How (Not) to Use Behavioral Economics to Influence Consumer Decisions

You need not dig deep to unearth a story that features a disgruntled Viagogo user. In fact, the Facebook group Victims of Viagogo has amassed over 5500 members, and is littered with angry customer complaints aimed at a company that has quickly become the bane of the entertainment industry.

Formed in London back in 2006, Viagogo has grown to be the ‘world’s largest secondary marketplace for tickets’. This growth, however, has come at a cost, with its business practises having attracted much criticism. For instance, back in 2012 leading up to the Olympic Games in London, the company liquidated its assets in the UK and registered a new company Viagogo AG in Geneva, making it exempt from UK law — which banned the resale of tickets for the olympic games.

That aside, if there is one way this controversial company can be heralded, it is for its textbook use of behavioral economics to bolster its marketing approach. It comes as no surprise that the company’s founder, Eric Baker, has expressed his admiration for the ideas set out in Nassim Nicholas Taleb’s Fooled by Randomness, a book that touches on many of the hidden biases and cognitive shortcuts that behavioral economists strive to explain.

This marketing approach continues to help Viagogo sell millions of tickets for prices that far exceed their original value. The Guardian newspaper has published several articles that highlight just how large these mark-ups can get. For instance, it was reported that tickets for a Harry Potter play worth £140 were listed on the site for £8,327, and tickets for an El Clasico football match listed for a ridiculous £196,155.94.

Despite these excessive prices, thousands of Viagogo users all over the world choose to purchase tickets from the website every day. So what drives them to do so? This article contends that Viagogo’s use of behavioral economics is, in part, culpable for this seemingly irrational consumer behavior.

Priming a Scarcity Mindset

Viagogo’s meticulously designed user flow — the path taken by a user on its website to find, select, and purchase a ticket — adopts behavioral economic principles to (a) increase conversion rates and (b) sell tickets for highly inflated prices.

When a vendor creates the perception that their product is scarce, buyers are more attracted to that product. Resource scarcity, as highlighted in Robert Cialdini’s book “Influence”, comes in two forms: limited-time and limited-quantity. With limited-time scarcity, an offer is made available for a predefined period, after which the offer becomes unavailable. In limited-quantity scarcity, the offer is made available for a predefined quantity of the product. Both of these forms of scarcity are harnessed by Viagogo to great effect.

Limited-quantity scarcity

When selecting an event on the Viagogo platform, all users are presented with a loading bar (see screenshot below). A cursory look at the website’s script reveals that this is actually one of forty-five set timers used purposefully throughout the site. This particular loading bar, which leads the user onto the marketplace where tickets are being sold, is set to a specified number of seconds (approximately 45 seconds I estimate), which is ample time for the user to be exposed to the scarcity messaging, or “scarcity primes” seen below. Research suggests that this has unprecedented effects on a Viagogo user’s intention to purchase tickets.

The effects of scarcity priming on consumption levels are concrete and remain consistent across different countries, cultures, and stimuli (Jung and Kellaris 2004). Laran, Juliano, and Salerno (2013), for instance, measured participants’ calorie consumption across two conditions. In the first condition participants were primed with a text that emphasised harshness and deprivation, with words like survival, persistence, shortfall, and adversity. The control group read a text with neutral words (i.e. words that didn’t evoke scarcity). They found that those who were subconsciously primed to think about scarcity consumed more calories (18.9 grams of candy) compared to those who were not primed (13.7 grams of candy). The scarcity-primed participants, the authors conclude, responded to the perception of impending scarcity by increasing their calorie consumption levels.

Viagogo uses comparable scarcity primes to nudge its users into a scarcity mindset. Their aim is to increase ticket consumption. Messages such as “Less than 2% of tickets left for this event”, and tickets “selling fast” are displayed to users above the loading bar, and in brightly lit pop-ups and tabs that follow users all over the site (see screenshot below). Their constant presence ensures that even if not actively attended to, they are subconsciously taken in by Viagogo users.

This should result, according to Laran and colleagues’ (2013) candy consumption study, in a considerable increase in ticket consumption. In their study, calorie intake increased by 28 percent when participants were primed into a scarcity mindset. If Viagogo’s scarcity primes have a similar effect, they could be increasing user ticket purchases by up to 28 percent.

Limited-time scarcity

The other main scarcity heuristic focuses on time limitations. Viagogo implements various time constraints throughout the buying process to limit the duration of a ticket offer, with the aim to accelerate purchases. Studies show that this may also increase the perceived value of the tickets being sold. Lee and Seidle (2012), for example, found that participants exposed to messaging that indicated limited-time scarcity (“Exclusive limited edition. Hurry, limited stocks” compared to “New edition. Many items in stock”), were willing to pay an additional 50 percent for a wrist watch. This is because these consumers used scarcity information as a heuristic cue, which induces relatively thoughtless and reflexive responses, and concurrently decreased their reliance on other product attributes, like price.

Neuroscience can provide some further insight into this decision process. It is thought that scarcity cues can overload the brain, which leaves less bandwidth for executive control functions (Mani, Mullainathan, Shafir, and Zhao, 2013). This effect, known as cognitive overload, is thought to diminish the glucose levels in the frontal cortex (the region associated with attention, planning and decision making). Dewitte, Pandelaere, Briers, Warlop (2005) found that concurrent cognitive load, as is the case with Viagogo’s bombardment of scarcity primes, can have devastating effects on consumer decision making.

In combination with the limited-time scarcity primes, Viagogo also uses a “social demand” or consumer competition heuristic. Consumer competition, as defined by Aggarwal and coauthors (2011), is the act of consumers striving against one or more other consumers for the purpose of achieving a desirable economic reward (i.e. two users in competition to purchase a ticket for a popular event).

In Viagogo’s case, when a user enters onto an events landing page, they enter into a live marketplace where tickets are rapidly being bought by other consumer competitors. It is hard to ascertain whether this marketplace is purposefully simulated to mimic the perception of consumer competition, or whether in reality other users are actually purchasing tickets. Either way, it has a powerful effect on a users purchase decision.

A study conducted by Worchel, Lee, and Adewole (1975) provides some insight into this. In their study, before participants could take a cookie from a jar of 10, the jar was switched with another jar of two cookies. One group was told that the missing cookies were needed for other tasters (competitors) in the study, while the second group was told that the researcher had initially given them the wrong jar. For the first condition, in which the cookies became scarce through the process of social demand (i.e., needed to supply the other tasters), participants rated the cookies’ quality higher, and believed them to be more valuable, than did the participants in the other condition.

Is this fair for consumers?

In sum, Viagogo is tapping into several powerful behavioral heuristics to increase both the amount of tickets being bought on their platform, and the price for which they’re being bought.

It could be argued that these tactics are simply marketing ploys comparable to those used by a smooth-talking car salesman who is closing in on a deal. In which case, it should be up to the user to see through the sales gimmicks, just as they would in a car showroom.

Looking at it another way, with the hundreds of thousands of customers navigating through Viagogo’s user flow, they have had the opportunity to fine-tune their system to fully optimise their equivalent of a ‘sales pitch’. Testing exactly where and when on the website the placement of a scarcity prime yields the highest conversion rate; which phrase works best; whether they work in green, blue, or red boxes; whether to address the user by name or not. Perhaps they’ve even figured out the perfect amount of ticket scarcity to portray to users: it could be that “1% of tickets left” is too little, 5% is too much, and 2% is just right. The point is, Viagogo has the luxury of an unlimited and hugely heterogeneous sample of participants to test and tune its use of scarcity primes (or any other behavioral heuristic they may choose to apply). Which may give them an unfair advantage over their users.


The AI Governance Challenge

To illustrate this point further we should imagine the human equivalent of Viagogo’s user flow. Having rehearsed his or her sales pitch hundreds of thousands of times this car salesperson would know exactly what to say to portray to the customer the scarcity and exclusivity of their offer. They would know exactly when in the conversation to push this point, and how to phrase and deliver it to optimise their sales rate. Additionally, there would be hundreds of consumer competitors in the car showroom snapping up seemingly better cars for lower prices. Under these conditions it’s easy to imagine that a consumer’s decision making ability would come under stress, possibly leading to snap, irrational purchases. The question, then, is should this be allowed? Or should there be laws and regulations brought in to protect vulnerable users online that come up against such powerful tools of influence. Ultimately, as digital marketing continues to become more ubiquitous, targeted, and powerful, this is a question policymakers need to consider.

Can Emojis Prevent People From Speeding?

I had been in Israel for about a week. I was driving, inundated with the signs on the street around me, the different types of traffic lights, and trying to follow the instructions Waze was giving me. One traffic intervention caught my attention. A speed display flashed “90 km/hr” and then gave me this: ☹. I slammed on my brakes, and was filled with a feeling of guilt. The speed limit was 80 km/hr. Whoops.

I have to be honest here and admit that I have been known to go over the speed limit. But this time, a combination of a circle, two dots, and a curved line made me feel the disapproval. Now, there is good reason to drive at appropriate speeds. In the United States, speeding contributed to 27% of the fatalities in car crashes in 20151. Speeding reduces a driver’s ability to steer safely around curves or objects in the roadway and extends the distance necessary to stop a vehicle2. Because of this, different speed reduction mechanisms exist—law enforcement, speed bumps (very popular, and nausea-inducing, in Israel), speed limit signs, and, as technology has advanced, speed indicator displays.

Speed indicator displays have been used in various countries in order to provide drivers with immediate feedback on their speed. The timing is crucial: the sign must be far enough away that the driver has time to read the display, yet near enough that she knows it is her car the sign is referring to.

First, why might these feedback signs work? After all, if a driver just looks at their own dashboard, don’t they see their own speed? The answer is, of course, yes — but we become desensitized to stimuli that are always in front of us as we habituate to them. Conversely, a new sign catches our attention, and thus can help someone who had no intention of speeding. And for those of us who were perhaps intentionally ignoring our dashboard? A psychologist might surmise that there is some public shame to having your misdeed posted to the world. Your private deed has become public, and as we can all attest to, that changes behavior.

A study in London3 reported that speed indicator displays effectively reduce driving speeds within a short distance of a sign (400 meters). However, there is also evidence suggesting that, after two weeks, drivers become desensitized to the sign and it is no longer that effective. Not surprisingly, drivers are most responsive if the sign is associated with a police car enforcing speed down the road.

And what about adding the emotional cue of a ☹?

Face processing is a particularly special type of processing. Infants develop an early competence in ability to process faces, and prefer looking at faces than other objects from birth4. Early facial perception abilities, together with neuroscientific research implicating certain brain regions in facial processing, provide evidence that we are wired to pay attention to faces5. Why are we wired to respond to faces? As a primate, recognition of individuals at first sight is important.  Unlike my dog, I do not have a powerful olfactory system that can “smell” the other person; I rely on sight to recognize my own child, mate, or enemy. We not only recognize people by their faces, but we also read faces for emotion. The expressions on someone’s face tell us whether we need to prepare to fight, flee, or receive a hug. In fact, there is even research that we unconsciously move our muscles somewhat to mimic the expression we see on someone else’s face6, highlighting our social nature.

We process faces and the emotions displayed rapidly (less than 100 milliseconds in some studies), and without conscious awareness, suggesting a certain level of automaticity in facial processing. In other words, we quickly process a face and it doesn’t demand that much of our attention7, both important points for trying to induce behavior change while someone is speeding by at 90 km/hr.

But, wait a second, it’s not a real face on those speed indicator displays; it’s a simple symbol of a face, or an emoji.  Does our brain even process an emoji like a real face?

Research suggests that yes, with the increasing use of face emojis, humans have learned to react similarly to emojis as they do regular faces8. Interestingly, however, if you have somehow avoided the digitally social world we are in, you may not react the same way.  For cultures that are not exposed to face emojis like ☹  or ☺, the emojis do not have the same effect9.


The AI Governance Challenge

Research in London showed that after a while speed indicator displays become less effective. And truth be told, after five months of now driving on that same road, and, admittedly, sometimes seeing that sad face, I don’t react as much. I am not startled. This phenomenon is known as desensitization.

Thus, one way we can attempt to maintain the effectiveness is by moving the sign and associating the sign with the threat of enforcement nearby. It makes sense to use a face instead of words. We process the symbol more quickly, we react more emotionally, and there are no language barriers. The next step is using science to test if it can be a lasting solution.