Have you ever noticed how sometimes you make decisions in a blink of an eye? Or maybe sometimes you follow the crowd unconsciously? Recent studies in cognitive psychology and behavioral economics suggest that over 90% of our decision-making is done daily unconsciously and automatically . Here are ten powerful nudges you can use in your product design and also explain why we are so irrational sometimes.
1. Ikea Effect: Personal Investment
Theory
The more involved people are in creating something, the better they feel about the product . This can lead to self-constructed items or products being valued more highly by the person who made it because of the effort that has gone into it.
Example
Ikea customers are strangely loyal to their self-assembled furniture because there is a piece of them in it.
The more customers get involved in the acquisition, development and construction of products and services, the more they perceive that product or service as valuable.
The idea of cheap things is that you can reduce the perception of low quality by making the person invest a tremendous amount of effort into it. Then that person, once built his desk or shelf, will come back to Ikea, because of the effort. Picking up your strawberries isn’t the same thing as buying cheap strawberries. Cheap strawberries raise the questions of — why are they so cheap? And if I had delicious strawberries, I would charge a lot for them. And in the case of picking your berries, it is less expensive because you contributed your effort into the process.
2. Commitment: Public Pledge
Theory
The more public our stance, the less willing we are to change it. People will often go through with acts that they hold private reservations about if they have committed to them publicly.
Example
A Finnish cable company offered new customers a discount if they were willing to dig the trench from their home to the street for their new cable connection. Months later, they found that those customers who had participated in digging the trench were far less likely to disconnect their cable service than control groups. Because they made a public demonstration of their belief in the company, admitting they were wrong by cutting off their service would be, on a subconscious level, both psychologically and socially painful.
3. Chunking: Offer Small, Well-Defined Tasks
Theory
Small, individual tasks are far less daunting than big ones. The way in which tasks are presented and broken down affects how motivated we are to start and finish them.
Example
Companies like Ryanair offer the entire purchasing process in chunks. They offer you a low ‘seat price’, and the lock you in the process. Getting you excited about your trip. Then, once you have decided where to go, you begin to form a mental commitment. Once this happens, it’s very unlikely that you’ll change your mind about the purchase .
And at this moment they start to add the extra charges in ‘chunks’. By the time you get to the full cost of your flight, you have put so much effort into the booking process, and are so attached to the idea of the holiday, that you would rather complete the purchase at a cost significantly higher than the initial seat price than write off the investment of your time and emotion.
4. Hyperbolic Discounting: The Power of Now
Theory
We have an overwhelming preference for immediate payoffs over later ones. Even if the later payoff is ‘better’, we’re addicted to ‘now’ and we consistently choose fun things now over things that are good for us in the future. Our preference for avoiding things that are effortful now, regardless of their long-term benefit, makes it hard to sell complex products.
Example
How do you get low-income customers to increase their savings rate for retirement? You can offer them extremely generous interest rates, or you can enter them into a contest to win $100,000 for just opening an account. Even though the latter option makes very little sense as an economic decision, as an emotional decision, the small chance of winning a huge prize is infinitely more appealing than the high chance of a significant sum in the future .
5. The Paradox of Choice
Theory
Offering customers more choices is not always better than offering them fewer choices. We are often paralyzed by choice. When we have too many options, the likelihood that we pick the ‘most suitable’ one is reduced, and so we procrastinate for fear of making a bad choice . If fewer options are presented, there is less chance of making a mistake, so decisions are speeded up.
Example
Consider the launch of the Prius. It came on the market as the first mass-produced hybrid car, and so there was only one decision to make: to buy a hybrid, or not to buy a hybrid. If there had been more choice, people wanting a hybrid would have most likely postponed the decision as they tried to evaluate which was the ‘best’ hybrid for them.
6. Reciprocation: Give And You Will Receive
Theory
People feel inclined to respond in kind to even the smallest acts of generosity or altruism.
Example
Bundling a $5 gift cheque in with an insurance survey was twice as effective in driving compliance as the promise of a $50 cheque which would only be given to participants after they had sent the completed survey back in the post.
7. Relativity: We Make Judgements Relatively and not Absolutely
Theory
People make decisions relatively and in context, not absolutely. Have you ever taken a sip of coffee expecting it to be tea? It looks the same, but for a moment the taste seems alien. It doesn’t taste like tea or coffee. You’re tasting the gap between what you expected and what you got.
Example
Many people will pay $3.50 for a coffee in Starbucks, but consider a better alternative to spend 50c for a coffee pod from Nespresso. Meanwhile many don’t realize that buying a pack of coffee at the same price from which you can get 30 cups of coffee is cheaper (it costs $4). The two are identical commodities, and yet the environment the commodity is presented in influence its perceived value. We don’t compare the coffee pods with a pack of coffee, but with the cup you buy in a Starbucks.
8. Representativeness: The effects of expectation and stereotyping
Theory
We use stereotyping to provide mental shortcuts for quicker decision-making. often, how we feel about a behavior is dictated by the preconceptions we held about it before we even took the action.
Example
During Christmas 2011, Coke released a new limited edition regular Coke can in white which looked very similar to its Diet Coke packaging. Some consumers complained that Coke had changed the formula as well as the packaging, stating that they “felt regular Coke tasted different in white cans”. The formulation had not been changed at all.
The new packaging led consumers to believe that Coke had also changed their product taste as well — because to consumers the new white packaging represented Diet Coke, not Classic Coke. Similar story happened to Cadbury when they changed the form of their chocolate and people thought they changed the formula.
9. Scarcity: Wanting what we can’t have
Theory
When an object or resource is less readily available (e.g, due to limited quantity or time), we tend to perceive it as more valuable. Laws of economics focus on ways to efficiently build wealth over time. But there are important financial concepts that turn this problem in the other direction. The Law of Scarcity is one of these principles. Its implications can have an impact on the ways a society produces and consumes its goods and services.
Example
The aura surrounding diamonds is highly irrational. Part of the allure is their high cost and supposed rarity. Yet, diamonds are abundant, both in nature and in synthetic forms indistinguishable from ‘fake ones’. The diamond industry stockpiles gems and controls the supply to give the illusion of scarcity and justify the high price.
10. Status Quo Bias
Theory
People prefer to carry on behaving as they always have done. The more we repeat particular behaviors, the more automatic they become, and over time these become a default behavior. To change a default setting or action requires a lot of cognitive effort, and as humans are lazy and look for shortcuts, we will rarely change it. This can be used to improve behavior or get a desired outcome.
Example
Nearly 9/10 people are in favor of organ donation. Consider the following donor registration figures: Germany — 12% / Austria — 99% The difference? Germans must choose to opt-in to become a donor, while Austrians are ‘opted-in’ by default, and must opt-out of being donors.
10 Powerful User Nudges Illustrated
PS. List of cognitive biases on Wikipedia has 100+ different biases, if the ones above were not enough for you. A fascinating read.
