We’ve been helping firms assess whether their products, journeys, and communications ‘exploit’ consumer biases, emotions, and vulnerabilities, writes Tim Hogg, director at consumer group and consultancy, Fairer Finance. The FCA expects firms to do this analysis as part of their compliance with the Consumer Duty.
One colloquial name for these projects is ‘sludge audits’. Although, as we will see, that isn’t necessarily the best name for this type of rigorous behavioural science analysis…
Here are five ways to conduct a good sludge audit.
1. Sludge is a subset
A sludge is where there is excessive friction, discouraging consumers from making decisions in their best interests. For example, making it harder than necessary to exit or cancel a product. You don’t want to make good decisions hard.
Excessive friction is a common type of harmful choice architecture. Equally, there could be insufficient friction. You don’t want to make bad decisions easy.
More broadly, there are other ways in which your choice architecture could be exploiting biases and emotions. It is important to identify these.
We use academic frameworks to classify different types of deceptive pattern (or ‘dark pattern’). This ensures that we detect all the potential ways in which the choice architecture could be harmful to real consumers.
So, sludge is just a subset of what you want to be identifying.
2. Broader than biases
Behavioural biases affect consumer decision-making in predictable ways. For example, relative to a reference point, we typically find that losses weigh more heavily than gains. This is called the ‘loss aversion’ bias.
The word ‘bias’ describes a deviation from the standard (and inaccurate) economic model of consumer decision-making. However, biases are just one of many factors influencing our decisions and behaviour.
For example, thanks to advances in neuroscience, we know that emotion is a powerful driver of decisions. Often, it’s only by considering the role of emotion that we’re able to identify harmful choice architecture.
Other important factors include: the wider social context; the economic context and scarcity; our intrinsic motivation; etc. In our experience, it’s important to consider all these factors. Practical behavioural science models such as COM-B and ISM can help by highlighting certain factors, but there is no single perfect model.
So, when it comes to sludge audits, remember – it’s broader than biases.
3. No neutrality
We will always be working within our cognitive limitations. We will always be subject to behavioural biases, emotion, social context, etc. And the choice architecture will always be influencing consumers’ choices, whether we like it or not.
In the words of Nobel-laureate Richard Thaler and his co-author Cass Sunstein, there is ‘no such thing as neutral design’. No matter how you design the choice architecture, prominence will be given to some information.
So, good sludge audits do not detect choice architecture that fails to be neutral. Rather, good sludge audits detect choice architecture that leads to poor consumer outcomes.
4. Mapping is meaningful
The first stage in a sludge audit is to map the customer journey. Gather the data on the number of steps and actions required to make a purchase decision, or use the product in a certain way, etc.
How many clicks, screens, scrolls are required to repay credit or opt-out of autorenewal? Benchmark this against journeys and decisions that are in the firm’s commercial interests. Can the level of friction be justified? It’s hard to do this without granular mapping of each journey.
So, journey mapping is a meaningful way to start a good sludge audit.
5. Dealing with discomfort
Applying behavioural science frequently forces us to revisit the status quo, and reimagine what well-designed products and journeys should look like. This is not always comfortable.
As James Daley (our managing director) says: ‘If you’re not feeling uncomfortable, you’re not doing the Consumer Duty right.’ The same could be said for sludge audits. We often start by warning people to ‘get used to the feeling of mild discomfort’. Thankfully, it will be worth it. Better consumer outcomes will help you avoid regulatory ire, and thus create a sustainable business model. Better consumer outcomes will generate higher levels of customer satisfaction, trust, and retention. Better journeys will help you compete more effectively for new customers. Hopefully these five ways to conduct a good sludge audit inspire you to go and do the same.
