Behavioural economics incorporates psychology into the science of decision-making. Some of it isn’t all that new to marketers, who have been using funny quirks in our decision-making skills to sell more stuff to us for years (e.g. pricing things at 0.99, hiking up mini-bar prices in hotels, putting all the useful information in tiny font, etc etc etc).
Policy makers who have cottoned on to this have broadly fallen into two categories. The first see behavioural economics as an extra tool for Government to get us to do things (eat fruit) and not do others (binge on Big Macs) a la Nudge. I was also going to say “save more”, but that message has become somewhat confused of late. Oops. These policy-makers, the Nudgers, are using those wily marketing practices for good – or at least are trying to.
The second category is the policy maker interested in consumer protection, who like a sleepy guard-dog, has just realised what sort of fast ones those pesky advertisers have been pulling under its nose and is sheepishly trying to work out what to do about it. And it is a tricky call – there are so many different ways of presenting a product that might affect consumers’ decisions.
In the UK, the OFT (Office of Fair Trading) has been grappling with this, since it commissioned an experiment looking at a few types of pricing practices that seem to confuse consumers. The prime one is drip pricing, beloved of airlines, where the headline price that was advertised doesn’t look so good now that you have been charged airport fees, credit card charges, luggage allowance payments and toilet charges. Oh yes, toilet charges. Thank you, Ryanair, for these pricing innovations.
The OFT proposal is to get companies to put all compulsory charges into the headline price. Ah, but toilet trips aren’t compulsory, are they? Taking luggage onto a flight isn’t either. So the proposal isn’t much extra help if you want to compare prices of flights with the number of toilet trips you need included.
Policy-makers can put out all the guidance and rules they want, but some clever advertiser is going to find a way round it. The marketers are already quite a few steps ahead. Can the policy-makers ever really hope to catch up?