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The behavioural science behind selling concepts from Teslas to transit plans

Anyone in the public relations business knows how difficult it is to craft a compelling message for change. Convincing people to make a switch—either in opinion or how they live their daily lives—has confounded communications people since the PR profession began. Thanks to research in behavioural economics, we’re gaining a better understanding of how to make it happen.

Behavioural economics, which studies the psychological underpinnings of how we make decisions, has found that people make choices based on social and cognitive biases, emotion and gut instinct. 

Research in this area has thrown into question the so-called “rational actor” theory of economics, which holds the view that people make decisions in their self-interest after objectively weighing costs and benefits. The idea that people are purely rational in this way has changed since research into behavioural economics began in the 1970s.

I interviewed social scientist Eric Johnson, a leading researcher in behavioural economics, for my upcoming book. According to Johnson, who teaches at the Columbia Business School at Columbia University in New York, there are three main principles of behavioural economics that influence how we make decisions: loss aversion, present bias and fairness. These are indispensible components of a compelling message for change:

1. Loss aversion: Studies have found that people are more concerned about a perceived loss than they are happy about a potential gain. Say I offer you a gamble: On the flip of a coin, I’ll give you $6 if it comes up heads. How much would you be willing to bet and potentially lose if it comes up tails, $2, $3, even $4?

Research shows most people are willing to risk $2 to win $6, or maybe $3 to win $6. However, when it comes to gambling $4 dollars to win $6, very few are willing to chance it. That’s because a loss feels twice as bad as a win feels good. This is classic loss aversion. People are much more concerned about negatives and bad outcomes than positives of equal magnitude.

So whether you are trying to sell a more expensive plug-in Tesla or a pricey new LED lighting system, or pitch a $7.5-billion regional transportation plan, you need to understand that losses loom larger than gains. The key to persuasion is to magnify the benefits. In fact, Johnson believes you need to convince people that the upside is 2.5 times better than the perceived loss. Then they’re more likely to take a chance and buy into your case for change.

But there are two other principles at work:

2. Present bias: It’s human nature to discount things that are distant in time and space. We tend to value immediate payoffs over future benefits. It’s why electric vehicle sales are still stalled: people see the higher price tag when they purchase the vehicle but rarely consider the money saved down the road, not to mention the long-term benefit to the environment.

3. Fairness: According to neoclassical economic theory, people are typically selfish, but according to behavioural economics they also care about fairness, for themselves and for others. Johnson believes the powerful force of fairness in human nature doesn’t kick in unless the problems are immediate and nearby, which ties back to present bias.

These three principles also raise three questions that every communicator should ask when constructing messages to make a significant change:

1. Can you make a credible and strong case that the benefits of the proposed change outweigh perceived loss by at least 2.5 times?
2. How will people be touched by the loss or benefit?
3. Will what you are proposing be seen as fair or unfair?

It’s these behavioural economics principles that will increase your chances of making change actually happen.

James Hoggan is a public relations consultant. His latest book, I'm Right and You're an Idiot: The Toxic State of Public Discourse and How to Clean It Up, is being published in May. Follow James Hoggan on Twitter