Integrating Firms’ Perspectives into Policy Making: A Behavioural Approach
Nudge Turkey undertook a project to increase the uptake of government subsidies by SMEs. Analysis showed our subsidies were used by a limited number of big companies, and government could reach the SMEs who need financial support the most. By interacting more closely with the firms, they clarified the pain points for the SMEs. Based on firms' feedback, organisers created a user-friendly website for explaining subsidies, and sent over 30,000 emails that used behavioural messages to nonapplicant firms.
Nudge Turkey, is the first official body in the Turkish public sector that incorporates behavioural insights into the policy design process. We believe that public policy should be human-oriented and evidence-based. Therefore, our project used behavioural principles and conducted a randomised control trial (RCT), which makes it first of its kind in Turkey.
In Turkey, as in many countries, there is no comprehensive exploration phase where we can gather information about the roots of a particular behaviour. Another reflection of this type of policy design is the language of the legislation and the way of communication. Experts talk the language of experts to explain an issue to people who might have no background in that particular area. By focusing on the citizens, we try to understand the causes of specific behaviours, therefore, the experts take into account the citizen perspective and shape the legislation accordingly. Another contribution is the frequent use of experiments to analyse the impact of different policies with small samples where possible. In the Turkish public policy environment, the conventional policy design does not include testing alternative policy proposals.
Our project was funded by the British Embassy in Turkey. The Behavioural Insights Team (BIT) from the UK provided consultancy and EY Turkey managed the implementation. BIT provided technical assistance on how to set up a nudge unit and how to apply behavioural insights to the issue we selected.
The major goal of our first project was to increase the utilisation of the subsidies, particularly by SMEs. Our analysis showed that 86% of the registered exporters who are eligible for at least one type of subsidy did not get support from our ministry. The data reveal even a more significant problem about utilisation of the subsidies. Our subsidies are used by the big companies who are familiar with the processes and have the necessary resources to manage the application process. However, we can not reach to SMEs who need our financial support the most.
Nudge Turkey's project had three main phases namely explore, intervention and analysis. In the first phase, we randomly chose exporters who did not receive any subsidy and made face-to-face interviews. The survey results indicate 77% of the firms did not know how to apply, 43% of them received positive feedback about the subsidies and more importantly, 62% believe that even if they apply they can not receive the subsidy. The main arguments of the last group include reasons such as they can not finish the application process due to complex procedures, they do not have sufficient resources to successfully complete the application process or they can not receive the subsidies due to their political association. It is important to note that these firms have never gone through the process and at least half of them received positive feedback from other firms. Therefore, Nudge Turkey decided to focus on awareness and accessibility. They designed an intervention that increases awareness for the subsidies but also encourages them to apply by addressing their concerns and prejudices.
In the intervention phase, we designed our randomised control trial (RCT). They first identified the target firms and randomly allocated these 30,000 nonapplicant firms to 1 control and 4 treatment groups.
Two separate tools were created for intervention: The e-mail messages and the subsidy website (kolaydestek.gov.tr).
Four different e-mail messages were designed.
1. Standard email – this is a basic email that introduces what the subsidies are and sets out that the recipient is likely to be eligible.
2. Message from a Minister + reciprocity – this message is directly from the Minister and seeks to create a sense of reciprocity between the Minister and the business
3. Honest + salient benefits + preparedness – this message builds on the previous one by also preparing the recipient for their application with five simple steps.
4. Testimonial - this message is directly from a business that has received the subsidies.
In addition to the e-mails, a new website has launched in order to provide information to the SMEs. The main advantage of this website is the way of providing information. There is no reference to the sophisticated legislation. The main takeaways are explained in a few sentences. The application process is shown by infographics with a few steps. The application documents can be directly downloaded from this website. Also, the firms can contact directly the experts for each subsidy.
As of submitting, Nudge Turkey were in the final phase, the analysis. The preliminary results show that applications increased by 33% with the testimonial message compared to the control group (at the 8% significance level)
What Makes Your Project Innovative?
Two main concepts make this project innovative; being human-oriented and evidence-based.
For the first time in Turkish public policy context, an official public body used behavioural insights to shape public policy and conducted an RCT for impact assessment. They improved the way of delivering public service based on the feedback they received from the exporters and created a new website that is designed according to the pain points of the firms. Second, a short video was filmed in which the Minister himself conveys a short statement that targets the cognitive biases of the firms. Finally, four different messages that include behavioural insights was sent to 30,000 firms to increase awareness and motivate them to apply to our subsidies. On the evidence-based policy side, organisers separated the firms into control and treatment groups to analyse the impact of our project and to scale up the successful messages.
What is the current status of your innovation?
The final assessment was done in February 2019. This was due to the fact that the firms needed time to find the appropriate subsidy for their needs and then apply for it. For example, a firm might need to attend an international exhibition. The firm needs to attend the exhibition, then apply to the ministry with the necessary proofs.
However, a preliminary analysis was done in December 2018. This analysis showed that the firms who received testimonial messages have 33% higher applications compared to the control group, who did not receive emails (at the 8% significance level).
Also, Nudge Turkey compared e-mail openings and link clicks data, which indicate different responses to the e-mails. The preliminary results show that the e-mail from the minister has the highest opening rate, which might imply Messenger effect. In terms of the link (to kolaydestek.gov.tr) clicks, the standard e-mail with very brief information has the highest ratio.
Collaborations & Partnerships
The first set of important partners were the firms that provided feedback about the applications process of the subsidies. Both the email messages and the new web site was designed based on their feedback.
Second, the implementing authorities, which can be defined as the local offices of the ministry, were partners. Organisers also got feedback from the experts who interact with the firms. Finally, the BIT consulted our department for the whole project from design to analysis.
Users, Stakeholders & Beneficiaries
The main beneficiary of the project is the SME exporters. Nudge Turkey's messages motivated them to apply for the subsidies, and the new website provided a very user-friendly way of communicating. Since March 2018, more than 120,000 unique users visited our website.
The second beneficiaries are the experts in the ministry. The exporters frequently contact the experts to receive general information about the subsidies. The new website has become a common tool to easily explain the subsidies, thus meaning less time is taken up of the experts explaining general information.
Results, Outcomes & Impacts
Google analytics show that more than 120,000 single users visited the new web site. When the monthly visit to the new website is compared with the related page on the ministry web site (trade.gov.tr), there is almost 10 times higher traffic. This clearly indicates that the firms are using the new website to get information.
Second, an RCT was conducted to analyse the impact of the email messages. The preliminary results show that applications increased by 33% with the testimonial message compared to the control group (at the 8% significance level).
The initial work also informed the future direction of the project: first, Nudge Turkey will update the communication channels based on the success of the new website, and other subsidies will be added to the website. Second, the most successful email message will be replicated to communicate with the firms.
Challenges and Failures
One of the main challenges was changing the application procedure in April 2018 just after we opened the website and sent the emails. Many firms could not apply to the subsidies due to technical problems, even though Nudge Turkey attempted to create awareness and provide simple information about the subsidies.
The second difficulty was the lack of proper databases to track the applications of the firms in our control and treatment groups. Just to accomplish this, organisers created a totally new online interface (davranissal.ekonomi.gov.tr) so that experts in the implementing authorities can submit information on new applications.
Conditions for Success
Organisers believe one of the most important conditions is to control the experiment's environment. New procedures, legislation etc, which is beyond your control can seriously disrupt your experiment by putting your analysis at risk.
Another vital issue is the cooperation with the partners. Many things can go wrong, but strong communication with the partners (in this example, the local offices) can help policy-makers to overcome many challenges.
Also backing by the top management is vital. Innovation requires changing many traditional approaches which create resistance. This can be solved through simple and clear messages to the top management which can show the importance and value added of the project
The results had not been shared with other departments and public authorities. Therefore, it was too early to see a replication of the email messages. However, the success of the new website kolaydestek.gov.tr is apparent, and some departments within the ministry were therefore planning to add their subsidies to the newly created website.
Organisers learned that communication with the top management and the partners is vital for overcoming resistance and handling challenges regarding the experiment.
Also, Nudge Turkey put significant effort into gathering reliable data. It is important to plan the data collection process right at the beginning.