Connecting with passenger preferences
How using behavioural economics to understand decision-making could help reshape the passenger experience
Are we really rational decision makers? When we imagine ourselves purchasing a flight, most of us think we are. We assume that, when presented with different choices, we reason carefully, and then pick the best (read: most rational) option. This is not to say that our emotions play no role, but rather that, as buyers, we are able to consciously access all our considerations, the sentimental ones included.
Much of classical economic theory not only supports this idea – it is founded upon it. But a relatively new field called behavioural economics suggests that this isn’t really true.
By blending economic frameworks with psychological principles and neuroscience, proponents of behavioural economics have unearthed new models for understanding human behaviour, which has in turn massively impacted everything from government policy to marketing strategies.
“Some of the most interesting things are happening at the intersection between disciplines rather than within them,” says Daniel Bennett, a Behavioural Economics Senior Strategist.
“Behavioural economics is a field of study concerned with the motivations behind why people do what they do.”
So what can this new approach to understanding consumer behaviour teach us about airline passenger preferences?
In brief: What is behavioural economics?
It’s a cross-disciplinary approach to understanding how consumers make decisions. It blends insights from psychology, neuroscience and other fields to create a complete picture of human behaviour as it relates to consumer choices. Its principles include the following.
- Social Proof: The influence the behaviour of others exerts on our own behaviour.
- Anchoring: When initial exposure to something (usually a number, but not always) serves as a reference point that influences our subsequent perception of value.
- Loss Aversion: A heuristic that refers to the observable tendency of people to prefer avoiding losses to acquiring equivalent gain.
- Endowment Effect: A theory to explain Loss Aversion that suggests people ascribe more value to things merely because they own them.
- Habit: In psychology, a regular behaviour or tendency that partially operates on a subconscious level and is thus hard to give up.
- Availability: A heuristic that describes the propensity for people to rely on the first examples to come to mind when making a decision, as opposed to employing deductive reasoning.
The social proof is in the pudding
As we rely on being online more and more in our daily lives, it’s perhaps unsurprising that customers increasingly expect inflight connectivity.
Lalitha Sivanaser is the CEO and Head of Inflight Entertainment and Connectivity at AirAsia’s inflight entertainment and connectivity platform, ROKKI. According to Sivanaser, AirAsia receives about 300 calls a month from passengers asking whether their upcoming flight includes Wi-Fi capabilities. And Sivanaser says the number of times she’s asked this question continues to grow.
Moreover, two thirds of passengers responding to the 2018 Inmarsat Inflight Connectivity Survey reported that Wi-Fi onboard was “an absolute necessity.”
Behavioural economists like Bennett say these new preferences could have a substantial impact on what airline customers expect and how they behave.
Consider a landmark study conducted by the United Kingdom’s Behavioural Insights Team. Tasked with getting more people to pay income tax punctually, they sent out two letters to taxpayers. One bore the message, “9 out of 10 people in your town pay their taxes on time,” while the other did not.
Impressively, recipients of the letter including this message paid their taxes 23% faster than those who did not. This begs the question: why
To answer this sort of question, behavioural economists rely on what’s called a ‘heuristic.’
Behavioural economists have shown that heuristics are at the root of many irrational decisions we make as consumers. In general, a heuristic is an overly simplified rule we rely on to make choices, ‘a rule of thumb.’ It may work in most circumstances, but can also prevent us from making an entirely rational choice in certain conditions. A heuristic is a kind of thinking shortcut – but it falls short of logical reasoning.
“If we had to manually process all the information that our heads receive we would be exhausted by about 8 o’clock in the morning,” says Bennett. “As our world has become more complex, we’ve developed mental shortcuts to help us manage this information overload. Heuristics are the invisible rules in our head that our brain uses to work stuff out.”
In the case of the taxpayers, the heuristic at play is called a Social Proof. Essentially, this heuristic describes the phenomenon of looking to others’ actions to gauge how we should behave ourselves. Rather than make our own decision, we reference those made by others and conform. Sometimes we do this when we’re unsure how to behave; other times, it’s because we care about being accepted or ‘fitting in.’ In both cases, our individual preferences take a backseat.
The Social Proof heuristic is useful for predicting future passenger behaviour relating to IFC.
“We know people don’t make decisions in a vacuum, they’ll be influenced by the behaviour they see around them. So, as an increasing number of airline customers connect to Wi-Fi onboard, then other passengers will see email inboxes, instant message apps and web browsers over their shoulder,” says Bennett.
Raising our expectations above 30,000 feet
In general, what we expect in the sky is not what we expect on the ground.
For example, for many years, airlines did not allow you to bring outside food on to planes, so the novelty of eating an infight meal was part and parcel of air travel.
However, as airlines have relaxed their policies on bringing food on to planes our expectations have shifted accordingly. Some of us may prefer to grab a sandwich, or sometimes we may opt to opt for whatever the airline prepares. We now have more choices, which is to say that passengers have more freedom to fly however best suits them.
Nowadays, airlines are grappling to adapt to passengers’ tastes as they relate to inflight entertainment (IFE). Because as the availability and usage of IFC increases, passengers will have more choices.
Right now, IFE is a nice plus for any passenger. A bonus. But open access to the internet means free access to streaming services – and even the best selection of television shows and films can’t compete with the ability to watch virtually anything.
According to Bennett, another heuristic called Anchoring can help us make predictions about passenger preferences here. Speaking broadly, Anchoring is a heuristic that observes how our judgments are skewed by what we’re first exposed to.
“An anchor works relatively and not absolutely,” says Bennett. “That means people will judge their Wi-Fi experience relative to the best or worst they’ve experienced.”
This is to say that the satisfaction of a strong and reliable connection on one flight will be much higher if the passenger has had a poor experience on a previous flight. Of course, this works in the reverse too, so Bennett says airlines should be mindful of managing expectations.
“As soon as people rely and expect a service as standard, it becomes a hygiene factor – one that works both ways.”
In essence, once airlines create the expectation (and anchor) of good Wi-Fi, not offering worthwhile IFC will feel like a slap in the face for passengers.
When a straightforward pricing model doesn’t yield straightforward results
Another area where behavioural economic insights have crept in is in pricing models – and the resulting strategies are now employed across many industries.
Say you’re buying something and you’re presented with three pricing tiers. According to an old-school economic understanding, you’ll likely consider the relative value of each option and choose the best deal according to your needs.
To test this idea, let’s consider how one airline sells Wi-Fi to its passengers.
This airline offers three levels of service, basic at €3, medium at €7 and high at €12. So how do passengers decide which of these three options to select? According to Bennett, this decision is largely independent of what passengers actually want from their Wi-Fi.
“The heuristic of Extremeness Aversion explains that we like to go for the middle option. We don’t like the cheapest or the most expensive, the middle feels normal, popular and a safe bet,” says Bennett. “So, offering three options is powerful. It nudges you up a size.”
So when we’re being sold IFC, and we’re presented with three prices, most of us will be unconsciously nudged to the ‘middle’ option – regardless of what we actually plan or want to do online.
But other airlines, such as JetBlue in the US, are committed to offering IFC free of charge. (JetBlue is the only carrier to offer free and fast Wi-Fi to every passenger.) When flying with JetBlue, being connected becomes an essential part of the experience – just as an inflight meal used to be. And so for American passengers for whom IFC is important, JetBlue is a favourite.
Now an increasing number of airlines are seeking to offer IFC for free. According to Bennett, this is likely an effort to indulge our habits on the ground while we’re in the sky.
“Our habits are a key area for psychologists to look into, as they largely operate in our subconscious brain,” says Bennett. “Our habits work beneath our conscious which means we’re not as in control of them as we’d like to be. This is an important to consider when looking at mobile habits on board.”
To say that our smartphones have become a habit is an understatement. Indeed, the average person in Britain now touches their smartphone more than 2,000 times per-day – even though half of all British people didn’t own a mobile phone in the year 2000.
As our phones demonstrate, if we decide to engage in a behaviour enough times, it becomes a habit, something we do automatically. This may in part explain why 67% of respondents from the Inmarsat survey said they would likely rebook a flight on an airline that provided inflight Wi-Fi.
There’s no free lunch, but if there is I’ll trade it for Wi-Fi
Another interesting finding from the Inmarsat IFC survey is this: the majority of passengers reported that they would happily give up their complimentary alcoholic beverage if they received free Wi-Fi in return.
This is a surprising result in light of a heuristic called Loss Aversion. Loss Aversion describes our tendency to value something we already have more than something we don’t – even when it’s not a particularly valuable thing.
To illustrate this concept, imagine you’re about to fly to Dubai. You expect your seat will be able to recline. Now say someone sitting behind you wants to purchase the room affected by you leaning back in your chair. You might ask for £50.
Now, in another scenario, you’re asked how much you would pay to keep the person in front of you sitting up straight. You will most likely ask for much less than in the first example. You might be willing to spend £25 for the extra legroom.
Experiments replicate this very situation and the results are always the same. Most of us will demand much more money from someone seeking to buy something from us than we would pay for it ourselves (an indication of how much we actually value it).
In fact, Loss Aversion causes us to place disproportionate value on things we already own – even if that sense of ownership is abstract or tenuous, such as leg space. We’re biased because we consider it ours. (Behavioural economists call this overvaluing the Endowment Effect.)
With the heuristic of Loss Aversion in mind, one might suspect that trading Wi-Fi for a free drink would be difficult – as passengers are people, and people are generally disinclined to give up something they already have. And, due to the resulting Endowment Effect, they will also expect more than they actually think it’s worth to part with it.
Assuming this is true, passengers must consider being connected on Wi-Fi to be substantially more valuable than a guaranteed alcoholic drink.
Taking this idea a bit further, it’s safe to assume that, as the availability of IFC increases, passengers’ expectations will change accordingly. More and more of them will expect Wi-Fi as part of flying. So not providing wireless internet may soon be the equivalent of not providing a seat that reclines. An airline, in other words, that hasn’t met passenger expectations.
The Availability heuristic describes our tendency to rely on the first example that comes to mind when being asked about a particular topic. This suggests our inflight expectations are largely determined by what comes to mind first.
But as more airlines are equipped with better and better Wi-Fi, the Availability of connectivity, according to Bennett, will increase in passengers’ minds.
“Our expectations are largely based on social norms, and what we think others expect,” says Bennett. “If we think other people expect onboard Wi-Fi and that ‘it’s a thing,’ so to speak, then we’ll start to frame Wi-Fi as a loss if we don’t have it, rather than a perk when we do. The framing is key.”
That almost all aircraft are wirelessly enabled is only a matter of time. The only question now is which airlines will take advantage of being well-known (and then re-booked, as the Inmarsat survey suggests) for offering fast, reliable IFC.
And in terms of potential, this is only the beginning. As more passengers connect on board, airlines could be a reliable source of personal data. This also means they can increasingly deliver a personalised experience. What’s to prevent high-end duty free shopping in the air – or a digital catalogue that exactly matches a passenger’s preferences?
We could soon be buying anything, even a new car, up in the sky. Because as technology changes, so too does our behaviour.