How Behavioral Science Can Be Good for Business

Delicious, perfectly portioned, and ready-to-cook meals delivered to your doorstep. Easy-to-use tools to significantly increase your retirement savings. Systems for de-biasing your hiring process. All of these ideas might seem unrelated, but in fact they’re tied together by one common thread: they were made possible by insights from behavioral science.

Such innovations are possible when behavioral science is applied to companies’ three primary functions: creating the best product, reaching users who want that product, and managing an efficient and ethical organization. In each of these processes, smart companies are infusing behavioral science to improve their bottom lines.

Product Creation: Blue Apron
Great products answer a behavioral need.

It only took Blue Apron about three years to join the ranks of the rarefied, so-called “unicorns”—startups valued at over a billion dollars. Driving this success is a simple, smart business idea: send people everything they need to cook tasty, healthy recipes right to their doorsteps (even pre-portion out the salt and pepper). The reason this is such a smart idea is because it answers the age-old behavioral conundrum that humans often don’t do what they know they ought to do. In this case, cook at home rather eat out.

The vast majority of millennials–80 percent—think cooking meals at home is “a good way to live.” And yet they eat out more than previous generations. Why? Cooking can be intimidating, hard to plan, and it can just feel like too much work after a long day. Whatever the obstacle, millennials have a hard time turning their good intentions into, say, fontina-stuffed pork chops with potatoes and pizzaiola sauce. By making cooking easy to do, Blue Apron makes cooking at home an easy intention to follow through on.

Another behavioral insight baked into the Blue Apron business model is that it removes the temptation to eat out by nudging its subscribers to plan ahead. You subscribe to Blue Apron when you are motivated to follow through on your intentions. Groceries arrive when your motivation to shop may have been waning: when you get home from work, tired and hungry.

Product Optimization: “Wellness Score”
Great products can always get … greater

HelloWallet is a personal finance app that was created to answer another age-old behavioral failing: people don’t save enough money (Disclosure: HelloWallet is owned by Morningstar, where I’m a Marketing Optimization Manager). HelloWallet was designed using behavioral insights, but it’s constantly looking for ways to improve how it helps people make smart financial choices.

Case in point: Despite having lots of information about how to save money, many HelloWallet users weren’t sure just how much they should save. Recently, developers rolled out a new feature called “Wellness Score” to address this problem. It works off of the behavioral insight that people are really, really sensitive to what other people are doing. Users get a financial score on a scale of 1-100 based on how good they’re doing relative to their peers. How well did it work? In a randomized control trial measuring the feature’s impact, people who saw their scores were lower than their peers quickly added an average of $600 to their savings accounts to catch up.

The key here is that while behavioral science theory is valuable, it will only get you so far. The best product optimization teams know this and couple theory with a rapid, on-going process of testing and refining designs based on how users actually behave in that context.

Engaging Users: Marketing Communications at Morningstar
Great companies know how to get their customers’ attention

At Morningstar, we partnered with a company to provide a tool to help their employees plan and save for retirement. We liked the tool, but the problem was our direct mail communications to the company’s employees were falling on deaf ears. A member of our team came up with a hypothesis: the recipients had no idea who we were and thought we were spam. Ouch.

To test this, we ran a simple randomized control trial (RCT). Some employees got the same letters as before. Others received the communication with their company’s logo next to ours. The result? Simply adding the employer’s familiar logo boosted uptake of the product by 300%.

The behavioral insight here is that no matter how good your product is, if you can’t capture the attention of the user, it’s not going to be effective. To find out what captures that attention, you not only need good ideas, but also testing and measurement.

Organization Operations: Assessing Interviews
Behavioral science can make hiring a science

Consider one of the most important and frequent decisions companies make: hiring new employees. Typically, candidates are evaluated through interviews, where they show, well, how good they are at interviewing. That’s not a super relevant skill for most jobs.

Daniel Kahneman recognized this during his time in the Israeli army and proposed a new process. Instead of interviews that rely on intuitions or gut feelings, simply select key traits or skills needed for the role (no more than six) and then grade candidates using questions that evaluate these traits and skills. After interviews are completed, add up the scores of each trait and select the candidate with the highest score.

Companies–like the U.K.’s Behavioral Insights Team–are offering platforms that make these more objective hiring practices easier to implement. For example, since we know names can bias our perception of candidates, the B.I.T.’s hiring platform, Applied, makes it easy to anonymize resumes. They also allow blind scoring of different candidates’ responses to the same question at once, ensuring candidates are not judged differently on the second question because of their response to the first.

Although managers may be reluctant to surrender a part of their hiring autonomy to a platform, these platforms can remove bias and help managers hire employees with the skills their organization needs.

Part of hiring well is about fairness and other part is about good business: hiring employees who bring the most value to your organization. Behavioral science can help companies do both.