How advertisement framing increased loan demand by 25%

The framing effect: A cognitive bias which results in our decisions being influenced by the way information is presented, rather than the content of the information itself.

Affective decision making: When our decisions are influenced by information eliciting an immediate emotional response rather than a rational option.

A lack of research on the effects of persuasive content on demand

There are advertisements all around us: during intermissions of television shows, between breaks in sport games, at bus stops, on large screens downtown, and on flyers in the mailbox. Although firms continue to pour substantial amounts of resources into advertisements, there is little systematic data on how persuasive content affects demand on a large scale outside of a laboratory setting.² 

Though firms often conduct small-scaled randomized experiments to adjust their marketing strategies, the sample sizes are generally too small for the findings to be reliably attributed to the behavior of a larger market. There is a need for more academic research to be conducted, consisting of large scale field experiments, to better understand the effect of marketed content on consumer demand. 

The need to implement more behavioral science into advertising strategies

Though economists and strategists have commonly used psychology and aspects of behavioral science, such as the mere exposure effect, there is room for growth. The application of many behavioral science concepts such as affective decision making, choice overload, and anchoring biases have not been studied at a large scale in reference to the advertising industry. 

As found in this large-scale field experiment, designing advertisement content based on  behavioral science can be very effective in generating demand within a consumer base.

Determining the sample population and contact strategy

A sample population of 53,194 individuals were mailed letters with a randomized combination of non-informational content and loan rates. The individuals in the sample were former clients of the lender company that the experimenters collaborated with. The collaboration provided the experimenters with personal information of the clients. The content was designed to be positively perceived bythe client based on factors such as age, gender, and language preferences.

Inclusion of deadlines to accept mailed offers

The letters included a set of randomized deadlines before which the client had to take up the offer. Though otherwise randomized, the assigning of deadlines took into account that some individuals receive their mail before others based on PO-box mailing addresses and proximity to urban areas. The assigned deadlines ranged from 2 weeks (short deadline) to 6 weeks (long deadline), with an option for short deadline clients to request an extension.

Creative treatments to the content 

Several versions of non-informational content were designed, each with varying creative treatments. All letters contained the same basic information such as the lender company’s logo, the slogan, branch hours, and instructions to apply for the loan rate offered. Several other aspects of the letter were purposely altered, such as:

1. Photos: A photo of a smiling person was included in 80% of the letters. There were photo subjects matching every gender and race combination within the sample population. 
2. Personalized language blurbs: A blurb mentioning that the lender’s company spoke the individual’s language was included on every letter sent to a client who did not primarily speak English, representing 44% of the sample population. 
3. Promotional blurbs: Letters with 50% off promotions included a blurb stating “A special rate for you” and 25% off promotions stated “A low rate for you.” The clients that received no discount did not have any such blurb. 
4. Example loan payment plans: The letters included a table displaying the example loan amounts and maturity. The number of examples included within the table were randomized, ranging from one to four examples. 
5. Comparison to competitors: Some letters were randomized to include a sentence comparing the offered loan rate to higher competitor rates. 
6. Deadlines: Letters included a randomized deadline by which the client had to respond to accept the offer. The deadlines ranged from two weeks to six weeks. 

The MINDSPACE Framework

Each of the six treatments were designed by the experimenters to study the effectiveness of specific behavioral science concepts applied to a large-scale setting. The design of the study was primarily guided by the MINDSPACE Framework. This framework utilizes nine forces to drive behavior: consisting of and working around Messengers, Incentives, Norms, Defaults, Salience, Priming, Affect, Commitments, and Ego. This study: presents an established Messenger to communicate information; provides clear Incentives to the people involved; uses Norms to influence behavior; works around people comfortable in their Defaults; promotes the Salience of the product; makes use of Priming and Affect to induce favorable subconscious decision cues; accounts for Commitments; cater to the consumer’s Ego. 

The photos that matched the client’s gender and race, and the personalized language blurbs were expected to promote affective decision making within the recipients. The inclusion of long deadlines were used to accommodate the clients’ commitments, while the promotional blurbs and comparison to competitors were mentioned to provide an incentive to take up the offer.

Non-informational content increased consumer demand

 The results suggest that using content that appeals to the consumer’s affective decision making hasa positive impact on demand. The inclusion of a female’s photo to the letter had statistically significant results, increasing demand by the same magnitude as  a 25% reduction in interest rate. Furthermore, extending the deadline to accept the loan by two weeks increased take-up by approximately 3% and increased demand equal to a 10% reduction in interest rate. The other content treatments did not produce any statistically significant results.

• The lender name and personal information of the participants was not disclosed 
• Only previous clients of the lender were contacted with letters and the participants were given a complete choice in their response to the mailed offer

Ad Retargeting and Psychological Reactance

Further interested in how behavioral science is used within the marketing industry? You might find this The Decision Lab article to be very interesting. This piece is an insight on the concept of ad retargeting in digital marketing, where advertisements are personalized based on the consumer’s browsing history. 

The Halo Effect in Consumer Perception: Why Small Details Can Make a Big Difference

People are likely to attribute certain properties to products based on non-informational content and aesthetics rather than objective information. The halo effect is found to have a great impact at the product level, with people attributing visually appealing products to a better quality, and vice versa. This TDL article explores the broad idea of the halo effect and describes key findings of studies relating to consumer perception.