Simon Swan's interview with Andrew Nicholson, Founder of the-Guku showing how behavioural economics influences customer online purchases and growing demand for Data?
Andrew is the founder of the-Guku, a digital marketing consultancy specialising in behavioural economics and the relationship this plays in influencing customers through their online purchase patterns.
Guku combine #DigitalMarketing, #BehavioralEconomics & #Psychology know-how to understand your customers better than they understand themselves!
In my interview with Andrew, he lifts the lid on the growing demand for data on behavioural economics, real-life examples of companies already successfully using these techniques and Andrew’s personal journey of launching his very own consultancy…
Q. You seem to have uncovered an interesting niche in web psychology, can you summarise what this is all about?
Absolutely. As I progressed through my MSc, it became clear that there was a huge understanding of marketing technology, but a relative dearth of knowledge in how that technology related to people’s behaviour (with the exception of UX). I was fortunately able to subvert my studies to pursue a Digital Psychology agenda – and I was able to spend my final year focussing exclusively on this exciting new discipline.
I’ve always been fascinated by people – it’s the reason why I got into marketing in the first place, but I’ve always felt that digital marketing spends far too much time looking at what customers do, and not enough time trying to understand why they do it. Google Analytics is the perfect example – there’s so much data available – bounce rates, conversion rates, basket abandonment rates etc. but none of it gives you an answer to why your customers are (or aren’t!) buying your product online.
Digital Psychology (also known as web psychology) takes a different approach. It looks at online behaviour through the lens of psychology and behavioral economics – and through this lens, explains why customers are acting the way they are. Better still, by applying the lessons learnt from social science theory, we’re able to remove barriers to online conversion, and increase customer spend and retention.
The metaphor I like to use that best describes this approach is of a fisherman standing in waders in a river. The river represents technology – always changing, always moving, often so fast we struggle to keep up. The one constant in this scene is the fisherman, representing the human brain. As fast as technology may change, the human brain remains the same, and has done so for hundreds of thousands of years. If we start viewing technology through a neurological perspective, rather than trying to influence humanity from a technological perspective, we’re going to be on far firmer, and longer lasting, ground.
Q. Can you provide some good examples of companies using web psychology?
I’ve just published an article for econsultancy showing what I believe are the top ten best examples of digital psychology in action. There’s no doubt that Amazon are the clear winners – they utilise pretty much every tactic from the Digital Psychology toolkit. From classic examples of anchoring, to scarcity, reciprocity and cognitive consistency – they even take digital psychology offline, with their approach to direct mail, which is something I’ve not seen any other pure play brands doing (yet).
Another incredibly powerful website, this time utilising social proof as their main conversion trigger, is Booking.com. I counted 5 separate social proof devices on one hotel profile alone. Booking.com is currently ranked the 103rd most popular website in the world by Alexa, and has a bounce rate of just 24.8%. That to me is remarkable!
What’s also really interesting is that there are also a number of big brands that should know better, but are doing things really badly. A lot of digital psychology theory is counter intuitive – people often do the opposite of what we instinctively expect, and brands need to understand that simply following the HiPPO (Highest Paid Person’s Opinion) is a recipe for disaster.
Let me use a classic behavioural economics example to illustrate this. If you were to ask someone if there was a correlation between a roll of a dice, and their estimation of the percentage of African Countries in the UN, they would understandably tell you to stop being ridiculous. Yet, behavioural economists, Tversky and Kahneman found, all the way back in 1974, that there was a direct and replicable link between an equally unrelated event (in this case, the spinning of a rigged real of fortune device), and a subject’s response to the aforementioned question. In fact, subject’s answers varied by an average of 20%, depending on whether they scored a 10, or a 65, on the wheel of fortune.
This technique is known as anchoring – and it’s as powerful today as it was back in the 1970’s, and I have carried out numerous experiments confirming its influence in a digital setting. I have yet to prove it, but I honestly believe that even a well placed telephone number could influence a customer’s average spend per transaction. If there are any companies out there that would like to work with me to prove this hypothesis, do drop me a line!
Q. Do you see web psychology playing a role in the digital marketing mix or should it be used more as a strategic vision piece?
Digital psychology isn’t a tactic in itself – it’s a way of thinking that can be applied across the digital marketing mix (and also traditional marketing approaches) at a strategic level.
From customer acquisition, through to user experience and retention, they are using digital psychology techniques such as social proof, effort, validation and reciprocity to increase sign up, stickiness, and ultimately conversion. It’s a powerful combination, and I’ve no doubt the tool will be putting the larger MA providers to shame when it goes live next year.
The digital marketing mix, whilst encompassing a varied range of approaches, such as paid search, inbound, social, email etc. has one common theme – every tactic is aimed at influencing human behaviour (it can even be argued that as Google focuses its results more and more on UX, that the same can be said about SEO).
Why would you therefore go to all the effort and expense of building and managing your digital marketing tactics, without first trying to understand how they relate to human behaviour? It’s like I was saying before – digital marketers need to stop putting the technology first, and start understanding their customers better.
Q. You’ve recently made the move from working in-house to creating your own digital agency – what are the biggest learning curves you’ve encountered?
I’m not going to lie, it’s been challenging. The great thing about working in house is that you get to focus all your time on doing what you love. I was a digital marketer, doing digital marketing, and I was as happy as a pig in muck – but the problem was that I wasn’t being challenged.
But when you start-up you own consultancy, suddenly there’s all this other stuff that you need to do – accounting, HR, business development etc. work suddenly starts to get a lot more complicated. The flipside of this is of course that you’re doing it for yourself, and you’re learning daily, which is very exciting. I’ve also been able to focus my energies on developing digital psychology methodologies which I can use to bring value to my clients.
One of the steepest learning curves I’ve faced is learning to put a hard value on my time. When you’re client side, you tend to add value through your company indiscriminately – if someone in another department or segment needs assistance, you’re free to give it as you know it’s for the greater good of the company. When you’re working agency-side, every hour has to be logged and apportioned appropriately. It’s a very different discipline, and I’m still coming to terms with it.
Q5. What’s your thoughts on the next frontier/challenge for digital marketing?
Actually, I’ve had a lot of conversations about this recently. One of the reasons the high street has always had an advantage over digital is the ‘experiential’ side of shopping (even in this digital age, internet sales in 2013 accounted for just 9.3 per cent of the £310.8bn spent in the retail sector). People like to try on, feel, taste, and visualise products before committing to purchase. But today we’re starting to see digital confronting this challenge head on.
Any advice for a newbie learning the trade?
Get out there, and start talking to people. It’s amazing how much encouragement and advice people are willing to share if you only ask them – and this is especially true in the world of marketing.