Hill+Knowlton Strategies

MINDSPACE (Dolan et al., 2010)

+  +  +         #2  Incentives         +  +  +

Incentives can be a powerful tool in harnessing the power of the public – engaging people and motivating behaviour change. The impact of incentives clearly depends upon factors such as type, magnitude and timing of the incentive. In a competitive economic environment brands are increasingly using incentives to attract consumers and stand out from the competition.

The power of incentive

Brands in the service industry – such as high-street banks, mobile phone network providers – are using incentives and rewards to become more attractive to consumers. However, the behavioural economic insight loss aversion is important in order to understand how best to use incentives in marketing. Loss aversion is used to explain that we dislike losses more than we like gains of the equivalent amount. What this means, for example, is human beings feel the loss of losing  £1 more than we feel the elation of being given £1. Therefore, brands that emphasise the money (or reward) that people will lose out on by not taking an action/purchasing can have a more powerful impact and motivation on people’s behaviour, rather than simply highlighting the amount they could be given if purchasing.

Brands in the fast-moving consumer goods industry consistently have to compete for consumer’s attention. Unilever’s Magnum icecream is an example of a brand currently (April 2013) using incentives as a marketing strategy to drive sales and engage consumers. The incentive Magnum is giving consumers is the chance to win a designer handbag worth £800 every day. However, now understanding loss aversion, if Magnum had framed the incentive in a way that consumers feel that they are losing out if they do not purchase, then this could have a more powerful impact on people’s behaviour to drive sales. Although, the type and magnitude of the incentive of a £800 handbag could be significant enough in itself to demand attention from some consumers. Furthermore, people have a habit of over-weighing small probabilities – for example lotteries – and so consumers may over-weigh the small chance of winning the handbag.

Magnum - win a designer handbag everyday

Another example of using incentives to engage a community is ConAgra Foods. In order to increase engagement on it’s Healthy Choice Facebook Page, users who “liked” the brand received a coupon for 75 cents off their next Healthy Choice purchase. ConAgra then coaxed more consumers to join its Facebook page by dangling a “buy one, get one free” coupon offer. In other words, the coupon’s value grew as more consumers joined the page.

However, a fundamental problem with using incentives, is that once an activity (such as buying a Magnum) is associated with external reward (chance to win a handbag), then individuals are less inclined to participate with the activity in the future without further incentives. Furthermore, and worst still, is if a brand fails to deliver on a reward/incentive – an example would be Red Bull’s VIP trip of a lifetime to the Belgium Grand Prix Competition. Red Bull was censured and criticised by the Advertising Standards Authority (ASA) in February 2013 after sending competition winners on a budget trip across three countries, making them share a bed and then sending them home early after they were barred from entering the race’s VIP enclosure.

Incentives - influencing behaviour and engaging consumers

In summary, incentives can be a useful tool to engage people’s behaviour – and the impact of the incentive depends upon type, magnitude and timing. People have a habit of over-weighing small probabilities, meaning competitions can be effective. Losses loom larger than gains, and so framing incentives to consumers in such a way that they feel the loss if they don’t participate can be a powerful communication and marketing tool. However, if brands become associated with external reward/incentive then consumers can be less inclined to participate in the future without these external rewards/incentives.

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This is the first in a series of nine blog posts which takes inspiration from a Cabinet Office commissioned report entitled MINDSPACE. The report sets out nine of the most robust (non-coercive) influences on our behaviour, which is captured in the simple mnemonic MINDSPACE:

MINDSPACE (Dolan et al., 2010)

The vast majority of government public policy aims to change or shape behaviour – changing or shaping behaviour and inspiring or engaging people is often a perquisite of many of the work we do for clients at H+K. “Hard” instruments such as legislation or regulation is the most effective way for policy-makers to compel us to act in certain ways. However, these instruments are not readily available, of course, to PR professionals aiming to change people’s behaviour and attitudes towards detergents, gin, football boots and the like – “hard” approaches are not appropriate. Policy-makers are increasingly turning to less coercive measures, such as incentives and sophisticated communications techniques, to change and shape behaviour. These less coercive approaches, summarised by MINDSPACE, are directly applicable to the work we do in marketing, advertising and communications. My series of posts in the coming months will work through each of the influences outlined in the MINDSPACE framework, giving examples and explaining how the framework is applicable to our industry.

+  +  +         #1  Messenger         +  +  +

The way we respond to information depends greatly on the reactions we have to the source of that information.We are heavily influenced by who communicates information. Whatever our considered judgment about the value of a message, we automatically give it more or less weight according to the messenger. For example, we are often swayed by authority that has associations of expertise: public trust in expert public sector workers like doctors and teachers is much higher than for politicians.

Brands understand the importance of ‘the messenger’ with regard to influencing consumer choices and driving sales. Celebrity brand ambassadors are effective marketing techniques, because who communicates determines the consumer response and engagement to brand messages. Marketing spends are increasing in budget for the celebrity brand ambassador - PepsiCo struck a $50 million deal with Beyonce to be Pepsi’s brand ambassador.

Beyonce - Pepsi Brand Ambassador

Of course there are plenty of notable examples in UK/global brand marketing campaigns, and include Walkers veteran Gary Linekar, Marc Jacobs and Taylor Swift for Diet Coke, and Blackberry and Alicia Keys. However, sometimes brands can get it wrong – Alexander ‘Hooray Henry’ Armstrong was dropped in 2009 after 7 years as Pimms brand ambassador, reportedly for being ‘too posh’.

Brad Pitt - Chanel No. 5

In order to quantify and qualify the use of celebrities in marketing campaigns it is important to evaluate their awareness, appeal, and relevance to a brand’s image and the celebrity’s influence on consumer buying behaviour. Advertisers are using celebrities for voice overs, and public relations + communications agencies understand the importance of influential celebrities to engage and shape behaviour. Harnessing the power of celebrities social media platforms can be a very powerful marketing tool. We saw that this week at H+K in which Ricky Gervais and Stephen Fry’s Twitter accounts generated a huge amount of consumer engagement with a hashtag campaign for our client Aviva.

Post your comments below on which celebrity brand ambassadors you think are the good, the bad and the ugly!

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Hello – I’m really pleased to be a contributor for the H+KStrategies UK London Blog. My name is Andrew, and I have recently started at H+K on the graduate scheme. I will write a couple of blog entries about the graduate scheme – students and those starting a career who want the best start to the PR + Communications industry watch this space!

The majority of my posts however will be on behavioural economics. Behavioural economics is delivering very interesting insights and is something I find exciting and topical. As means of an introduction, behavioural economics is somewhat an umbrella term for a range of approaches that seeks to understand and explain the effects social, cognitive and emotional factors have in influencing the choices and (economic) decisions of individuals and institutions.

Behavioural Economics - an umbrella term

Why I find behavioural economics so interesting, and why it is so popular across the advertising, marketing and PR service industry, is that it provides the framework and insights to better understand people and the way people behave. Therefore behavioural economics can be an incredibly useful tool because it can assist in better understanding the ‘public’ and provide the structure in which to devise the most effective strategies to shape and influence conversations.

There are various ways in which social, cognitive and emotional factors influence choices and decisions – such as loss aversion, framing, status quo bias or simply not putting in the mental effort to make the right decision!  Check back here for my blogs, which are going to give a range of examples to show how these different factors and behaviours influence choices and (economic) decisions.

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The British American Business’s http://www.babinc.org/ recent event, ‘Fixing Britain-the Business of Reshaping our Nation in 2012’, featured keynote speaker Lord Digby Jones, who over the course of the morning took some time to share the key points from his new book Fixing Britain  http://www.digbylordjones.com/fixing-britain.html

 After listening to months of news focusing on nothing but the doom and gloom of our struggling economy, it was refreshing to hear someone confidently speak about and celebrate the good qualities of UK businesses. In Digby Jones’s view London is one of the most attractive international financial centres, especially considering its political, financial and legal stability. We are also the 6th biggest manufacturing economy and home to one of the world’s most productive car plants – in Sunderland, managed by Nissan. The second biggest pharmaceutical company in the world, GSK, is also proudly British. For every Airbus which circumnavigates the globe, half of its parts including the Rolls Royce engine are made in….you guessed it, Britain!

Confidence tricks never go out of fashion and Digby Jones showed how displaying confidence can be a truly valuable commodity, which certainly helps to sell a new book or bargain for Britain at the trading table. He also answered a few questions on the state of the European economy relative to Asia’s and highlighted that Britain needs to better foster Asian trading relationships in order to remain competitive and harness our strengths. Warren Buffett once claimed, “when the tide goes out it shows the wrecks at the bottom of the sea” and in Britain’s case we are still fixing the social, political and corporate ‘wrecks’ which the recession has left us with.

Digby’s new book gives us some good reasons to celebrate what we are good at in Britain. In order to reshape our nation we can start by supporting British businesses, develop stronger trading relationships and use events like the Olympics and the Queen’s Jubilee to inject some much needs confidence into the economy.

Launching the world’s first snore absorption room; creating the world’s biggest shave; reinterpreting art with technology; revealing the best place in the UK to bring up a family… As 2011 draws to a close, we take a look back month by month at some H+K Strategies campaigns and work throughout the year.

January: City & Guilds Million Extra

You're hired: Karren Brady+ City & Guilds' Chris Jones

To start the new year, preparations to launch City & Guilds first ever Apprenticeship Summit went underway early on. The aim of the campaign was to help ensure one million Apprenticeship starts by summer 2013.

In January, we commissioned a report to identify the barriers employers face in hiring apprentices with the findings discussed by key political and business leaders at the Summit, hosted by Apprentice star Karren Brady.

Nearly 100 pieces of coverage resulted from this campaign as well as a request from Professor Alison Wolf to receive a copy of the full report after seeing the articles to include in her Government review of 14-19 education.

February: Intel Remastered

Shortlisted for various industry awards, our Technology team created an exciting art campaign- Intel Remastered to showcase the creative application of Intel technology. The project saw 13 modern artists reinterpret iconic masterpieces using digital technology and techniques.

Pushing the boundaries of art and creating one of the most talked about art events on the year, the stories and inspiration behind classics such as Picasso’s ‘Guernica’ and Da Vinci’s ‘The Last Supper’ were retold and presented to a digital-savvy audience.

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Following this afternoon’s Budget, H&K’s head of Financial & Professional Services, Ben Curson, provides his initial thoughts on what today’s announcements will mean for businesses, big and small.

Ben Curson - Head of Financial & Professional Services

“Making things happen…not making things up”. So said George Osborne in a business friendly budget delivered from Parliament today. Well, we’ll see about that in the fullness of time but it seemed clear to me on first listening that the Chancellor was pitching particularly to small business and entrepreneurs. He proposed a range of tax simplification measures, tax breaks and additional enterprise zones to encourage starting and growing businesses. Should this initiate a surge in enterprise and economic growth, the Chancellor will have every reason to trumpet his success as a man doing everything he can (with very little room for giveaways) to stimulate the economy.

Not everyone will be pleased of course, especially not the banks. One can’t help but feel they will be slightly irritated by the fact the bank levy will be increased despite an understanding that their tax treatment would remain stable in return for  increased lending to small business – 15% according to the Chancellor today and detailed on page 76 of the Budget docs.

George Osborne - "A Budget for making things, not making things up"

The other big business losers in tax terms are the oil companies, who will pay a lot more in tax in order to fund the cut in fuel duty – perhaps the ‘rabbit out of the hat’ moment in today’s announcement, and something that it seems the Opposition weren’t really expecting judging by Ed Milliband’s immediate response.

What else? Personally, I’m very pleased to see an open acknowledgment that Britain has been dropping down the league in terms of competitiveness (4^th to 12^th according to the Chancellor), and that the Government is doing something to address educating and upskilling the workforce. There appear to be specific steps to make Britain a more viable, cost effective place to do business in an increasingly global marketplace to attract business from overseas, which as Britain comes to terms with its place in the new world order is absolutely fundamental.

I do believe simplifying and incentivizing business rather than just cutting spending is the way that Britain will recover from the financial crisis of the last few years. I was enormously reassured therefore, as you would expect in my position, that there was a clear intent for the “City of London to stay a leader in financial services”. For their part, the markets have seemed largely unmoved by the Chancellor’s proposals, though bank shares have dropped slightly as you’d expect from the bank levy announcement

While the devil is always in the detail and many of our clients will be analyzing the budget book in-depth on behalf of their own business and their clients’, it seems the Chancellor made a very pro-business speech. Whether the consumer will feel as positive as they become increasingly squeezed by rising inflation and commodity prices will remain to be seen, especially in the forthcoming elections in May. I suspect not.

The power of Four in traditional business...

Investment bank UBS turned the spotlight onto supermarkets this week with a report claiming food inflation is higher in the UK than anywhere else in the OECD. The report inferred this was the result of the ‘Big Four’ supermarkets (Tesco, Asda, Sainsbury’s & Morrisons) using their market dominance to inflate prices above the actual increases stemming from food inflation.

By contrast, in other European markets where the food market is more segmented, prices haven’t risen as fast – strong stuff, which led to a swift response from trade body the British Retail Consortium, as well as a wealth of media comment.

This issue got me thinking though, for it’s not only in the supermarket sector where four big players hold sway in the UK. Accountancy is dominated by a Big Four (Deloitte, PwC, KPMG & Ernst & Young) and so is mobile telecoms (Vodafone, O2, Orange and T-Mobile, now joined commercially as ‘Everything Everywhere’).

High street banking was similarly controlled by Four (Barclays, HSBC, Lloyd’s and RBS) until Santander went on its recent spending spree. Four then, seems a very powerful number in the business world, even if the positive impact of it on consumers remains up for debate.

But what about the power of Four on the internet?

As my Issues & Crisis colleague Duncan Gallagher pointed out yesterday, the evidence for the power of Four on the internet seems scant to non-existent. Instead, it increasingly seems to be the power of One.

...versus the power of One on the internet

Look at the big internet success stories – Google, Amazon, eBay, Facebook, Twitter. Yes, some of them have competitors but they have much smaller market shares and/or offer a more limited suite of products.

Governments historically tend to get quite nervous about monopolies developing in traditional offline sectors and so do consumers. Curiously though, there doesn’t appear to be a similar feeling about these dominant online brands yet. Nor have there been sustained questions about whether the power of the digital One is good for consumers.

Will this change?

Maybe, although who exactly would initiate a monopoly ruling on a transnational, digital company is unclear. There is one other question though.

Last week we blogged about a possible bubble forming amongst social media and online companies as investors queued up and valuations soared. So here goes – if you were an investor considering a stake in one of these companies, how much risk would you attribute to a potential monopoly investigation and would that affect your decision to take the plunge?

The answer of course, is no, it didn’t, although some mainstream commentators are getting a little excited about it. There’s no doubt that new media and digital channels like Twitter and Facebook certainly played an incredibly influential role in the events in Tunisia and in the downfall of President Mubarak, but a little perspective is probably needed.  

Social media is invaluable as it offers a new spectrum of platforms, or channels, for communication with either local, regional or global networks. Not easily shut down and offering immediacy transparency and exchanges of information, it allows an easy flow of information, both good and bad.

Charlie Beckett, Director of the POLIS think tank at the LSE offers some words of wisdom on the subject here. He argues that when looking at the Middle East, social media could actually now be a really useful indicator, or even predictor, of political change. He also rejects the causal link arguing real important pre-conditions for any revolution will always be socio-economic.  

Mr Twitter himself, Biz Stone, also argues that social media plays a supporting role but not a starring one. “How a revolution comes to be is a mystery to me. It’s important to credit the brave people that take chances to stand up to regimes. They’re the star. What I like to think of services like Twitter and other services is that it’s a kind of supporting role.”

As I write this piece, Colonel Gaddafi is now refusing to stand down in a defiant speech being shown live on Libyan state television (shown in UK thanks to the BBC!).  So let the social networks in Tripoli play their role – but just please don’t call your next born ‘Facebook’.

Hello All! Welcome to another edition of the Financial and Professional Services team’s Friday Fiver. Big thanks this week to Linzi Goldthorpe, Karen Butcher, Chris Pratt and Jonathan Henderson.

Joanna gears up again…Monday saw the Bar Council and Law Society launch their campaign against government cuts to legal aid. The lobbyist group Sound off for Justice, which is championed by actress and rights activist Joanna Lumley, aims to put pressure on the government to reconsider the cuts which were unveiled in November of last year.

Guess who's back for round two?

Currently the UK provides free legal advice for those people fighting civil cases that don’t have sufficient funds to cover legal costs. The Ministry of Justice plans to cut the £2.1bn legal aid bill by £350m within four years, reducing the number of people of people able to seek help by up to 500,000.

So far the propositions have been dubbed ‘brutal’ and ‘devasting’ by the legal community who are calling for the plans to be scrapped. Enter Joanna to weave her magic again…

Bribery is still bribery…Some of us attended the British American Business’s Law Forum UK Bribery Act event this week. Given the new date for the guidelines on the Act are yet to be confirmed the seminar focussed on what businesses need to  be thinking about before implementation comes into force.

The focus was very much on laying minds at rest following the confusion around the Act’s implementation. Two messages were clearly played out through the seminar:

1. Facilitation payments always have and always will be a crime. The Bribery Act isn’t changing that.

Care is still needed when choosing a hotel for business guests

2. The reaction to the Act’s hospitality element has been blown well out of proportion. Sensible and proportionate expenditure remains lawful but flying a potential new business partner halfway around the world with their family and putting them in a deluxe hotel is not.

Confusion remains on events such as the Olympics though – the clock is ticking on this one, so watch this space.

Confused about petrol…This week we received an email from price comparison site confused.com about their partnership with The Sun for their new ‘Do Your Duty’ campaign. It seems to have won a lot of support from readers of the paper and has been well shared on Confused.com’s website. This week’s inflation figures can only have heightened support for it as well.

The campaign looks like a no-brainer for Confused.com then doesn’t it? We do wonder though if it doesn’t look somewhat self-serving for organisations if they choose an issue that isn’t well-aligned with their business. We’ve been running a successful campaign for Hymans Robertson on pension reform recently. But then being pension consultants they can lead that debate and offer well-respected opinions – the risk of falling short in the credibility stakes is low.

Well done to confused.com for showing the nerve to embrace an issue though. Not all organisations are willing to do so, but we hope they build on this position and develop their credentials as an organisation that represents consumers interests in keeping prices low, including insurance prices.

Goodbye Western investment returns…Barely a day goes past without reports of the fundamental shift in global wealth and productivity from the developed to the developing world.

This week the London Business School weighed in. Their new report indicated that the equity risk premium (the additional return generated by investing rather than taking a risk-free option such as cash) is set to fall in developed markets. They believe that investors can expect a future return of around 3 to 3.5% from equities in the developed world, the lowest rate in 110 years, down on the historic average of 4.5%.

The report comes as Barclays Capital predicted foreign investors can however expect annual returns of 10.5% from developing economies. The findings are likely to have significant repercussions for where western pension funds invest their money as younger generations search for returns further afield than the western blue chips that have traditionally been a staple of pension portfolios.

Money Saving ‘Expert’…Martin Lewis and his website have been a big success in recent years, by offering a new approach to personal finance. Lewis has binned the jargon and offers simple rules of thumb on saving and investing. Now however, there are questions being asked about his credentials following a slip-up on ITV’s Daybreak show this week.

An expert yes, but a qualified one?

The whole issue of financial advice is under the spotlight at the moment thanks to something called the ‘Retail Distribution Review’. This proposes to change the way financial advisers earn their keep – from taking commission on selling products, to billing clients (people like us) for their time. As the ever excellent Anthony Hilton pointed out recently though, this could put advisers out of the financial reach of most people.

That means the majority will have to turn to Mr Lewis and others like him for their money advice. The first test on the horizon in this brave new world? Explaining to 7m workers why their pay checks are suddenly 4% lighter following the start of auto-enrolment in 2012. Good luck guys…

This is actually Daisy Sheppard under the guise of Jonathan, many thanks this week for our contributor’s Me, Dave Chambers, Ross Gillam, Ed Jones & Nick Woods…

This week there was the unsurprising announcement that top Uni’s intend to charge top fees, interest rates are STILL at 0.5%, Osborne’s Project Merlin, the return of RBS Six Nations & H&K were trending with their digital insights at #SMWLDN. 

The stakes were raised… It came as no surprise this week that Cambridge University will be charging students the maximum tuition fees of £9k a year. Viewing higher fees as a measure of academic excellence is already the norm in the US and in the UK public school system and it was this position that Cambridge took in defence of its plans arguing anything less than the maximum would be ‘fiscally irresponsible.’

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