I, Robot…how to create digital - The Financial Services ... · having trust in the financial industry compared to 54% in US and Hong Kong • Trust is fundamental to the financial

January 2017 Copyright © 2017 Decision Technology 1

I, Robot…how to create digital platforms that consumers want to use


Agenda

1. The Future is Digital

2. Digital is Trustworthy

3. Digital is Tabloid

4. Digital is Malleable

5. Q&A


1. The Future is Digital


Dectech specialises in helping businesses understand and manage consumer decision-making

Example Clients

• Independent: Founded in 2002 at the University of Warwick, we are now entirely staff-owned and based in central London

• Innovative: Nick Chater is a Professor of Behavioural Science at WBS and advises on the latest behavioural research

• Commercial: Henry Stott has over 25 years of commercial experience and prior to Dectech was a Director of Oliver Wyman

• Quantitative: We specialise in quantitative methods, with large sample sizes to tackle commercial problems

Decision Technology


The migration to online is inevitable, how can behavioural psychology help the industry adapt?

Digital is Trustworthy

How can firms use digital tools to increase trust and truthfulness?

Digital is Tabloid

How can simplicity of online platforms improve customer decision making?

Digital is Malleable

How can choice architecture increase website sales?

• Since 1989, Britain has lost 53% of it’s bank branches, with more than 600 closing in the last year alone (Apr ‘15 – Apr ’16)

• In 2011 there were 478m “customer interactions” in Britain’s bank branches. Last year it was less than 280m

• Meanwhile, online alternative finance market within the UK grew 83% (£3.2 billion) in 2015



Background Case study


The financial crisis has severely damaged the reputation of the banking sector

Source: Dectech (2015), Decision Technology Brand Personality Survey 2015, http://www.dectech.co.uk/brand2015/brand_personality_2015.pdf; http://www.edelman.com/insights/intellectual-property/2016-edelman-trust-barometer/state-of-trust/trust-in-financial-services-trust-rebound/

• Financial services and banks are consistently found to be one of the least trusted industries

• Only 41% of consumers in the UK report having trust in the financial industry compared to 54% in US and Hong Kong

• Trust is fundamental to the financial industry, as almost any consumer interaction is dependant on it

30 40 50 60

Political Parties

Utilities

Banks

Airlines

Insurers

Media

Telecoms

FMCG

Retailers

Car Makers

Technology

Supermarkets

Industry trust scores


For trust to occur, at least one of the following three conditions within the ABC trust framework must be satisfied

Source; Dectech (2015). Mind the Gap: restoring trust in UK financial services. Financial Services Compensation Scheme, White Paper https://www.fscs.org.uk/globalassets/press-releases/20151111-fscs-trust-white-paper-final.pdf

Trust Framework

Alignment

Competence

Benevolence

Is it in X’s interest to

provide the things that I

want or need?

Are X able to consistently

deliver what I want and

what they promise?

Do I believe that X will do

things for me even if not

in its own direct interest?

How can X credibly

commit to always act in

my best interest?

How can X demonstrate

competence, capability

and consistency?

What can X say or do to

build a reputation for

altruistic behaviour?


The move into the digital space could actually help with trust

How many people reported that they saved regularly?

29%

14%

• Traditional face-to face interaction is burdened with peer effects and social desirability

• However, studies using self administered methods tend to obtain more honest answers

• Being online can potentially increase trust: as people can be more truthful and trusting in these interactions

Lind, L. H., et al. (2013). Why do survey respondents disclose more when computers ask the questions?. Public opinion quarterly, 77(4), 888-935.

People are less likely to be honest about saving in F2F interaction





Our work for TAL discovered numerous ways in which we can improve honesty in the online space

• TAL is the market leading life insurance company in Australia, with 4 million customers over $3bn in revenue

• Managing people’s honesty during a new online life policy underwriting process was a key concern for TAL

• Since the research TAL has continued to expand, with a growth of 10% from 2015 to 2016


Summarised under three key axes, we generated ideas on how findings from the literature can be applied digitally

Reciprocation People will behave in a more trustworthy

way if you have exhibited trust or persuaded them that you trust them

Honesty Priming People will be more honest if you can

remind them of the desirability of honesty or their own prior honest behaviour

Self-Consistency When people see themselves behave in a given way, they tend to prefer to continue

to behaviour that way in future

Source: Shu, L. L., Mazar, N., Gino, F., Ariely, D., & Bazerman, M. H. (2012). Signing at the beginning makes ethics salient and decreases dishonest self-reports in comparison to signing at the end. Proceedings of the National Academy of Sciences of the United States of America, 109, 15197-15200.

Signature location

23,670

26,098

Bottom Top

Signing at the top led to a 10.25% increase in

mileage reporting for a car insurance company


The ideas generated were implemented on a new digital online underwriting platform to drive growth and sales

Use of positive imagery to encourage truthfulness

Disclosure appears before the customer answers any questions about themselves

Personal medical questions appear at the very end after inoffensive ones to encourage self consistency





The financial industry is stacked with choice and complexity, but is this what consumers want?

• The amount of choice available to consumers within the financial industry, especially online, is staggering

• The common belief is that consumers want more and more choice, but behavioural science tells us otherwise…


When faced with complexity we can make mistakes or disengage from the decision-making process

Source: DecTech (2010). Consumer Decision-Making in Retail Investment Services: A Behavioural Economics Perspective, Final Report

• People are more inclined to choose a simpler product even though it may not always be optimal

• Given the option to invest in two funds, people are much more likely to optimally invest their money if funds are simple

• This can also be seen when funds have explanatory advice and pre-calculation showing a distinct aversion to complexity

14.6%

7.3%

3.9%

0

2

4

6

8

10

12

14

16

Simple Pre-calculated Advisory

Incr

ea

se in

op

tim

al

ass

et

allo

cati

on

(%)

Simple fund: Dow Jones / no fees Complex fund: Dow Jones / guarantee min return / with costs


Less choice can also lead to greater loyalty for products

Chernev, A. (2003). The role of ideal point availability and assortment in consumer choice. Journal of Consumer Research, 30, 170-183.

• Having a lot of options can lead to confused decision making and people are more prone to changing their mind

• People tend to stick with their original choice if they have less to choose from in the first place

• Offering less can lead to more focused decision making and increase the chance that customers stay loyal

How many people stayed with their original chocolate choice?

91%

62%

4 options

16 options





This consumer need for simplicity was a primary focus in our research on British Gas’ HomeCare range

HomeCare before re-launch

• Dectech were asked by BG to enhance the online purchase journey in order to meet changing customer demand

• The existing offer, whilst ultimately 4 products, had in fact 126 different product configurations

• This needed a robust online experiment and a large sample size to test a variety of different propositions


Using randomised controlled trials, we tested a range of different portfolios against the current offer

• A bespoke online sales journey simulation was created mimicking the existing BG website

• Each consumer was randomly allocated to one of 25 conditions, followed-up with purchase likelihood questions

• Portfolios tested ranged from limited choice to build-your-own and included variations to pricing, excess, extras etc.

Slide 20


The relaunch of Simply HomeCare more than doubled the 5% online sales conversion target

• Online conversion rates improved by 12% due to the simplified product range and optimized online sales journey

• The Net Promoter Score for the online sales journey has also improved from +9 to +24 since the re-launch

• Our successful research also won the MRS award for Financial Services Research

Dramatically simplified to

8 options

Previously offering

126

Product options

Condensed product options

???





Which square is lighter, A or B?

http://upload.wikimedia.org/wikipedia/commons/6/60/Grey_square_optical_illusion.PNG


People’s preferences are not always stable, but rather framed by the context effects around them

• Human preference is incredibly malleable, even slight changes in context can influence behaviour

• People tend to have a preference for the ‘default’ options that are presented to them – status quo bias

Source: Knetsch, J. L. (1989). The endowment effect and evidence of non-reversible indifference curves. American Economic Review, 79, 1277-1284.

11%

10%

Given a straight choice 56% would take the mug

gave up mug for chocolate bar

gave up chocolate bar for mug


Consumers can rely too heavily on information that is given to them when making a decision

• People use potentially unrelated info as anchors or reference points which can wildly sway the decisions they make

• This is no different online, and the way in which information is presented is vital to the choices consumers make

Source: Stewart, N. (2009). The cost of anchoring on credit card minimum payments. Psychological Science, 20(1), 39-41.

Credit card payments

£0-100

£0-100

£100-200

£100-200

£200-300

£200-300

£300+

£300+

0%

20%

40%

60%

80%

100%

Min Payment

Included

Min Payment

Omitted

People pay less on their credit card when given the minimum payment





We were asked by LBG to help understand consumer behaviour across home insurance direct channels

• Historically strong in selling home insurance via it’s branch network, sales in this channel were showing a year-on year decline

• LBG were looking to grow their market share and compete more effectively in direct channels like online and aggregators

• Two behavioural experiments were created to explore customer journeys in both the aggregator and .co.uk space


Comparison is everything within aggregators, and further optimisation in the .co.uk journey can increase satisfaction

This Page Intentionally Blank


Once on the direct site, a transparent customer journey is key to improving satisfaction and sales

Clear breakdown of features which

are easy to add/remove

Price recalculation when different options selected

Easy comparison across two levels of cover

Additional help pages offered for each element of cover

Option to change from monthly to

annual pricing

Property details pre-filled from aggregator


5. Q&A


Digital is an intrinsically different channel and represents an opportunity to increase customer engagement

Digital is Trustworthy

Digital is Tabloid

Digital is Malleable

• Use honesty to improve tailoring • Deliver 100% reliability (or else!)

• Obsessively simplify each customer journey • Sell and cross-sell later. Don’t bundle

• Facilitate flattering price comparisons • Communicate quality with framing

Insight Engagement Opportunity

The Medium is the Message

Source: McLuhan, M. (1964). Understanding media: The extensions of man. New York: McGraw-Hill


Thank you

Henry Stott

[email protected]

Nick Chater

[email protected]

Decision Technology Limited

Dilke House, 1 Malet Street

London, WC1E 7JN

www.dectech.co.uk

[email protected]

http://www.dectech.co.uk/

Documents

I, Robot…how to create digital - The Financial Services ... · having trust in the financial industry compared to 54% in US and Hong Kong • Trust is fundamental to the financial