Behavioral Economics Experiments: How to Use Times of Uncertainty to Your Advantage

What is behavioral economics?  

Behavioral economics is still a young research discipline. It explains why people do what they do. As such, it offers approaches on how to guide human behavior. Behavioral economics makes use of several psychological principles, on the basis of which behavior-guiding measures, so-called nudges, are developed. Behavioral economics experiments are used to measure and further enhance the effect and effectiveness of such nudges. 

How do behavioral economics experiments work? 

1. Determine target behavior 
   
   Before thinking about a behavioral economics experiment, the intended target behavior must be determined. The target behavior should be specific and as concrete as possible in order to make it measurable. For example, if one wants to encourage users to use more digital payment channels, the target behavior could be defined as "fewer calls to the hotline" or "more registrations in the online portal." 
    
2. Identify user needs 
   
   Nudges are context and user dependent. They must be tailored to the problem at hand, the environment in which a user operates, and the user. There is no guarantee that nudges will be effective, which is why in-depth knowledge of the decision-making situation is a basic prerequisite for their success. User research methods such as context analysis help to create these prerequisites.  
    
3. Develop nudges   
   
   Based on the user insights and the identified target behavior, nudges are developed. This is based on the intersection between the target behavior desired by the provider and the user needs. Appropriate nudges must consider both aspects to be effective. Behavioral economics principles provide guidelines and help to derive promising nudges in a targeted manner.   
    
4. Testing nudges 
   
   To test developed nudges, behavioral economics experiments are used. The developed nudges are tested on different groups. These groups usually consist of real people who do not even know that they are part of an "experiment". Especially in the digital space, nudges can be tested in a wide variety of ways at the same time, so you can see how users react to them on an ongoing basis and under real conditions.    
    
5. Make fact-based recommendations 
   
   Finally, the observations from the experiment are consolidated and statistically evaluated. It is deduced which nudges are most effective in moving users toward the intended target behavior. What emerges is a fact-based recommendation for action that removes uncertainty in decision-making - quickly and reliably.  

Where do you apply behavioral economics experiments?   

Behavioral economics experiments can be applied anywhere. Recently, we optimized a registration process that users could go through either via an app or via a website (see article in Netzwoche). The client's primary goal was to increase the number of registrations. As many as possible should be done via app. To achieve these goals, we created an upstream switch page where users could choose whether they wanted to register in the app or on the web. For the experiment, we created variants of the switch page with a series of nudges and tested them quantitatively with users. In this way, we identified the variant with the largest effect in terms of target behavior.   

Figure 1: Simplified procedure of a behavioral economics experiment. 

Using behavioral economics experiments yourself  

Behavioral economics experiments provide facts that are invaluable in an increasingly unpredictable world. Because facts provide clarity, reduce uncertainty, increase the quality of the offer and thus offer a decisive added value in a highly competitive environment.  

Would you like to learn how behavioral economics experiments can be applied to your case? Or would you like to know how we at Ergonomen have helped our clients to achieve more turnover and (project) security? Then contact us!