Communication specialist Like Mind's Jerry Edmondson explains what motivates people when they decide whether or not to do something – such as saving into a pension fund.
This drive, along with other basic behaviours, is part of what makes us human, and explains how we act in certain situations. According to the research paper, the study has “novel implications both for when people choose to obtain or avoid information”.
If you show how many people have chosen a particular course of action and lived to tell a positive tale, you are giving reassurance about any decisions that need to be made
Behavioural scientists would do well to model this in situations where people are faced with pension communications. I can’t think of many better examples of how people’s reactions can be predictably observed when faced with dull, complicated and occasionally scary information.
The pensions industry has a lot to learn from behavioural science, just as the advertising world did many decades ago. It offers effective techniques for engaging with different audiences – recognising the need to combine people’s understanding with motivation and the emotional aspects of decision-making.
Loss aversion
It is in our nature to hate losing – in fact, even when faced with the threat of losing something we never actually wanted, we will often put extra energy into keeping it.
The traditional approach to advocating pension scheme membership has been all about telling people what they are going to get – in 30 years’ time. Loss aversion suggests that a more effective approach is to position the ‘membership deal' so that not joining the plan will feel like a loss.
Status quo bias
People generally prefer things to stay the way they are. Even if change is a better option, we tend to favour sticking to what we already have or know, because change requires energy.
The lesson for pensions is not to force changes or options on an audience. You should make these seem as painless and natural as possible, or make them unavoidable.
Anchoring
Nothing is absolute in the human mind. Whenever we are presented with something – be it a new product, person or idea – we immediately compare it to something else.
You cannot stop comparisons being made, but you can influence and inform them. Suggest an anchor to the audience. For example, you could point straight away to the high level of employer contributions or benefits on offer compared to other typical schemes.
Framing
Our perception of something will change depending on the context in which it is positioned. This frame of reference changes the way we think about our choices and decisions.
For example, if you are promoting higher member contributions, you might tell your audience how some people have financial difficulties because they did not start saving a little more a lot earlier.
This way you could then frame your pension plan as a solution to never having to face such a situation.
In-group bias
When in groups, we produce a hormone that helps us form strong bonds with other members of the group. For the same reason we tend to be suspicious and negative towards other groups.
It is helpful to craft your message so it points out that you are on the same side as your target audience – empathising with their needs and wants, and constraints and opportunities.
Bandwagon effect
The bandwagon effect is about conformity, which is necessary for groups, and society, to work.
It also applies at times of uncertainty when others serve as cues for what we should do – for example, they might know of some danger or risks coming up that we are not aware of.
Decisions tend to bring some amount of uncertainty, and questioning of: 'What’s the right choice for me? Can I trust what I’m being told?'
If you show how many people have chosen a particular course of action and lived to tell a positive tale, you are giving reassurance about any decisions that need to be made.
To engage, you first have to be engaging. By understanding some of the basic principles of how people intuitively perceive and process information, and using these to help influence and inform the way saving for retirement is communicated, you might just be able to help your members make sense of their pensions world.
Jerry Edmondson is a managing consultant at employee communication specialists Like Minds
