Behavioral science to drive market participation

Behavioral science involves understanding what influences behavior. It can be an effective ally that enables small businesses to participate more effectively in digital marketplaces. This brief outlines insights and best practices on how to use two behavioral science techniques, digital nudges and gamification, to encourage digital adoption by small businesses. A “nudge” is an intervention that gently steers individuals toward a desired action. Gamification is the application of typical elements of game playing (e.g., point scoring, competition with others, rules of play) to other areas of activity to encourage engagement with a product or service. These two techniques have been found to be effective at encouraging and sustaining behavior. 

Nudges and gamified design elements can support small businesses in adopting and using digital tools and solutions that increase their participation in digital marketplaces and, in turn, reach more customers and earn more money. For example, solutions that employ digital nudges can offer altered decision contexts or persuasive cues to small business owners, encouraging them to adopt positive behaviors that increase their participation online. Further, game design principles—such as leaderboards, points, or rewards— have the potential to motivate and incentivize small business owners to transform how they interact with digital marketplaces. 

This brief captures evidence and best practices from organizations focused on behavioral science, research from similar case studies and applications, and insights from existing Mastercard Strive projects.  

When done in a way that respects a small business owner’s autonomy and decision-making agency, behavioral science techniques have the potential to encourage greater participation in digital marketplaces, enabling entrepreneurs to tap into a wider pool of opportunities and customer reach. Below, we outline some insights and good practices we’ve identified. As a living record of our learning, we will update this insight brief as we uncover best practices through our partners and programs.

Pilot as many nudge variants as possible.

When it comes to nudges, research suggests that testing multiple variants is advantageous so long as the sample size of target users can support this. For example, an analysis of previous interventions leveraging nudges found that projects tend to test between three and five variants (some upward of seven) during their pilot phases to determine which is most effective in achieving the desired outcome. 

Establishing a sample size that can support testing multiple variants of nudges and gamification techniques can be advantageous. Additionally, recognizing that different nudge variants can lead to different behavioral outcomes and effects, researchers suggest that testers should agree to prioritize the results of each variant and the next steps in the pilot phase.  

Timing matters.

In addition to piloting multiple variants to test whether nudges lead to desired outcomes, timing plays an important role with nudges in two ways. The first is timing nudges to arrive at the most appropriate point of need for small business owners. These just-in-time nudges bring a behavior to the top of mind and can be beneficial at times when a behavior may deviate from the desired outcome. Given how busy and time-poor small business owners can be, nudges can serve as important reminders of the behavior. The importance of timing plays a role in a variety of different contexts: 

• For example, in an intervention with fintech Digit, Common Cents Lab found the timing of an SMS nudge affected the proportion of a tax refund that users were willing to save in Latin America. Those who received the SMS nudge at the start of tax season were willing to save more of their tax refund (22%) compared to those who received the SMS nudge after receiving their tax refund (12%). 

• Google found that sending a simple nudge email to managers on the Sunday before a new hire started led to the new hires being “fully effective 25% faster than their peers.”

• Boost Capital, our Mastercard Strive partner in Cambodia, found that uptake of financial education content is better when it is delivered at a relevant time. For instance, 35% of small business customers who were offered content after their loan application was rejected clicked over to consume educational content. However, when a small business customer was in the middle of a loan application and was offered financial education content, the uptake rate rose to 57%. 

• In partnership with UC Berkeley and Arifu, which is also a Mastercard Strive partner, researchers found that changing the timing of SMS training to micro-retailers led to a higher intensity of received training by the treatment group (who received the training in December 2020, compared to the control in November 2020). They suggest that this higher level of engagement may have occurred because the holiday season offers micro-retailers more spare time and opportunities to engage in training, as well as perceived greater value in training due to it being a favorable demand period.

Beyond delivering nudges at the most appropriate time of need, the time of day is also an important consideration. New Ventures, a Mexico-based investor and accelerator, monitored what time of day and which days of the week target users were most responsive to nudge messages. Messages sent in the morning led to more than 50% more interaction from users than those sent in the afternoon. Similarly, our Mastercard Strive project in Southeast Asia found anecdotal evidence that nudges sent to merchants during peak business hours were significantly less successful than those sent during off-peak business hours. 

To ensure nudges lead to desired outcomes, providers should identify the key points of need for the small business owners, as well as monitor and test the appropriate time of day/days of the week to send nudges to project participants. 

Appeal to intrinsic and extrinsic motivations.

Motivation is an important factor in encouraging behavior change. Gamification techniques should include both intrinsic (originating with the user) and extrinsic (originating from a source other than the user, such as rewards or incentives) types of motivation to keep users interested and to encourage a lasting effect. For example, language learning app Duolingo recognizes the importance of integrating both types of motivation into its features; it uses leaderboards and rewards to satisfy extrinsic motivators and invites users to set their own goals to meet intrinsic motivators.

Goal-setting as an intrinsic motivator technique has been shown to have positive effects on users. For example, Common Cents Lab found that enabling users of the gig-working platform Steady to set earning goals resulted in an additional $7 to $20 per week for each user. This ‘“Goals” feature was rolled out to Steady’s entire user base and on average, 36,000 users increased their monthly income by $28 to $80. 

Integrating gamification techniques that appeal to both intrinsic and extrinsic motivations can lead to effects that encourage lasting digital adoption for small business owners. 

Automate behaviors and capitalize on inertia.

Generally, research suggests that when it comes to choice architecture for nudges, making a behavior automatic has the biggest potential for sustained behavior change. Employing default options, perceived default options (or “defaultless defaults” as some researchers refer to them), auto-enrollment, and predefined values have led to some of the largest effects on behavior, according to recent systematic reviews. Similarly, research suggests that inertia can be a powerful influence on behavior change. 

• Learnings from BlackRock’s Emergency Savings Initiative find that this type of choice architecture observed a median uptake rate four times higher than interventions where users had to take action proactively.

• Common Cents Lab found that users who were prompted with predefined savings values were more than twice as likely to create a savings goal compared to those in the control group.    

• Working with the Money and Pensions Service in the UK, the Behavioural Insights Team found that a soft default message (e.g., “We’ve opened an account for you.”) led to four times as many users signing up for payroll saving schemes. Additionally, inertia led most users to stick to the preferences they selected when they signed up. 

• Researchers experimented with an opt-out presentation for enabling a smartphone app. This “defaultless default”—presenting information to users as if it were a default—had a large effect. Seventy-nine percent of users enabled the app in the opt-out presentation, while just 28% enabled the app in the opt-in presentation.

Informational-based nudges sent to micro-retailers could also encourage usage and digital adoption. For example, our partner project in Nigeria is testing whether these types of nudges containing meaningful information for women micro-retailers (such as pricing alerts, stock availability, and margin calculators) lead to an increase in micro-retailers making digital orders. After identifying that micro-retailers were worried about perceived high data usage with self-ordering, our partner has tested nudges to encourage self-ordering by communicating how data-lite their system is. Roughly one-third of the women micro-retailers responded to the nudge and tried self-ordering for the first time.

Researchers have also experimented with the role of color in nudges by using familiar colors from other commonly used digital interfaces (in this case, blue “continue” buttons). They found that changing colors to match habitual patterns in existing digital interfaces appeared to increase adoption by accelerating user decisions.  

We encourage providers to assess whether defaults, predefined values, or inertia could be utilized when developing the choice architecture for nudges to encourage small business owners to participate in digital marketplaces.

Offer valuable incentives and rewards.

Incentives and rewards can be advantageous for increasing the adoption of desired behaviors and encouraging small businesses to participate in digital marketplaces. In Brazil, research found that a business training program for micro-enterprises had no effect on their business practices. However, coupling the training with small monetary incentives and nudge reminders significantly increased the adoption of business practices by micro-enterprises. Similarly, research from the Behavioural Insights Team found that monetary incentives increased sign-ups to payroll savings, which was consistent with other studies that suggest prize draws are powerful for promoting behavior. Additionally, a key learning from our partner project in Indonesia found that offering entrepreneurs incentives and rewards was a key motivating factor for completing the WhatsApp-based program. 

Research and literature on incentives and rewards finds that:

• People tend to prefer smaller, more regular prizes, and these may boost uptake more than occasional larger rewards. For example, Duolingo balances smaller and larger rewards by offering users a pleasant sound and celebratory animation after completing each exercise in the app. They then offer a larger reward in the form of unlocked content or in-game currency. 

• Research on gamified loyalty programs found that participants prefer rewards that involve self-benefits (in this case, free coffee and food) compared to rewards that benefit others (such as a donation to a community service). 

• Further, user research from our partner project in Brazil found that users may also value proportional rewards (e.g., watching a 10-second video earns them 10 points) in addition to diversified products that they could choose from (such as monetary prizes, cash back, or credit that can be redeemed for items), provided they have a good perceived value. 

• Rewards can encourage entrepreneurs further along the user journey by rewarding certain stages of digital uptake. In India, Hindustan Unilever Limited’s (HUL) Shakti project offered women entrepreneurs “Ushop Points”—cashback rewards that were redeemable against future orders based on digital progress.

• Our partner project in Indonesia addressed data affordability as a presumed barrier to learning by offering participants a digital or mobile credit incentive after completing the program. Further, the project rewarded top-scoring participants with an additional digital cash prize as well as promotion of their small businesses via social media channels.

Where providers are leveraging rewards and incentives to drive the adoption of desired behaviors, they are encouraged to ensure these rewards have strong perceived value for the participating small businesses and determine whether smaller rewards might also be appropriate, which can be earned more regularly for continued motivation towards digital adoption. 

Gamified elements for consideration

While existing case studies and literature on gamification from the Center for Inclusive Growth’s network and within Mastercard Strive’s ongoing projects tend to focus on applications for financial services, there are some considerations that may be helpful for encouraging small business participation in digital marketplaces.

• Our partner Flourish Fi identifies three types of gamified elements that can be utilized by financial services providers: points and rewards offering instant gratification, which can be redeemed for cash back and/or prizes; progress bars and levels to track progress and encourage continued engagement; and challenges and gamified quests to “encourage motivated clients to achieve their goals.”
• Similarly, participants of Filene Research Institute’s FinTech Catalyst Incubator workshop prioritized 4 (of 12) game mechanics that could be integrated into both member-facing and staff-facing applications for credit unions: Quests, Trophies/Badges, Leaderboards, Reward Schedules.
• To incentivize mobile money agents in Indonesia, local bank BTPN leveraged gamified elements in “Susan,” an agent empowerment smartphone application. The app featured a points-based program with successive levels and a leaderboard. The most popular features for agents were checking and redeeming points along with incentive reports.  

As we continue to learn more about gamification techniques that can drive desired behavior outcomes and encourage small businesses, we will share our insights.

Supporting small businesses to adopt and use digital tools and solutions that increase their participation in digital marketplaces can enable them to reach more customers and earn more money. Behavioral science techniques have the potential to encourage greater participation in digital marketplaces. As we learn through our program and partners, we will continue to update these insights.