Everybody needs an Alec Mercer! (Do you have a Chief Behavioral Officer?)

As a young banker I often saw a television commercial that Western Company, an oil services company used to run. It’s tag line that became famous in Texas – “If you don’t have an oil well, get one!”

I am often asked by clients, what should we get? Well, have you seen the new NBC show Irrational? Inspired by Dan Airley’s book, Predictably Irrational, it tells the story of a professor who solves problems by leveraging behavioral economics principles. Behavioral economists know that much of human decision making and behavior is less about being the logical and emotion-less Mr. Spock, and more about being the instant gratification and irrational Homer Simpson. It’s true we often fall into a pattern of poor, unreasoned decision making, but we do it in very predictable ways. A credit union that understands those patterns can mold their environment in ways that will improve the financial wellbeing of their members and their teammates. And a great way to do that it to make sure you have access to a Chief Behavioral Officer (CBO). A CBO is a professional who uses the principles of behavioral science to understand and influence human behavior, improving the organization’s ability to solve problems and achieve their goals.

There are many benefits to having a CBO on staff. Here are just a few:

• Improved customer experience: CBOs can help you design products and services that are more user-friendly and effective. They can also help you develop marketing and outreach campaigns that are more persuasive.
• Increased sales: CBOs can help you identify and target your ideal customers, and to develop sales strategies that are more effective.
• Reduced risk: CBOs can help you understand and mitigate the behavioral biases that can lead to financial mistakes. For example, CBOs can help you develop educational programs that teach members about the risks of credit card debt and predatory lending.
• Enhanced innovation: CBOs can help you develop new products and services that are more aligned with the needs and wants of their members. They can also help find new ways to improve their marketing and outreach efforts.

What are the broad roles that a CBO might tackle?

• Conducting research on member behavior: A CBO might conduct research to understand how members make financial decisions, what their financial needs and goals are, and what factors influence their behavior. This research could be used to develop new products and services, improve existing products and services, and target marketing and outreach campaigns.
• Designing and implementing behavioral interventions: A CBO might design and implement behavioral interventions to help members make better financial decisions. For example, a CBO might develop tools and resources to help members set and achieve financial goals.
• Developing and implementing marketing and outreach campaigns: A CBO might use their knowledge of behavioral science to develop and implement marketing and outreach campaigns that are more persuasive. A CBO would use insights into behavioral biases to develop marketing messages that are more likely to resonate with members.
• Advising on product and service development: A CBO might advise on the development of new products and services to ensure that they are aligned with the needs and wants of members. They might also provide advice on how to improve existing products and services.
• Collaborating with other departments: A CBO would likely collaborate with other departments within the credit union, such as marketing, sales, and product development. This would help to ensure that behavioral science insights are integrated into all aspects of the organization.

Here are five specific ways that a CBO might use behavioral economic principles to improve the financial wellbeing of your members:

1. Use defaults to encourage members to save more money. Defaults are powerful because they imply the correction decision and are often not questioned or changed. Some credit unions setup an automatic transfer from a members transaction account into their share account every month. Members can opt out or change the default at any time, but few do.
2. Use the framing technique to position benefits in the most impactful way. Don’t just talk about lower interest rates on loans, send the message that our rates let you keep more of your money.  Make sure you take the attributes of your products and services and describe them in ways that reflect the benefits the members will experience.
3. Talk about the progress that other members are making on their financial goals. Social norms can have a huge impact on individual behaviors – when members see progress in groups of people they identify with they are driven to replicate those results.
4. Help members set effective goals. One mistake we often see is making the goal too long-term based, and we know that it’s very difficult to drive behavior change now for benefits that don’t materialize for years or decades. Break those long-term goals into shorter term milestones.
5. Once those goals are set, provide regular updates and reminders. Reminders are incredibly powerful and can be simply and easily provided to members through a variety of channels. Establishing shorter-term goals and providing regular reminders has a significant positive impact on behaviors.

These roles and tasks, if properly executed, will add substantial value to your organization and improve the lives of your teammates and your members. Even a fractional CBO role will show results, so go get one… Today!