The study of behavioural economics can provide valuable insights into the reasons why people make poor decisions. Understanding these behavioural insights can help firms develop strategies, products and information, which encourage customers to make better decisions, and improve outcomes for governments, regulators, companies, and individuals.
Much of the world is designed around the assumption that humans are perfectly rational, as opposed to people who make mistakes. Even the smartest of people can make mistakes, and is why we need to design for humans.
Would you buy 5% fat milk – or 95% fat free?
The ‘framing’ of this question shouldn’t make a difference to the answer, but it does. This suggests that costless changes can dramatically influence behaviour, for example, improving the health of a nation.
This paper sets out what behavioural economics is, why it should be at the forefront of strategy and the customer agenda, and provides a number of potential key impacts to businesses.