Big data empowers personalised defaults

The growth of ‘big data’ – quintillions of bytes of behavioural data on consumers - now allows for the creation of ‘personalised defaults’, which have the power to customise and tailor a choice, experience, product or service to meet a consumer’s needs more effectively. In a world of so many varied preferences and unending choice many behavioural scientists believe that more tailored and personalised defaults can help to make our lives better and simpler. Cass Sunstein, co-author of Nudge recently argued that ‘personalised defaults are the wave of the future’.[1]

Although companies and governments can use consumer data, demographic information and purchase history data to set defaults in order to structure choice and tailor products and services to individuals, the move towards consumer access to their own data sets represents an exciting new development. For example, there are ambitious plans for consumer access to behavioural data through schemes like the UK government’s midata (where consumers would be able to access personal transaction data in an electronic, portable and machine-readable format), the US government's Smart Disclosure Data Community (which, launched on February 11^th, has made over 400 different data sets available to both consumers and innovators on a unique online platform) and Tesco’s Clubcard Play, through which Tesco plans to develop products and games to give Clubcard-holders access to their own data.

Such increased access could greatly empower consumers, allowing them to analyse their own past preferences and behaviour – which they may not always be aware of - and select an option or default best suited to them, enabling far more reflexive and reflective choices and even prompting behaviour change. Indeed, it can actually facilitate the development of personalised ‘pull’ defaults – where consumers can ‘pull’ together their own highly tailored and customised products and services by setting their own defaults. For example, rather than a supplier presenting them with the default plan, consumers could instead be in a better position to select the most suitable energy tariff for them using their electricity usage data or to choose a new healthcare plan using their personal medical records.

How defaults help to guide choice

Even when defaults aren't deliberately tailored to an individual, behavioural economics shows us that they can nevertheless be very powerful tools to guide choice. They might help us to make the choice that is best for us in the long run, such as a default which automatically enrols us into a retirement savings scheme. Defaults can save us time if we are in a rush – perhaps when we are installing some new software and sticking with the manufacturer’s settings - or save us energy when we're mulling over what to choose or how much to buy as we tend to assume (or hope) that someone else knows what’s best for us. In a world of extreme choice we can often be paralysed by complexity, so at the very least defaults can guide us to make the recommended choice which allows us to feel comfortable that what we have chosen can't be all bad.  

The Harvard Business Review recently discussed avoiding stress by reducing the number of decisions we make during the day and advocated setting our own defaults and routines.[2] It cited an example from an interview with Barack Obama - who is himself a strong advocate of the use of the behavioural sciences - in which he demonstrated one of his own personalised defaults:

“You need to remove from your life the day-to-day problems that absorb most people for meaningful parts of their day… You’ll see I wear only gray or blue suits. I’m trying to pare down decisions. I don’t want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make. You need to focus your decision-making energy. You need to routinize yourself. You can’t be going through the day distracted by trivia.”[3]

Moving from mass to personalised defaults

Up to recently however, many defaults set by the private and public sector have tended to be ‘one-size-fits-all’ – often not the best solution. Consumers can get irritated by generalised defaults and mass marketing as they may not match their preferences, causing them to opt out of them altogether. Or consumers may go with them, sticking with the status quo, even though they may not offer the best choice for their personal situation. For example, consumers often stick with the default settings on a mobile phone, the default energy tariff, the same pre-installed web browser on laptops, or the default contribution rate into pensions. Personalised defaults can help to solve these problems as choices can now be guided by knowledge of individual preferences and characteristics.

Companies themselves sometimes try to personalise and match defaults to their customers, but people can find this level of penetration and analysis of shopping habits unnerving. With consumers now being given greater access to their own behavioural data this could allow them to feel more comfortable and empowered. The RSA has also stressed that behaviour change should ideally be reflexive and self-directed rather than externally directed through nudges and imposed defaults, so empowering individuals with easily assimilated knowledge of their own behaviours is a big step to moving closer to this ideal.[4]

Personalised ‘pull’ defaults – knowing the codes to your castle

Personalised ‘pull’ defaults - where consumers are given access to their own purchase and behavioural data, allowing them potentially to set their own defaults for products and services – are now receiving more attention from both companies and governments. This move towards greater access could not only allow consumers to have a more conscious understanding of their behaviour and make better choices as a result, but could also put them in a strong position to choose their own defaults to enable their lives to run more smoothly and make the best use of the wealth of choice available to them.

The UK government's midata programme seeks to give people access to their personal data (so far in the energy sector, mobile phones, credit cards and bank accounts) in an electronic re-usable format so that they can make better, more informed choices and enable price comparisons. This access will help them to avoid the status quo or one-size-fits-all default choice and select something better matched to their own behaviour or known preferences.

For example, energy companies could release data to their consumers to help them make decisions about which tariffs to use. Similarly, consumers would be in a better position to manage their money, with numerous tools at their fingertips which would allow them to analyse their spending and saving behaviours across different accounts in one place, compare their spending and money management with others of a similar income, location or family size (bringing social norms into play), to access price comparison tools so they can see which provider could be a better match and save them money and be well equipped to seek advice, since they have an accurate picture of their spending which an adviser could base recommendations on.[5]

Some 20 companies have already signed up to participate in the scheme, including Visa, Mastercard, Three, Lloyds, RBS, British Gas and EDF Energy.  Consumer Minister Norman Lamb said:

“midata will allow consumers greater insight into their everyday consumption and lifestyle habits by using applications and intermediaries to analyse their actual behaviours and thereby empower them to make better spending choices and secure the best deals.”[6]

The US has also recently launched its Smart Disclosure Data Community at Consumer.Data.gov. This is a first-of-its-kind online platform containing a wide range of transparent government data sets on consumers and suppliers, from education, food and nutrition, housing and transportation to finance, health and energy. These federal data sets are available to consumers directly and notably to innovators/entrepreneurs who are allowed access to encourage the design of tools and apps to allow consumers to better analyse their own data. For example, a health care tool has been developed to connect patients to the best local healthcare providers for them and another tool utilises anonymous credit card complaint data to allow consumers to monitor suspicious charges on their credit and debit accounts. Similarly, consumers can access different personal data to see how they could save money on bills or make the best education choices.[7]

Behavioural scientist Richard Thaler thinks Smart Disclosure is a win-win for business and consumers, commenting on the problems of the past:

“When it comes to choosing a calling plan or a credit card, it is very difficult to get the necessary data, either on prices or on one’s own utilization, to make a good choice. The same is true for mortgages. If we can make the underlying data available, we can help consumers make much better choices in these and other domains, and at the same time make these industries more competitive and transparent. There are similar opportunities in education, especially in the post-high school, for-profit sector.”[8]

He believes that this scheme will be accelerated in the next few years, to allow access to private sector data in addition to the government data available now.[9]

In the UK there is already a first step towards private sector involvement. Tesco's Clubcard Play[10] is an initiative currently being developed by Tesco that will give customers access to their data records and let them manage their own shopping habits data. Tesco intend to make it fun and simple, using gamification to encourage consumers to engage and achieve goals. In allowing personal access, it could also help Tesco to fully recover from the criticism they faced a few years ago about the Big Brother implications prompted by the launch of its loyalty Clubcard.[11]

Laptops and other mobile devices have also allowed for greater personal customisation. Gone are the days when our search engine opened up to the default page. Personalised homepages like iGoogle have allowed us to set up a homepage featuring our own design themes, weather reports, news headlines, favourite online magazines, bookmarks, even quotes of the day. iGoogle is now being phased out but Google Chrome can be tailored to your preferences using different apps and there are new innovations such as The Little Printer and Undrip which help you to collate your news and social media feed each day.[12] Easyjet has redesigned its homepage on customer accounts so that preferred departure airports and other default choices are pre-selected. When testing the new homepage in its 2012 January sale, EasyJet reported its best ever sales record – with five sales per second.[13]

Technology providing consumers with access to behavioural data - such as midata and Clubcard Play - is empowering. Cass Sunstein and Richard Thaler advocate ‘giving feedback’ to enable informed choice and reflexive behaviour change. In gaining access to our behavioural data set we are receiving feedback on our own behaviours and preferences allowing us to effect behavioural change based on this. There may be things we do that we might decide we should do less of, or more of. We can understand more about our preferences, how much we buy of something and when, often things that we didn’t even know ourselves. Much of behaviour is subconscious so there may be some things that we do or like that we have not even been aware of, in a whole range of areas of our lives. We might also be able to compare ourselves to others with similar profiles, making social norms more commonly known and enabling greater social norm enforcement. Armed with this personal behavioural knowledge we might also be able to approach a supplier with key elements of this data set and ask them to find the best match for us. It’s difficult to know what we want, if we don’t know ourselves truly. Further, since our data set does not lie, we may engender greater respect from companies and advisers who will be less able to persuade us that we need Y rather than X or even Y and X, when all we really want is X.

The future  - If you set (build) the code they will come to you

Looking even further ahead, there are those like Richard Thaler who believe that the consumer will increasingly be in the driving seat, creating demands using personalised defaults and preference knowledge which can be met by any supplier. Doc Searles, author of The Intention Economy believes that rather than customers belonging to a varied set of loyalty accounts for different companies and services, they will manage their own single loyalty program – in which companies can be members. Gone will be the need to carry around a vast set of loyalty cards, and memorise different online access details.   In a recent interview Searles said  “I see it as the economy that arises when customers can express their intentions directly to sellers.”[14]

There are already some signs of this ‘come to me’ economy.  Much Better Adventures, a UK holiday company, invites you to describe your holiday preferences – eg for a skiing trip, preferred resorts, approximate dates, size of group, budget etc – and based on your information local and independent operators can approach you directly. This makes the experience much more tailored and better matched to your needs and allows you to express your preferences just once, rather than with numerous companies.[15] The Open Data Institute has developed a fascinating loan solution: MiLoan allows individuals to ask potential lenders to pitch for their loan business once they have been provided with an accurate picture of the borrower's financial status and other useful information in a “Request for Proposal” which states their loan requirements.[16]

Truly a me-centric future

Innovative developments like these and personalised pull defaults are fascinating since they take technology in a new direction. Technology has, up to now, mainly enlarged our choices which has often proven overwhelming. But big data technology and personalisation actually has the potential to narrow our choice, in a way that will make the best of the options on offer. The things we see are the things we need and that we like. Personalised defaults can allow us to reduce and pare down our choices to the really useful options, the choices and preferences that are well-suited and matched to our needs, leaving us with more time and energy to focus on other things.

Further, the mass of behavioural data collected by companies can actually be deeply empowering to us, the consumer. Allowing us to be more self aware, to help us make more informed, self-directed choices and decisions, to set key codes to our very own behavioural castles – now that's a pretty exciting development.

Read more from Crawford Hollingworth.