Applying Behavioral Economics to Consumer Health
By Nicolas Pochart, Director of Consumer Innovation
It’s been 10 years since behavioral economics hit the mainstream when Nudge was first published, and one year since author Richard Thaler received the Noble Prize for his work. In their book, Richard Thaler and Cass R. Sunstein describes two systems that characterize human thinking named the ‘automatic’ and ‘reflective’ systems.
As the names suggest, the automatic system is “rapid and instinctive, and it does not involve what we usually associate with the word thinking.” Examples of the automatic system at work include: smiling upon seeing a puppy, getting nervous while experiencing air turbulence, and ducking when a ball is thrown at you.
Conversely, the Reflective System is deliberate and self-conscious. It is what people use when deciding which college to attend or where to go on trips, solving complex mathematical problems or parking in a tight space.
These two systems are more thoroughly defined in Daniel Kahneman’s book Thinking, Fast and Slow. In it, Kahneman departs from the conventionally flawed notions of decision-making previously assumed by social scientists — which states that people are generally rational, and that emotions explain most of the occasions in which people depart from rationality- to present a new theory of System 1 (automatic) and System 2 (reflective) thinking.
This theory proposes that people are not as rational as once assumed, and that emotions and feelings themselves are a form of thinking rather than their antithesis. Within a larger behavioral economics framework, which incorporates the study of psychology into the analysis of the decision-making behind an economic outcome (ie: consumers choosing one product over another), we can begin to apply this concept both from the micro (individual) and macro (societal/markets) perspective.
Current Applications within GSK Consumer Healthcare
Within GSK Consumer Healthcare Shopper Science Lab and Consumer Sensory Lab, we have implemented three main biometric research tools to better understand consumers System 1 or automatic thinking.
Eye tracking is used, for example, when we invite consumers onto a ‘shopping mission’ in the supermarket shelves of our Shopper Science Lab. Consumers wear glasses, which track where they look at during the shopping mission, and the recording is subsequently used to analyze the behavior and elicit consumers’ automatic thinking process.
Galvanic Skin Response is used, for example, when we invite consumers to interact with a concept, product, or piece of advertising in our Consumer Lab. Consumers wear a wrist bracelet, which measures the conductivity of their sweat. Biosensors determine the degree of emotional interaction with the products shown. The more sweat, the more emotions (positive or negative).
Facial expression recognition is typically used in combination with Galvanic Skin Response, to gauge both a consumer’s instantaneous reaction and their general mood.
How Behavioral Economics Can Be Further Leveraged in Healthcare
“The final common pathway for the application of nearly every advance in medicine is human behavior. No matter how effective a drug, how protective a vaccine, or how targeted a therapy may be, a clinician usually has to prescribe it, and a patient accept and use it as directed, for it to improve health” writes Mitesh S. Patel M.D., M.B.A. in the New England Journal of Medicine. “Clinicians’ and patients’ environments influence their decisions about taking these actions, and the seemingly subtle design of information and choices can have outsize effects on our behavior. When the ‘choice architecture’ is designed to influence behavior in a predictable way but without restricting choice, it is often called a ‘nudge.’”
Coined by Thaler, nudges offer a method of improving suboptimal care by addressing specific decision that drive substandard behavior. This can manifest both in subtle ways, such as setting generic drugs as the default for physicians prescribing medication to lower costs and increase prescribing rates for generics, to more complex decision paths such as transforming opt-in systems into opt-out systems to increase referral rates for those requiring rehabilitation following medical emergencies.
The key to creating effective nudges, according to Charles Duhigg, author of ‘The Power of Habit: Why We Do What We Do in Life and Business,’ is to create a habit loop, defined as a three-step process that determine our brains function and react to circumstances or emotions without conscious thought. In other words, habit loops operate on automatic systems, and can largely influence the outcomes of seemingly conscientious and calculated decision making.
“Our habit loop is a significant part of our being human. Because of it, our brains can save energy when we do our routine works. We don’t have to pay much attention when we brush our teeth, take a shower, lift our spoon or sit on the chair” writes Kunvuth MonyKanchna in Khmer Times.
The three step process that forms a habit loop — cue, routine and reward — are deceptively simple to design in theory, but difficult to achieve in practice. What generally undermines intervention attempts are the concepts of loss aversion, the tendency to be more sensitive to the possibility of loss over the prospect of gain, and present bias, which leads people to consider their immediate costs and benefits over their equally (or perhaps even more important) future circumstances.
To effectively design for behavioral modification, Duhigg explains that the change of routine should equal or exceed the level of satisfaction as the original habit. Moreover, providing a sense of immediate reward serves to reinforce positive behaviors, and avoiding decision fatigue — categorized by offering too many options to the point where people end up making poor decisions — helps to clarify the optimal decision path. When offered a path of least resistance, the mind can steadily rely on system 1 thinking, helping to solidify habits at the subconscious level.
Current examples of behavioral economics issues being tackled in healthcare include correcting medical non-adherence, reducing missed appointments, promoting weight loss and smoking cessation, increasing the rate of organ donation, decreasing the rate of nurse practitioner burnout and so forth.
Creating environments that consider behavioral economics in healthcare innovation discussions are the key to achieving incremental behavioral shifts that will ultimately serve to achieve the Triple Aim at the societal level. This can be achieved by introducing cross-functional behavioral design teams to identify opportunities for improving clinical care and consumer health, creating reward programs, validating hypothesis via test groups and getting a better read on the cultural contexts of markets via ethnographic research.
If you would like to explore opportunities for collaboration with GSK’s innovation team to push the envelope in behavioral economics research within the consumer healthcare space, please follow the link the below to send us a message: