The retail mass markets in many sectors of the Nigerian economy have remained shallow simply because business decision making is yet to be anchored on requisite research, global Economics Consultants, Genesis Analytics, has said.
For this reason, the firm says it is using the instrumentality of Behavioural Economics to assist banks, microfinance providers, insurers, asset managers and payments firms in the Nigerian market to achieve improved financial performance. The BE, Genesis Analytics says, is driven by knowledge of how organisations and market systems interface to achieve financial performance success.
The firm, however, regrets that the importance of research and factbased data in decisionmaking through the instrumentality of Behavioural Economics is generally ignored in Nigeria — the reason for which the nation has shallow retail mass markets across many sectors of its economy.
Behavioral Economics challenges the traditional idea that people act rationally and in their best interests in most situations. It is concerned with how people actually behave, than by how they should behave, and thus seeks to understand the various quirks of human behaviour (in a robust and objective fashion) that influence decisionmaking.
Neil Lightfoot, Partner at Genesis Analytics and an expert in Behavioral Economics said: “On behalf of policymakers and businesses, we are exploring how to use Behavioral Economics to better understand and communicate with target audiences to improve organisational performance. The role of Behavioral Economics is becoming more and more important as its impact becomes better understood.”
According to Lightfoot, Behavioral Economics has immense power to influence perception or behaviour, and will one day become a standard tool in most organisations’ toolkits. He said forward thinking private and public sector organisations are already capitalising on this tool, giving them a competitive advantage that will last well into the future.
“For example, a British financial institution achieved a 20.3 percent increase in sales and 7.1 percent increase in customer satisfaction levels simply by implementing a few Behavioral Economics principles at its call centre. Similarly, President Barack Obama appointed an eminent behavioral economist as head of the White House Office of Information and Regulatory Affairs in 2009 and, more recently, appointed the same economist to serve on the National Security Association oversight panel. In both the public and private sectors, Behavioral Economics is now being used to advance organisational objectives.”
In Nigeria unfortunately, the importance of research in decisionmaking, let alone fact based data on consumer Behavioral Economics, is grossly ignored, and is reflected in the shallow retail mass market across all sectors of the economy. Access to data from research, data mines, core banking systems or any source for that matter are no good in themselves, if they are not applied strategically.
Ada PhilUgochukwu, Nigeria Country Director for Genesis Analytics, remarks that for the financial services sector, which is now consciously deepening its reach into the mass retail market, and implementing a number of consumer driven financial policies within the banking and insurance markets, there may be an even greater application of Behavioral Economics.
She says that, perhaps, BE is the missing link needed to make sense of financial performance against investments in product and channel developments, transactional services, marketing, pricing and costtoserve its retail customers. Banks and indeed any retail focused financial services firm needs to come to terms with the realisation that consumer “behaviour” rational or not is what drives revenues.
As banks, for example, continue to launch new products, institute new pricing regimes, alternative channels and spend huge sums on advertising; the final choice still lies with the customer and their range of choices are influenced by inherent and usually reoccurring behaviour.