How to Convince Your Boss

to use insights & strategies from

Behavioral Economics

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Imagine yourself as…
The VP of an A member of the A Human Resource
international fashion American Transplant Officer of a major
retailer, trying to boost Foundation advisory corporation, trying to
your company’s sales. board, struggling with increase employees’
low consent for organ 401(k) participation.
donation.

…what do you do?

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Approach the problem
like everyone else…

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The marketing The health care The HR officer
executive often advocate often typically
resorts to sales relies on people encourages
campaigns and choosing to enrol retirement
steep discounts. in organ donation advisors to market
programs. pension plans by
explaining the
rational benefits
of savings.

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…and you will get the same
results as everyone else.
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 INSIGHT: Lower prices don’t
necessarily lead to more purchases

Steep discounts
tarnish consumers’ perception
of brand quality and image.

Hardesty, D. M., & Bearden, W. O. (2003). Consumer evaluations of different promotion types and price presentations: the moderating role of
6 promotional benefit level. Journal of Retailing, 79(1), 17-25.
Yoo, B., Donthu, N., & Lee, S. (2000). An examination of selected marketing mix elements and brand equity. Journal of the Academy of Marketing
Science,28(2), 195-211
 INSIGHT: Relying on people to actively
enroll doesn’t necessarily mean they will

Few people choose to participate in

organ donation programs… almost
every hour an American dies while
waiting for an organ donation.
7 US Department of Health & Human Services. Available at: http://www.organdonor.gov/about/data.html. Accessed August 25, 2015.
 INSIGHT: Even when an action is in their best
interest, people don’t always follow through

68% of Americans aren’t

saving for retirement.
8 Ghilarducci, T., Saad-Lessler, J., & Bahn, K. (2015). Are Us Workers Ready for Retirement? Trends in Plan Sponsorship, Participation, and
Preparedness. Journal of Pension Benefits, Ferenczy Benefits Law Center, 25-39.
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 Because decision-makers assume people
are rational.

But THEY AREN’T

Once you understand
the drivers of behavior,
you can change
behavior.

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What should be done?

“Our problem is not ignorance,

but pre-conceived ideas”

Hans Rosling

11 Rosling, Hans. "Debunking Myths about the World." HANS ROSLING, June 18, 2007. Web. Accessed August 25, 2015.
<http://roslingsblogger.blogspot.ca/2007/06/debunking-myths-about-world.html>.
 The BE
(Behavioral
Economics)
approach

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Behavioral Behavioral Economics has revolutionized
our understanding of decision making.

Economics We now know that humans are far from

perfectly rational. Instead, there are
psychological biases that strongly
influence people’s choices.

The result is a more accurate prediction

of human behavior, which can facilitate
desirable business outcomes.

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 How can this
approach be applied
to retail, healthcare,
and retirement?

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 Behavioral Economics
Solutions in Retail

What BE Tells Us: Real-World Application:

• Retailers like Zara

• Scarcity Effect: People maintain quick
are attracted to things merchandize turnover,
that are hard to obtain with few or no re-orders
• Customers know that if
they don’t buy the item
they like, it might be
gone tomorrow

15 Lynn, M. (1991). Scarcity effects on value: A quantitative review of the commodity theory literature. Psychology & Marketing, 8(1), 43-57.
Ghemawat, P., Nueno, J. L., & Dailey, M. (2003). ZARA: Fast fashion(pp. 1-35). Boston, MA: Harvard Business School.
 REAL-WORLD RESULTS

High Merchandise Turnover:

• Zara’s stores are re-stocked with new

designs twice a week

• Inditex (Zara’s owner) has thrived in the

current retail environment and is now
the biggest fashion group in the world

16
2013 Annual Report, Inditex Group
 Behavioral Economics
Solutions in Healthcare

What BE Tells Us: Real-World Application:

• Status-Quo Bias: The • To improve organ and tissue

status-quo is taken as a donation, Wales has decided to
reference point and any introduce a soft opt-out system
change from that baseline
is perceived negatively • Starting December 2015,
people will have to deviate from
the “baseline” and “opt-out” of
organ donation, instead of
being given the choice to opt-in

17 Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1991). Anomalies: The endowment effect, loss aversion, and status quo bias. The journal of economic
perspectives, 193-206.
(November 2013). Organ donation in Wales: putting the new law into practice. http://organdonationwales.org/News/news2611?lang=en
 REAL-WORLD RESULTS

Share of designated organ donors13

Countries where people 100.
are defaulted into not
being organ donors
75.
Check here if you would
like to be an organ donor
50.

Countries where people 25.

are defaulted into being
organ donors
0.
Germany

Hungary
Sweden

Poland
Netherlands

Belgium

France
Denmark

Portugal
UK

Austria
Check here if you would not
like to be an organ donor

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Johnson, E. J., & Goldstein, D. G. (2003). Do defaults save lives?.Science, 302, 1338-1339.
 Behavioral Economics
Solutions in Retirement
What BE Tells Us: Real-World Application:

• Loss Aversion: People are Save More Tomorrow Program:

very reluctant to forego even a • Employees commit to contribute
small part of their immediate more to their 401(k) plans, but
income only once their salaries have
been raised
• Hyperbolic Discounting:
People have a tendency to • This program allows employees
underestimate future earnings to continue enjoying the same
level of disposable income they
are used to

19 Tversky, A., & Kahneman, D. (1991). Loss aversion in riskless choice: A reference-dependent model. The quarterly journal of economics, 1039-1061.
Laibson, D. (1997). Golden eggs and hyperbolic discounting. The Quarterly Journal of Economics, 443-477.
 REAL-WORLD RESULTS

Save More Tomorrow Pension Plan:

Within 3 years of Pension savings as share of monthly salary

introducing the Save 11.6
More Tomorrow
9.4
(SMarT) pension plan,
employees who joined 6.3 6.5 6.2 6.1 Declined SMarT
SMarT saved almost Joined SMarT

twice as much as
employees who
declined SMarT
Year 1 Year 2 Year 3

20 Thaler, R. H., & Benartzi, S. (2004). Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving. Journal of political
Economy, 112(S1), S164-S187.
 Scarcity Effect,
Status-Quo Bias, and
Loss Aversion are just a
few of the hidden biases
that rule our behavior.

For a brief introduction to

some other human
heuristics and biases,
explore
http://ConceptTree.BEworks.com/

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Behavioral experts do not make
decisions based on “hunches” or
“gut feelings.” BE practitioners
formulate concrete and testable
assumptions to be examined
under the rigorous lens of
empirical verification.

Taking special care not to give

any advice that they cannot
justify, behavioral experts are
minimizers of risks.
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 How to Convince Your Boss
to Leverage Behavioral Economics
Explain that the Benefits of BE include:

• Enabling Innovation and implementations of

empirically validated strategies
• Mitigating Risk by safely pre-testing new
business ideas
• Challenging of Assumptions that are no more
than “hunches” or “gut feelings”
• Democratizing Ideas by subjecting all opinions
to the same verification standards
• Unleashing Creativity and Curiosity through a
systematic approach to new ideas and testing
• Leveraging Cutting-Edge Scientific Insights

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Our mandate at BEworks is
to design controlled
experiments so that business
leaders do not have to rely
on anecdotal, historical, and
correlational evidence.

Dan Ariely
Co-Founder &
Chief Behavioral Scientist, BEworks
Professor, Duke University
Best-selling author

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 You’re on your way to advancing
your business through the
BEworks Approach!

✓ Review this Slideshare Presentation

✓ Get excited about applying the BE

method to your organization info@BEworks.com
www.BEworks.com
Contact BEworks (+1) 416-920-1921

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