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.
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About the Author
James Rowbotham
James completed an International BSc at the University of Leeds and Australian National University. Following this, he completed an MSc in Behavioural Economics at Leiden University where he received a Cum Laude distinction. He now works for a tech start-up in Amsterdam and continues to work with Leiden University to publish research around sustainable behaviour.
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