Conference material

How Can Behavioural Insights Solve the Last Mile Problem in Service Delivery?

Date Posted

1 Jan 0001

Issue

Issue 17, 14 Jun 2017

BEHAVIOURAL INSIGHTS AND THE LAST MILE

It is generally believed that the field of behavioural insights was established with the intent to document biases in individual behaviour. However, these biases are defined with respect to a norm that is not grounded in human realities. Now that the differences between ‘econs’ and ‘humans’ are better understood,1 it is important to acknowledge that all individuals are inherently subjected to irrationality and biases as benchmarked against economic rationality.

Nonetheless, governments and businesses still tend to design their interventions/products based on assumptions of economic rationality and this creates a “last mile” problem, where people were exposed to policies, programmes and products designed for ‘econs’. Thus, policymakers must ensure that their programmes are ‘human-compliant’.

Interventions for Behavioural Change

Broadly speaking, there are four types of behavioural change that practitioners can hope to achieve via behavioural interventions:

S/N Behaviour Change Example
1 Compliance A company complies with regulations
2 Switching/Purchasing A doctor advises her patient to spend less time watching TV and more time in the gym
3 Consumption A dietician advises his patient to consume more fruits and vegetables
4 Acceleration A person saves early for retirement

Behavioural interventions work best when practitioners are trying to elicit behavioural changes related to consumption or acceleration:

1. Consumption: Under-consumption could occur in various domains when the products or services offered did not have salient effects on their users.

Example: Why didn’t patients keep to their medication regimes?

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2. Acceleration: Initiatives aimed at accelerating behaviour change need to take into account factors such as the timing of the intervention.

Example: Why don’t users want to read privacy policies meant for their benefit?

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Importance of Psychological Factors

  • Governments and businesses generally focus on addressing stakeholders’ biases by providing them with more information. However, it is crucial to also consider their motivations, perceptions and emotions when designing interventions, as some of them — such as emotion — could impede decision making.

Example: Why didn’t eligible families apply for the Canada Learning Bond?

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  • Motivations or perceptions could also hinder the success of certain interventions. Governments or businesses might (mistakenly) assume that their stakeholders’ motivations are aligned with theirs, or they might not account for the possibility that their stakeholders would perceive the problem differently from them. These mismatched expectations of behaviours could result in failed interventions because the stakeholders do not behave the way that the programme designers expected them to.

Key Pillars of Human Decision Making

  • Context, inertia and procrastination were also key factors which influenced decision making.3
  • Context often drives people’s decisions and preferences. An example would be the compromise effect,4 where people select the middle option by default.

Example: What is the ‘Goldilocks’ size of coffee?

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  • Procrastination and Inertia. Although people have intentions to act in their best interests (e.g. start a healthier diet, spend more time with their families, learn a second language), they have problems acting on these intentions because ‘life gets in the way’. In addition, people tend to remain in status quo, unless there are external factors which pushes them to make a change. This would explain how default options have a significant impact on people’s decisions. Hence interventions should try to close the gap between intentions and action; people are already aware of what is in their best interests but they need more help to actually carry out their plans.

Strategies for Behaviour Change

  • Governments and businesses need to understand the characteristics of their stakeholders so that they can make a more targeted attempt at behavioural change. These stakeholders can be broadly classified into three types:
S/N Type Description
1 Motivated Enthusiasts (“Done!”) People who would definitely change their behaviour because they were highly intrinsically motivated to do so
2 Diehard Opponents (“No way.”) People who would definitely not change their behaviour because they were intrinsically opposed to it
3 Naïve Intenders (“Yes, I’ll do it tomorrow.”) People who intended to change their behaviour, but would never get around to doing it

  • Naïve intenders generally make up the bulk of most markets. Governments and businesses hence need to shift their efforts from trying to convince diehard opponents, to helping naïve intenders overcome the frictions they faced in making the desired change.
  • Professor Soman mentioned four strategies for changing behaviour:6
  1. Restrictions: Governments could impose bans on specific behaviours, while businesses could restrict access to specific products.
  2. Incentives: People could change their behaviour for monetary or social rewards, but incentives are generally only effective in the short term.
  3. Information: Information can facilitate decisions, but excessive information could reduce the likelihood of people making decisions.
  4. Choice Architecture: Nudges, a feature of the environment that could affect behaviours without restricting people’s choices or changing their economic consequences, are proven to be effective in changing behaviours.

Sludge

  • Professor Soman introduced the concept of “sludge”,7 which is the opposite of nudge. While a nudge is meant to facilitate decision-making, sludge impedes decision-making.
  • Sometimes it is necessary to intentionally deter people from making impulsive choices or engaging in unhealthy behaviour.
  • On the other hand, impedance could be undesirable if it is exploited for profit. Businesses could employ a ‘nudge and sludge’ strategy to steer consumers towards subscription-based services and then make it difficult for them to cancel their subscription.
  • Sludge could also be an unintentional result of legacy systems arising from unorganised government processes, or outdated administrative requirements (e.g. paper disclosures used by financial institutions). Governments and businesses thus need to be more aware of and willing to question their existing processes to minimise sludge.

Conclusion

Behavioural insights have till now been applied mainly to address the ‘last mile problems’ of programmes, e.g. alteration of forms or reorganisation of information on websites. Nonetheless, if behavioural insights could be embedded throughout the entire design process of policy design, last mile problems could be greatly alleviated.

Link to Professor Dilip’s presentation slides

NOTES

  1. R. H. Thaler and C. R. Sunstein, Nudge: Improving decisions about health, wealth and happiness (New Haven, CT: Yale University Press, 2008). In the ‘Introduction’, the authors defined ‘Econs’ as the ‘economic man’ or the theoretical version of people presented in economics textbooks as forward-looking, unemotional and able to assign utilities when making their decisions. In contrast, ‘Humans’ are real-life individuals who are short-sighted, emotional and make decisions without thinking too deeply about them..
  2. E. Nesterak, “How Do We Solve the Last Mile?”, The Psych Report, 24 October 2015, accessed 9 September 2019, http://thepsychreport.com/business-org/how-do-we-solve-the-last-mile/.
  3. D. Soman, “The Last Mile,” in The Last Mile: Creating Social and Economic Value from Behavioural Insights (University of Toronto Press, 2015).
  4. I. Simonson, “Choice based on Reasons: the case of Attraction and Compromise Effects”, Journal of Consumer Research, 16(September 1989), 158–174.
  5. D. Soman, “The Last Mile,” in The Last Mile: Creating Social and Economic Value from Behavioural Insights (University of Toronto Press, 2015).
  6. D. Soman, “Choice Architecture and Nudging,” in The Last Mile: Creating Social and Economic Value from Behavioural Insights (University of Toronto Press, 2015).
  7. D. Soman, “Behavioural Insights and the Last Mile”, Presentation slides, CSC Behavioural Economics Symposium 2019, 16 August 2019.