CONTRIBUTED ARTICLE by Jonathan Steffanoni, Principal Consultant, Legal & Risk, at QMV
Powerful tools to promote member engagement, based on behavioural design, exist. They are very effective but must be used with great care.
There is a paradox at the heart of the superannuation industry’s efforts to improve member engagement. Faced with the behavioural might of hyperbolic discounting, which sees individuals placing little value in long-term plans, superannuation trustees have dedicated significant resources towards initiatives intended to promote member engagement.
All the while, the powerful principles of behavioural design have been employed in other industries to underpin everything from Instagram news feeds, notifications on smart phones, airline loyalty rewards programs, to addictive poker machines and that next Netflix episode which somehow automatically started even though it’s time for bed.
If used responsibly and effectively, the same behavioural design thinking could empower superannuation trustees to combine well designed technology and increasing access to data to identify and trigger member engagements. This will however require a significant rethink of what we mean by member engagement.
Rethinking Member Engagement
It is easy to fall into the trap of simplifying member engagement into a broad term for activities intended to promote greater involvement of members in their superannuation.
While there are some common engagements which are universally beneficial (such as encouraging members to keep their contact details up to date), there is little consideration of whether a greater level of involvement is best for the member.
Much of the activity directed towards promoting greater levels of member engagement places too little emphasis on ensuring that the engagement results in better outcomes than if the trustee made decisions on behalf of the member.
Perhaps a more useful way of thinking about member engagement could be found in identifying activities which are most appropriate, based on a member’s profile along the scale of awareness, understanding, involvement, and independence (for example).
Once the actual and appropriate levels of engagement are profiled for members, designers can identify specific micro-engagements or target behaviours which bridge the gap between awareness, understanding, and involvement.
Target behaviours might be as simple as having an awareness of when contributions are paid (or missed) by an employer, through to the necessary involvement in planning for retirement. The target behaviours will vary, however the methods to ensure that members engage with their superannuation appropriately can be very powerful if used effectively.
In designing these strategies, trustees should consider turning their attention to the proven principles of persuasive technology and behavioural design.
Persuasive technology to form good habits?
The foundational model for behavioural design was developed at Stamford University by Professor BJ Fogg. His Behaviour Model for Persuasive Design asserts that for a person to do something — whether it’s nominating a preferred beneficiary, clinking a link in an email, or going for a 30 minute jog— three things must happen at once:
The person must want to do it, they must be able to, and they must be prompted to do it. A trigger — the prompt for the action — is effective only when the person is highly motivated, or the task is very easy. If the task is hard, people end up frustrated; if they’re not motivated, they get annoyed.
The model suggests that the nudge towards the target behaviour will almost certainly be effective if these three aspects are satisfied.
There are some basic psychological responses which govern a member’s motivation levels for any activity. The pleasure and pain response is particularly influential in the short term. Longer term motivations are often driven by prospective hopes and fears, while social acceptance or rejection can also play an important role.
In targeting account consolidation, a strong motivation may be communicating the potential benefits of consolidation in the long term or promoting social conformance by highlighting that so many other members have consolidated their accounts.
In the design of technology, psychology and design consultant Nir Eyal has also been very influential in his development of the Hook model for designing habit forming (or addictive, depending how you view it) technology which relies on the creation of internal triggers to motivate an engagement.
He has provided an approach which relies on the chance of an uncertain reward (however trivial), to stimulate a small dopamine hit and motivate individuals to engage with technology.
Our limited attention makes it critical that a member is triggered to perform the target behaviour. The individual member profile – which the increasing availability of data has allowed us to create – can be very useful in identifying appropriate life events as trigger points, which can be used to notify a member that an activity should be engaged in.
Behavioural Design is a very powerful tool that is currently underutilised by the superannuation industry.
Of course, serious consideration must be given to ensuring that the engagement creating technologies are used in a responsible manner, and to the benefit of members.
The behavioural design principles which will be effective in promoting beneficial member engagements with their superannuation are the same design principles which are often exploited to extract profit from customers.
It’s difficult to emphasise enough the importance of responsible use of behavioural design principles, not only because the reputational backlash from misuse could be catastrophic, but because it’s the right thing for superannuation trustees to do.
Ensuring that our efforts to accommodate varying levels of member engagement add value to the retirement outcomes of members needs to be at the forefront of our thinking.
Originally published on Superfunds 1st September