Human Behavior Hacks Every Financial Services Marketer Should Know

Human Behavior Hacks Every Financial Services Marketer Should Know

Written by: Danielle Stitt

Email. The cornerstone of any financial services marketer’s kit bag. Not the shiny object it once was after Digital Equipment Corp marketing manager Gary Thuerk sent the first “mass” email in 1978.

However, a quick look at Google Trends and the term “email marketing” has stood the test of time, showing steady interest over the last five years while other marketing channels have ebbed and flowed.

So, if you are going to use email in your marketing mix in 2017, then let’s make sure it’s as effective as possible.

One of the presenters at Inbound16 was Nancy Harhut, who’s won over 150 awards for direct marketing effectiveness (with creds like that she got my attention!), presenting “10 Human Behavior Hacks that Will Change the Way You Create Email”.

Here’s what I learnt.

We all use decision making shortcuts as a way to conserve energy and speed through our waking day. Marketers can use this to our advantage by leveraging the following human behavior hacks to improve the chances your readers notice, open and act upon your email communications. 

Tip 1: Magic words in subject lines
 

A boring subject line is not going to perform as well as a subject line that compels you to click through, right? However, the finance sector is not an industry that can indulge in blatant click-bait subject lines. This is where “magic” words or “eye magnet” words are your friend.

  1. NEW – one of the top 5 most persuasive words (synonyms also include now, introducing, discover, announcing etc.). It appeals to the human brain’s need for novelty, news and newness
  2. FREE – spam filters can catch this so test but Nancy posited the use of FREE can lift open rates by 10%
  3. RECIPENT’S NAME – apparently we all like the look of our own name and Nancy has seen open rates increase by 29% when the recipient’s name was included in the subject line
  4. SECRET – making your readers feel they have information that isn’t widely available saw open rates increase 11% (think “confessions of” too) but check with Compliance first!
  5. ALERT – humans are hard wired to look out for danger… and breaking news… and could lift your open rates by 33% according to Nancy
     

We also have to remember that a lot of email is read on mobile so word length is important - think 35 words or less, and front-loading your “eye magnet” words to avoid them being truncated.

Tip 2: Position your message for a fast response
 

Humans respond to two action-inducing principals: scarcity and exclusivity. We hate to miss out (we didn’t call our newsletter FOMO Friday for nothing!). If your reader feels time-pressed or special, they are more likely to respond. This is where Nancy saw a 17% increase in click-through rates from the inclusion of a countdown clock. 

Tip 3: Ripple effect of the scarcity principal
 

Garnering the first “yes” is the hardest but once your reader has taken that first positive action, it’s easier to encourage them to say “yes” again. The trick to activating the first yes is to make it a small ask. Subsequent yeses are made easier if the first “yes” was public (for instance on social – see Tip 4) and if you remind them they said yes before. You can ask for larger commitments as you go.

Tip 4: The benefit of social proof
 

Decision makers, both personally and professionally, look to social proof prior to making a purchase decision. We trust the opinions of others, particularly if they’re like us. If you can show your reader how others like them have taken up your offer, they are more likely to make a purchase decision.

Tip 5: Negativity can deliver positive results 
 

People are twice as motivated to avoid pain as they are to achieve gain. This is why cash investments paying almost zero interest are so popular after major economic downturns or times of uncertainty. By highlighting the potential pain, e.g. “Don’t let inflation destroy your investment returns”, they open themselves to a solution that helps them avoid a negative outcome.

Tip 6: Availability bias turns doubters into buyers
 

We use our past experiences and memories to decide the likelihood of an event occurring. For example, if your client had a bad experience when dealing with your customer service team, they are expecting they’ll have a similar experience next time. To use this to your advantage, stir your readers’ memories or imaginations before you ask them for a response.

Tip 7: The authority principle to make you look better than your competition
 

Children are taught to respect and respond to authority from the get-go ensuring by adulthood this is well ingrained, making us hard-wired to listen and follow anyone that presents authority. In business, we position brands and spokespeople as leading experts through commentary in the media, releasing research reports, securing ratings and so on. We’re all familiar with the term thought leader, I expect. And your clients respond to hearing from the leading expert. 

Tip 8: The power of “because”
 

This is one of my favourite tips. Nancy referred to psychologist Ellen Langer’s experiment where an office worker jumped the photocopier queue. When the worker asked if they could go ahead of the person in front, the probability of the person agreeing was increased from 60% to 94% if they used the word “because”. It didn’t matter what the reason was, “… because I’m in a hurry” was about as successful as “… because I have to make some copies”. Perhaps try that in the coffee queue tomorrow!

Tip 9: The journalists’ secret that boosts readership
 

The information gap theory is that humans will act to close the gap between what we know and what we want to know. Journalists are taught to answer the 5 Ws + the 1 H i.e. who, what, when, why, where + how to ensure their article leaves no question unanswered. And marketers can encourage action by highlighting an information gap with subject lines like “How to boost your savings”, “Why under-insurance can leave you stranded” or “When using a fund manager makes sense”. 

It’s also worth noting that numbers stand out in a sea of words because they promise ease and order. And if including numbers in your subject line, Outbrain’s study of 150,000 article headlines found that odd numbers are perceived as more credible than even numbers. The exception is 10 and its multiples which also work because they are cognitively fluent.

Tip 10: The Von Restorff Effect
 

In 1933 Hedwig von Restorff’s experiments on memory found that if you want people to notice, make it distinctive. For marketers, Nancy recommended piggybacking on holidays and celebrations, customer birthdays, and anniversaries. People notice and remember things that standout and special days clearly fit into that category. E-commerce and retailers have mastered this with sales around the end of financial year, Boxing Day, Black Friday, Easter etc etc.

However, the major holidays or events can be crowded from a marketing message point of view so Nancy suggested leveraging minor holidays or even inventing your own celebration/ remembrance day which works too (I’ve scheduled in World Compliment Day on 1 March, have you?!).

Carden Calder
Marketing
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Carden Calder is a consultant, marketing commentator, and passionate advocate about the importance of financial decisions in Australians’ lives. Since 2004, she has grown Bl ... Click for full bio

Building a Better Index With Strategic Beta

Building a Better Index With Strategic Beta

Written by: Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF at J.P. Morgan Asset Management

With the global economy warming up, but political uncertainty remaining a constant, it’s more important than ever for investors to position their global portfolios to navigate long-term market volatility. That’s where the power of diversification comes in, says Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies at J.P. Morgan Asset Management and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF (JPIN).

Not all diversified portfolios are alike  


In their search for diversification, many investors turn to passive index ETFs, which track a market cap-weighted index. But these funds aren’t always the most effective way to steer a steady course through volatile markets—and there are two key reasons why.

First, traditional market cap-weighted indices are actually less diversified than investors may think. For example, in the S&P 500, the top 10% of stocks account for half the volatility of the index. Within sectors, while you might assume that sector risk is distributed across the ten major sectors fairly evenly, it is a surprise to many that at any point in time, one sector can be as high as 50% of the risk.

Second, cap-weighted indices come with some inherent weaknesses, including exposure to unrewarded risk concentrations and overvalued securities. So, while these indices provide investors with exposure to the equity risk premium and long-term capital growth, as is the case with any other investment, investors can also experience painful downturns, which increase volatility and reduce long-term performance. For investors seeking equity exposure with broader diversification—and potentially lower volatility—strategic beta indices may be better positioned to deliver the goods.

How do we define strategic beta?


Strategic beta refers to a growing group of indices and the investment products that track them. Most of these indices ultimately aim to enhance returns or reduce risk relative to a traditional market cap-weighted benchmark.

Building on decades of proven research and insights, J.P. Morgan’s strategic beta ETFs track diversified factor indices designed to capture most of the market upside, while providing less volatility in down markets compared to a market cap-weighted index. Rather than constructing an index based on market capitalization—with the largest regions, sectors and companies representing the largest portion of the index—our strategic beta indices aim to allocate based on maximizing diversification along every dimension—sectors, regions and factors. The index therefore seeks to improve risk-adjusted returns by tackling the overexposure to risk concentrations and overvalued securities that come as part of the package with traditional passive index investing.

So, how do you build a better index?


As one of just a few ETF providers that combine alternatively-weighted and factor-oriented indices, our disciplined index methodology is designed to target better risk-adjusted returns through a two-step process.

First, we seek to maximize diversification across the risk dimension. This essentially means that we look to ensure risk is more evenly spread across regions and sectors, which balances the index’s inherent concentrations. As uncontrolled risk concentrations are unlikely to be rewarded over the longer term, we believe investors should strive for maximum diversification when constructing a core equity exposure.

Second, we seek to maximize diversification across the return dimension. Research shows that there are a number of sources of equity returns beyond growth itself. These include risk exposures such as value, size, momentum and quality (or low volatility). When creating a diversified factor index in partnership with FTSE Russell, we seek to build up the constituents with exposure to these factors. We therefore select securities through a bottom-up stock filter, scoring each company based on a combination of these return factors to determine whether it is included in the index. These factors provide access to a broader, more diversifying source of equity returns as they inherently deliver low correlation to one another, providing diversification in the return dimension.

So, whereas traditional passive indices allow market cap to dictate allocations, the diversified factor index seeks to ensure that we minimize concentration to any source of risk—whether it be region, sector or source of return.

How are you currently weighted versus the market cap-weighted index, and how have your under-   and over-weights enhanced risk-return profiles?


Crucially, our weightings don’t reflect specific views on sectors or regions and are instead, by design, the point of maximal diversification. It is important to remember that market cap-weighted indices typically carry a lot of concentration risk—for example, at various points in time, a single sector can explain half the risk of the index when left unmanaged. At the moment, three sectors explain two-thirds of the risk of the FTSE Developed ex-NA Index—these being financials, consumer goods and industrials. In contrast, the FTSE Developed ex-NA Diversified Factor Index—or strategic beta index, which JPMorgan Diversified Return International Equity ETF (JPIN) tracks—is explicitly designed to maintain balance and therefore these sector allocations range from 8% to 12%. In the short term, any concentrated portfolio can of course outperform a more diversified one, if the concentrated bet paid off.

Investing wholly in a single stock may outperform over short-term periods. At other times, it may significantly underperform an index. However, it is well understood that an investor is better off diversifying across lots of stocks for better risk-adjusted long-term gains. The same applies here. From a pure return perspective, if financials, for example, account for half of a cap-weighted index in terms of market cap and have a strong run over the short term, of course, this index would outperform over this period. Over the long run, however, it is fairly uncontroversial to suggest that the more broadly diversified index could achieve better risk-adjusted returns.

Seeking a smoother ride in international equity markets?


For investors targeting enhanced diversification through a core international equity portfolio, JPMorgan Diversified Return International Equity ETF (JPIN) targets lower volatility by tracking an index that more evenly distributes risk, enabling them to get invested—and stay invested.

Learn more about JPIN and J.P. Morgan’s suite of strategic beta ETFs here.

Call 1-844-4JPM-ETF or visit www.jpmorganetfs.com to obtain a prospectus. Carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read them carefully before investing.

 

J.P. Morgan Asset Management
Empowering Better Decisions
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See how ETFs differ from other investment vehicles, learn how to evaluate them, and discover how ETFs can be used effectively to achieve a diversity of investment strategies. ... Click for full bio