitive bias thus resulting in the desired behaviour – memory. Perhaps Aldi were successful with their bizarre stimuli as the series of ads were the most remembered of the 2010’s (Sheeka, 2018).

It may also be interpreted that Aldi were appealing to the mere exposure effect and trying to trigger availability bias. The desired behaviour the choice architects are seeking here is an increased likelihood of recalling the Aldi ad in decision making contexts. Aldi released a number of the ‘like brands, only cheaper’ ads following the same format with different products. As such, Aldi were flooding the ‘operant conditioning chamber’ with stimuli (advertisements) directed towards the consumer. For this reason, it may be interpreted that Aldi were trying to take advantage of the mere exposure effect and trying to trigger the availability heuristic in system 1. Availability bias in this scenario may cause consumers to recall the Aldi ad in decision making contexts more easily and more favourably. Nudge theory also supports the easier consumers can recall an example the more likely it is going to influence behaviour (Thaler and Sustein, 2008). To link back to the behaviourist model the stimuli are the number of advertisements released by Aldi, this triggers the availability heuristic in system 1 producing the desired behaviour.

Aldi’s ad may also be interpreted through Nudge, and more specifically both types of social proof heuristic (information and peer pressure). The desired behaviour sought by Aldi here is the power to comply to the majority and like the Aldi alternative. The first type of social proof heuristic relates to information, we look to others for behavioural guidance when unsure. Aldi are manipulating the choice architecture by providing data at the bottom to support the character in the middles claim ‘I like this’. Data at the bottom shows that a high percentage of people also like the Aldi brand and implies a subtle nudge ‘you know what to do’. The addition of this data nudges consumers towards the Aldi alternative. Secondly, the data at the bottom creates a sense of social pressure. The data shows the majority of people like the Aldi alternative, whilst also the character in the middle likes it. Subtly, the context has been manipulated by Aldi to create pressure to conform to the majority. Thus, creating a nudging effect. To link back to the behaviourist model, the stimuli is the data at the bottom of the ad, this triggers the social proof heuristic resulting in the desired behaviour.

Overall, it may be interpreted that Aldi were able to apply the EAST framework (Halpern, 2015) when designing the ad. Aldi have made the choice easy, they have removed the friction costs from the consumer. This is shown by the cost of the two products and the data at the bottom. Aldi has made the Aldi alternative attractive by incentivising it with a much lower price compared to the brand. Aldi may also be factoring in the concept of loss aversion here; customers do not want to feel as though they have lost money by paying for a brand that performs the same. The social aspect is clear as explained in the previous paragraph. The ad can also be interpreted to be timely. Aldi have provided an anchor potentially disrupting any habits, thus making an intervention more effective. Aldi’s ad can therefore be interpreted to be a nudge and thus a means of behavioural persuasion.

In summary, this essay was a broad exegetical commentary of the behaviourist approach to persuasion whilst the second part was an interpretation of Aldi’s ‘Like brands. Only cheaper’ campaign through this technique of persuasion. The essay discussed the origins of the approach, behavioural economics and the applications of the various frameworks such as EAST. In conclusion, the behavioural approach has evolved a lot since the 1900s, it is no longer as reductionist, thanks to Kahneman it now encompasses aspects of cognitive psychology. Although, the fundamental principles still remain the same – change the context and you can change behaviour. Behavioural economics will continue to evolve, in relative terms behavioural economics is a new way of thinking compared with its counterpart classical economics. More and more people are seeing the value of this approach as seen with the US and UK government implementing its principles. It’s likely there will be more influential theories presented based on behavioural insights in the near future.