AN INTERESTING DECEMBER 2012 paper from the Australian Government's Department of Finance and Deregulation, Offices of Best Practices Regulation entitled "Influencing Consumer Behaviour: Improving Regulatory Design" is an instructive piece of research when viewed through the lens of our own TV business.
The paper explores two broad frameworks that influence consumer behaviour – Rational Choice theory and Behavioural Economics. Rational Choice theory holds that consumers maximize utility subject to their budgetary limitations. Behavioural Economics assumes choice is affected by social, economic, emotional and other factors. Examples from the health, finance and other sectors are used to illustrate how government or businesses for that matter, can use the findings from behavioural economics to modify or nudge choice architecture and influence consumer behaviour.
It emphasizes that an understanding of consumer behaviour can assist in developing appropriate regulations – and that regulators should build on rational choice theory as well as the more complex area of behavioural economics. That got us thinking at Cartt.ca about the role our Regulator faces this fall in its review of Canada’s television policies… and the repackaging initiatives that have already been sparked in part by calls for greater consumer choice.
One of many interesting points noted in the paper is how small changes in choice architecture can create major behavioural changes. Applied to our industry, one can look at the way in which distributors like Eastlink and Videotron have of late, given higher prominence on their web sites to creating your own package. That one architectural change, encourages a departure from status quo bundle/heuristic consumer behaviour that has served our industry so well.
As you review the paper's examples of rational choice and behavioural economics, it’s interesting to extrapolate to the broadcast/distribution industry and consider how changes or nudges in choice architecture can impact our industry. By moving from a bundling default approach to an a la carte choice default architecture, here are just a few of the challenges that come to mind:
1. How do you maintain our long standing preponderance rules and pride of place for Canadian voices?
2. How can Canadian brands compete for brand recognition and selection against international brands like CNN and CNBC?
3. Alternatively, if U.S. brands maintain the position that they are to be carried in broadly penetrated extended basic packages, how can regulators justify the relegation of Canadian services to lower penetrated pre assembled and customer selected packages?
The paper concludes that both rational choice and behavioral economics provide a useful foundation for policy makers. The challenge is how to best incorporate these findings from rational choice and behavioural economics, into a regulatory design that balances consumer choice while upholding the Broadcasting Act and maintaining the diversity of Canadian voices and choices.
As has already been stated by others, the devil is in the details and we should bear in mind how even small changes in choice architecture can have a major impact on consumer behaviour.
Enjoy the read and send us your comments.
