Consumer watchdog finds against brand for misleading marketing practice:
A lesson for applying behavioural economics
Remember behavioural economics? It was the marriage of psychology and economics that enjoyed a burst of popularity a decade ago and has never really gained any further traction. Sometimes, with rather disastrous consequences, findings from academics’ behavioural experiments were generalised and applied in business.
For example, one of Australia’s largest insurers was convinced into applying the behavioural economics paradox of choice theory. The theory contends that reducing range will reduce anxiety and lead to increased sales. Product range was reduced by 15%. Rather than increase, sales fell by over 20%. Whoops.
Another behavioural economics theory relates to scarcity. Here the theory is that feigning scarcity will cause procrastinators to act. Trouble is, apparently the behavioural economists forgot to check with the competition lawyers.
Last week Australia’s competition watchdog successfully prosecuted its case when the court found that a reseller ‘misled consumers by claiming tickets to certain events were scarce when the scarcity only referred to the tickets available on its resale platform and didn’t include tickets available elsewhere.’ According to the Australian Competition & Consumer Commission Chair, the reseller’s “claims misled consumers into buying tickets by including claims like ‘less than 1 per cent tickets remaining’ to create a false sense of urgency.”
The moral of the story is, no matter the source of the theory, even if it is from a Nobel prize winning academic, it is only a hypothesis until it is scientifically tested and applied in your category, in your market and for your brand. (And, it needs to be lawful!)
For more information:
Ken Roberts 0412109993
Group CEO, Forethought Pty Ltd
Level 5, 550 Bourke Street, Melbourne, Australia
Level 5, 400 Madison Avenue, NYC, USA
Forethought is Australia’s most awarded marketing insights business. According to USA authority Greenbook, Forethought was in the top 150 largest marketing research agencies in the world (103). Forethought believes marketing science should empower decision-making. We not only work with our clients to define their growth challenges, design research and analyse data, but we take it one step further – we move through to activation and help management to implement tangible change.
About Ken Roberts
Ken Roberts, Group Chief Executive Officer and Founder, opened the Forethought doors and solved his first client challenge in July 1994. He has since led Forethought to be ranked the most commercially effective and innovative marketing science consultancy in Australia.
Ken is a serial innovator and inventor. He has pioneered the application of advanced analytics and implicit measurement in applied marketing.
Amongst his industry recognition, Ken has been awarded the:
- ARF Gold David Ogilvy Award for Research in Communications;
- AMSRS Award for Innovation in Research Methods (twice);
- AMSRS Award for Commercial Effectiveness (twice); and
- Australian Marketing Institute CPM Marketer of the Year.
Ken has twice been first runner-up in the globally prestigious INFORMS MSI Practice Prize. The capstone competition for applied statistics and has published extensively, including twice in the Journal of Marketing Science and seven times in ADMAP.
Ken is an Advisory Board Member Centre for Business Analytics at Melbourne Business School, a top 25 business school in the world. He is also a former Associate Professor from that same university.
In October 2016, the Vice Chancellor of Monash University in Melbourne honoured Ken’s contribution to marketing with a Distinguished Alumni Fellowship.