Wednesday, April 27, 2011

Empowering consumers using behavioural insights

The Behavioural Insights Team located in the British Cabinet Office has released its latest strategy document (pdf here). It argues for the use of insights from behavioural psychology to empower consumers and help them make more informed and effective choices. It is hoped that this will in turn encourage competitive businesses, improve overall economic efficiency and thereby long term economic growth. As the report says, "A better deal for consumers and the economy means a better deal all round."

Its earlier report which advocated the use of insights from behavioural economics to address health care issues is discussed here. Its two-fold objectives are defined as

"1. To put consumers in charge so that they are better able to get the best deals for themselves individually and collectively as well as looking at ways to empower the most vulnerable who may not otherwise benefit from these exciting developments.
2. To contribute to our broader growth agenda, supporting a strong private sector recovery and helping to raise underlying long-term growth rates."

The strategies and initiatives proposed include,

"1. A radical new programme of work – 'mydata' – which will enable consumers to access, control and use data currently held about them by businesses;
2. A range of new ways of ensuring that consumers are given richer, more relevant information about the goods and services they buy (including clearer information on Credit Card Statements);
3. A drive to encourage collective purchasing and collaborative consumption, which enable people to come together to buy or use goods;
4. The development of a self-regulatory quality mark for web and comparison sites, and the publication by Government of complaints and performance data held about businesses"

The Better Choices : Better Deals program seeks to put power into the hands of consumers so that they can choose optimally between suppliers and in the process incentivize businesses to be more efficient and innovative. In order to achieve this, it seeks to leverage three recent trends,

"1. The increasing role of new technologies, in particular internet and mobile phone applications, that have opened up new channels for consumers to find, compare, and purchase goods and services.
2. The use of data, drawn from customers’ own transaction histories, that have allowed businesses to understand their customers better, allowing them to make more tailored recommendations.
3. The development of new ways for different consumers to collaborate across the economy – for example whether by sharing cars or bicycles, or giving feedback about a GP practice, a local tradesman or a multinational corporation."

The centerpiece of the campaign is the "mydata" program undertaken by the government in partnership with consumer groups and leading businesses to give consumers more control and access to their personal transactions data in a way that is portable and safe. This will enable them to "take advantage of the growing number of applications which can use this data to find them a better deal, or tell them interesting things about their spending habits".

The Better Choices : Better Deals campaign also proposes to go beyond the conventional regulations driven approach to protect and benefit consumers. This would include working in partnership with businesses and voluntary associations to build norms of social responsibility and consumer satisfaction. The program will appeal to businesses to reduce their carbon footprint, improve skills and create jobs, support the local community, and improve the quality and well-being of their consumers.

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