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A Double Whammy – Hyper-connected and marginal Consumers
December 14, 2015
Just when you thought you had it all under control, something changes.
Most organisations are aware of the ‘’hyper-connected consumer’’ … we have been told that people are now connected 24 hours a day; if they don’t like something there is a website they can criticise you on; if you don’t have multiple social media channels, no-one knows who you are, etc. – the reality is that is true and with the advent of a more ‘’open market’’, many organisations in the social care sector will soon find out what this really means.
Consider for a moment just how connected consumers are today. It’s rare that the average person isn’t within arms-reach of virtually any information they desire - whether accessed via their phone, tablet, laptop, or PC. This reality creates a great challenge to anyone tasked with keeping up on consumer engagement and preferences. For example, we know that:
Experts estimate that anywhere between 60% and 90% of in-store purchases are influenced by the web.
81% of consumers regularly research products online, 83% actively shop online, and nearly 70% have purchased online. (Nielsen)
Mobile shopping stats are catching up quickly; 4 out of 5 consumers use their smart phones to research prior to purchasing. (ComScore).
People are far better informed about what you do than you are! What is more, they know more about what your competition is dong than you do. However, what is the likelihood that with all this information, people will actually make a change? Will it be different in the social care sector when we are not talking about widgets, gadgets and shopping but personal needs, health and wellbeing?
The answer of probably yes, uptake and change may be slow but therein lies a different issue; that of the marginal consumer. This is a term with different meaning but in this case we are referring to the impact of choice in a regulated environment. That is, how do we predict how people will behave when they are given the ability to choose, yet the market is highly regulated?
The effectiveness of a regulatory intervention often depends on how successful that intervention is in changing consumer behaviour. Traditionally, approaches to consumer behaviour have been influenced by standard economic theory and models. These are based on the assumption of human rationality – that is, it assumes that consumers make choices such that their utility is maximised, subject to budget constraints. Under rational choice theory, regulation which increases income, alters relative prices or changes consumer preferences will be effective in changing behaviour.
One negative implication of human rationality is that some economic models explain choices which fail to maximise utility by attributing such choices to either a lack of information or a misinterpretation of the available information. What we do know now with things like the Regional Assessment Service and the NDIS is that people do not fully understand what is happening. This is likely to lead many initially at least, not to change.
However, in a regulated market and one in which government will need to extricate themselves from in due course, there is a need to force the message on the ‘’unconvinced’’. Government will likely use choice (just like with Superannuation) to drive behavioural change. It may not yet be well understood but what we do know is that research has found that, in some circumstances, small alterations to choice (architecture) can give effect to disproportionately large behavioural changes. For example, including simple messages which reinforce social norms was found to influence electricity consumption. This is sometimes referred to as ‘’nudge’’ theory and there are three categories of interventions; a “pure” nudge; an “assisted” nudge; and a “shove”. Watch out for all three during this transition period.
Sound strange…..it may be but it shouldn’t be. What it really means is that people have a lot of information but don’t really know what to do. They may not change initially and that will facilitate your belief that ‘’nothing will change’’. Governments, still in regulatory mode start to push more messages about choice or tinker with the choice architecture and before long, movement occurs. What it really means is that in order for largescale change to occur, there does not need to be largescale change in consumer behaviour.
Think about it this way - the thought that some people will exercise their choice and change, triggers off a response in the industry. Organisations change the way they deliver a service or engage with a person, even though that person has not changed or asked for it. A competitor organisation notices the change (new offer) and responds by varying their offer so as not to miss out, just in case the person does change. Another organisation responds accordingly and before long you have new offers and services, yet no-one has changed.
It may take less than 10% of people to actually change to cause a significant shift in the market.