How psychology influences business travelers’ choices

Behavioral economics looks at how people make decisions about what they’ll buy and how much they’ll pay. It examines what influences our choices for purchasing everything from laundry detergent to airline tickets. Perhaps the most surprising aspect of behavioral economics is that it runs counter to what you may have learned about economics in school. The reality is that buyers don’t always behave as they should in a marketplace based on pure supply and demand. Rather, we allow other factors to drive our decisions. What does that mean for business travel? The upside is that travelers can be influenced to …

Behavioral economics looks at how people make decisions about what they’ll buy and how much they’ll pay. It examines what influences our choices for purchasing everything from laundry detergent to airline tickets.

Perhaps the most surprising aspect of behavioral economics is that it runs counter to what you may have learned about economics in school. The reality is that buyers don’t always behave as they should in a marketplace based on pure supply and demand. Rather, we allow other factors to drive our decisions.

What does that mean for business travel? The upside is that travelers can be influenced to make better choices about their trips, says David Coppens, who teamed with fellow BCD Travel executive Kathy Bedell to lead a well-attended session on behavioral economics at a recent Association of Corporate Travel Executives conference in New York City.

“The reality is technologically savvy business travelers make decisions very differently than their counterparts did just a few years ago,” Coppens says. “If we can better understand how they make decisions, then we can figure out ways to influence their choices.”

The research behind this decision-influencing strategy comes from the book Predictably Irrational, by behavioral economist Dan Ariely. In the book, Ariely says psychology is the secret to gaining influence that can change behavior.

BCD Travel has created its own book on behavioral economics—this one pegged to the business travel industry. The Traveler Management Survival Guide maps out scenarios (such as those shown below) for using behavioral economics to strengthen the effectiveness of travel programs.

Now, BCD Travel is working with ACTE, a group of corporate travel programs and some of those companies’ most frequent travelers to field test how to turn behavioral economics theory into money-saving reality.

Participants are spending the next few months trying out these interesting new approaches to managed travel to determine their real-world effectiveness and relevance. They’ll measure the results to show value and to help make these concepts tangible to corporate leaders. The plan is to present early findings at an ACTE conference in Barcelona in October.

Behavioral economics on the road

Business travel scenario No. 1: Use decoy pricing

Behavioral economics: When presented with two options of similar quality, consumers will choose the lower-priced one if a third, much cheaper option is also on offer.

Lesson for travel management: Think about a booking tool that displays all the accommodation options from a company’s preferred hotel program for a particular city. If company policy is to stay in four-star hotels, then including a lower-priced, three-star option (even though travelers may not choose it) will encourage travelers to book the lowest-priced four-star option.

Business travel scenario No. 2: Validate lower-priced options

Behavioral economics: This principle is linked to decoy pricing. Consumers usually choose between two similarly priced options and bypass the third option if it is not directly comparable with the other two. This is true even if the third option is actually the most appropriate.

Lesson for travel management: Let’s say a policy allows travelers to stay in upscale hotels. But the company wants to save money by encouraging mid-market accommodation. It should offer at least two mid-market hotels in each city so these hotels lend each other perceived validity. Alternatively, the company could discourage the use of upscale hotels by offering only one upscale option per city.

Business travel scenario No. 3: Establish anchor prices

Behavioral economics: The first price to which buyers are introduced becomes their mental anchor for pricing. Even though this benchmark price is arbitrary, it dictates how much they are prepared to pay for related products and services.

Lesson for travel management: For the first 12 months of employment, the company might require junior staff to fly economy class and stay in midscale or economy-tier accommodation. In addition, HR might build a conversation about appropriate travel spending and trip avoidance into orientation sessions. The aim: To set lower anchor prices and condition employees to become frugal travelers from the start.

Business travel scenario No. 4: Limit choices

Behavioral economics: Purchasing indecision can derail buyers who will look for additional options even after finding an acceptable price.

Lesson for travel management: Yes, there can be too many choices—particularly when it comes to business travel. An employee’s time equals money, so it’s important for a company to curb buying indecision that can hamper productivity. One good way to do that is to limit the number of options travelers see on their booking tool. This strategy works in tandem with the other behavioral economics strategies above. The goal is to give travelers fewer options and steer them toward the right choice.

icon-electricWant to learn other ways to strengthen your travel program by influencing business travelers? Read BCD Travel’s latest white paper, Traveler Management: How to influence your employees to plan, book and travel smarter.

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