What Digital Marketers can Learn from Behavioral Economic Research in the Developing World

Digital marketing analytics and data collection present a great opportunity for modern marketers. We can answer just about every question about human behavior in our online environment – where you acquired them from, how they use your site, when they’ve visited, etcetera. But even with all of this data, determining why someone did something is still an educated assumption at best.

Luckily there’s a wealth of research and data at marketers’ disposal that they can employ to complement their digital data, and create a more complete customer persona. Behavioral economics, in particular, offers a unique resource for marketers who want to take their targeting strategies to the next level .

Behavioral Economics

Behavioral economics is a fascinating field because it focuses on two aspects: What the sensible, prudent choice would be in a financial situation; and what people actually do instead. A nonprofit organization pioneering research in this field is Innovations for PovertyAction (IPA). Hearing that example, you’re probably thinking “What on earth does research on financial behavior in the developing world have to do with digital marketing in a first world country?”

The answer is that people are equally as bad with money and irrational about their spending habits in the first world as the developing world. And on the other side of the coin, sometimes the best choice for an individual is not always what a company might imagine.

Translating Third-World Crop Insurance into Conversions

Take this study for example, which offered farmers in Kenya three options for buying fertilizer: A standard offer; a discounted offer where the price was reduced 30%; and a “harvest deduction offer,” where farmers would pay full-price, but a significant portion of was paid after harvest. 72% of respondents chose the third, Harvest Deduction offer.

Now here’s the dreaded question: why? The researchers posited two ideas.

1.     The farmers have a present bias, meaning they give more weight to costs closer to the present time, and don’t feel the loss as much when considering a further future payment;

2.     Farmers did not have enough lump sum capital to make the full purchase at the outset without selling crops, even with a 30% discount.

So how does selling agricultural insurance in Kenya relate to selling products online? Take, for example, a segment of customers who have been buying from your site for a long period of time, but their purchases are less frequent compared to other customers, and they also spend less money per order. This segment also tends to make wish lists if your site has that feature, or they put items in their cart and leave them there for long periods of time without ever even beginning the checkout funnel. Just like the farmers, they know they want to buy from you, but they also know when it is prudent for them to actually finalize the purchase.

This is valuable information. Now you can send them discounts via email to speed up and encourage the purchase process; you can launch a CPI remarketing ad campaign targeting this segment to keep ad costs low and conversions high; and if you notice a segment like this comprising a large swatch of your customer base, you may want to consider introducing payment plan options like the researchers did in Kenya. This would make the customer buy earlier, possibly buy more frequently, and greatly increase their lifetime value.

Lessons in Direct Marketing from Ghana

Another IPA study in Ghana tested whether text message reminders straight to peoples’ cell phones increased their rate of completion for malaria treatment. The results are significant, but not staggering. There was a 5% increase in completion in the treatment group. Two different messages were used – a short one, and longer one with an additional warning – and there was no statistically significant difference between the two.

However, the short text message reminder more than doubled the completion rates amongst women, yet had no significant effect on completion rates amongst men. It’s also worth noting that participants who attended private clinics had a 14% increase in completion compared to participants who attended public hospitals and the control group.

Again, how does this relate to digital marketing? Simply put, it reinforces that profiling is not only ok in the marketing world, but it has more value than marketers may even give it credit for. Granted there is more research needed and every industry is different, but taking medication for a sickness you want to get rid of is a pretty convincing control.

According to this research, a direct marketing message reminding someone of something they want to do, that also provides a direct reminder of next steps to take, can be very effective with women, but not so much with men. Also, the private clinic participants could be considered your segment of reliable customers – they’re looking for you to reach out to them, and they’re more ready than their counterparts to take action.

In short, to get ahead and stand out in the marketing world, you can’t limit yourself to marketing data. Yes, digital data is nearly infallible when collected correctly. And no, spending your free time reading up on behavioral economic theory may not be your ideal Friday night. But if you want to get closer to answering “why?” you’re going to have to look further than Google Analytics.