These are times of major changes in how people live and consume. Today’s developments demand from us new ways of producing and consuming, given the increasing scarcity of natural resources and the rapid growth of the global consumer class, especially in developing countries.
One of the greatest challenges facing governments and companies around the world is how to influence consumers into developing more sustainable buying habits and lifestyles. There is a significant opportunity for businesses to help consumers make major changes in their lifestyles and purchasing habits.
The role of businesses in this context goes well beyond just increasing consumers’ awareness of their social and environmental responsibilities, which by itself is not sufficient to address today’s problems with the scale and the speed that are needed.
For example, while market research in Brazil has identified an increase in consumers’ awareness of environmental issues over the last 20 years, this has not resulted in any major changes to their buying habits and preferences, at least not at the same rate of change.
Responding to this challenge requires a much more complex approach. Here, we’ll look at three main areas of action: shaping supply, creating demand, and using shortcuts from behavioural economics to influence consumers.
Shaping Supply
The first place to start is on the supply side, and the need for products and services that are cleaner, healthier, better priced and more convenient. Brands will only develop these products if it makes business sense for them to do so. In fact, new companies in Brazil and beyond are already creating and selling innovative and profitable products and services that provide real benefits for consumers while making their buying habits more sustainable, and all without appealing to their social or environmental conscience. Online platform OLX allows users to buy and sell used goods on an unprecedented scale. Easy Taxi has led to a revolution in how we book taxis, making this process easier, faster and safer for drivers and passengers alike, as well as reducing air pollution by optimizing routes. Airbnb is reshaping the hospitality business, making any person a possible provider of spare rooms, apartments and houses, both creating income and bringing people together.
This trend goes way beyond recent Internet businesses. For example Nike, which has been subject to massive boycotts because of its supply chain problems in Asia, has reinvented itself and extended its brand from just selling running shoes to supporting and promoting sports. Nike wants to be more than a business that sells sportswear; it now aspires to positively influence the health and well-being of its consumers and to participate in the fight against obesity. This new positioning has proven to be very successful in Nike’s market, while also delivering tangible benefits for consumers and for society.
Creating Demand
The second challenge is to create demand. On countless occasions I have heard people from major multinationals in the consumer goods sector tell me that their marketing people think that sustainability ‘doesn’t sell.’ To which I respond – doesn’t sell what? And to whom? Looking after the environment and being socially aware are all well and good, but they do not have the same importance to all consumers. Most people worry more about the elderly neighbour who finds it hard to walk down the stairs than the latest tragedy in the Bangladesh sweatshops that make the fast fashion we all buy. For parents, the safety of their children in a playground is much more important than deforestation in the Amazon. But when companies and organisations run sustainability campaigns, they always tend to focus on these far-off problems and forget about the role of sustainable behaviour in our everyday lives.
This is not to minimise the importance of global problems. But consumers care most about what has a direct impact on their own lives. If as sustainability professionals we do not want to fall into the trap of just talking to each other, of preaching to the choir, we are going to have to adapt our message to reach a much wider audience.
As global experts in creating demand and influencing consumers, brands have a critical part to play in building this dialogue. They can use their marketing power to transform society by delivering products and services that change deep-rooted consumer behaviour and buying patterns.
Today’s brands need to engineer a massive shake-up of their supply of products and services. This is not about saving the planet by appealing to a consumer’s conscience. To be frank, there is very little conscience in consumerism, and that approach is not working anymore, if it ever did.
As consumers, we are much less rational than we would like to think. Marketing has always used techniques that talk to the most elemental aspects of human behaviour and needs: social status; group identification; the need for security, freedom, connections, recognition, meaning and self-improvement. It should not be too much to ask companies to deploy these techniques to influence the same consumers more positively.
The social and environmental challenges that we face today are of a massive scale. It is naïve to think that we can overcome them without the full cooperation and capacities of companies and their brands.
Shortcuts for Influencing Consumers
The third issue is not widely understood, which is one of the reasons why we are organizing the New Frontiers Forum and the Consumer Behaviour Change Framework: It is to make the most of shortcuts from behavioural economics to influence consumers.
When trying to influence behaviour, as important as it is to shape supply and create demand, it is perhaps more essential to create incentives for consumers and reduce any barriers to positive behaviour, while at the same time making it hard for them to persist with their old, negative habits.
Very often, relatively simple actions can have a major impact. These can strike at a much deeper level than cognitive thinking. As I said before, we are much less rational than we like to think. In his book, Predictably Irrational, Dan Ariely explains how our choices are often determined by variables that are not absolute and definite but random and haphazard. Ariely is a practitioner of Behavioural Economics*,* the area where psychology meets economics and explores the process of making judgements and decisions.
According to Ariely, not only are many of our choices irrational, but they are irrational in a systematic and repetitive way — to the extent that our irrationality is actually predictable. On the foundations of this predictability, which contradicts some of our most deeply held beliefs about our self-control and rationality, companies and other organizations can carry out simple actions to change consumer behaviours.
Different motivational factors have different weights in our decision-making processes, and these weights are not calculated on a rational basis. In some situations, social norms can be the most effective (and the most economic) motivators, rather than any financial reward. In fact, financial rewards can sometimes have the opposite of the intended effect.
Exploiting these social norms and rules is one shortcut to influencing consumer behaviour. This approach can support the shaping of supply and the creation of demand for new products and services. In most cases, the solution can be found in adjusting people’s choice architecture and in providing so-called ‘nudges’ for these products and services.
These shortcuts in the choice architecture can often be very simple. In Brazil, card reader machines often print out the customer receipt before the user has asked for it. The receipt is then nearly always just thrown away. If the reader only printed the receipt when the user asked for it, in a country with the size and population of Brazil the savings in paper from such a simple action could become massive over time.
An understanding of choice architecture can be used just as much to encourage positive behaviour as to discourage bad habits. It has been used to increase the number of organ donors; on online health forms, if users have to opt out of donation, the percentage of people who become donors is much higher than if they have to opt in.
Taxi apps are another good example — booking a taxi using the app is much quicker and more effective than older methods. Human beings tend to put a high value on what is simple and straightforward, as a legacy of the time when making the best use of our resources could mean the difference between life and death.
The possibilities of marketing that is informed by Behavioural Economics and Consumer Neuroscience are endless. Even governments have begun to understand its potential; the UK government has established a Behavioural Insights Team that deploys the insights of Behavioural Economics to support public policy, such as actions to reduce drunk driving and teenage pregnancy and to improve national health.
The potential of using this revolutionary approach to influence consumer behaviour is massive. Our job now is to understand and decode how consumers make the decisions they do and help them change those decisions. This is the most sustainable way ahead for the brands that we manage, for the consumers that we serve and for the society in which we live.
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Published May 8, 2015 7pm EDT / 4pm PDT / 12am BST / 1am CEST