You’re walking down the street. Consider two realities:

A: You unexpectedly find $10 in your pocket. 

You feel positively-surprised!

Or:

B: You left the house with $10 in your pocket.

But you reach in and it’s gone.

The pain you feel from its loss is greater than the good feeling of finding it.

Prospect Theory explains that our perceptions of value differ based on how something is framed, and losing things feels worse than getting them feels good.

As one of the grand concepts that underpinned a lot of the early ideas within behavioral science, Prospect Theory is a beast with many aspects to it, such as Loss Aversion, Framing, Certainty, and Risk.

But for now, take your practical understanding a step further by reading the Aggregation Effect and Segregation Effect Nuggets.

You’re walking down the street. Consider two realities:

A: You unexpectedly find $10 in your pocket. 

You feel positively-surprised!

Or:

B: You left the house with $10 in your pocket.

But you reach in and it’s gone.

The pain you feel from its loss is greater than the good feeling of finding it.

Prospect Theory explains that our perceptions of value differ based on how something is framed, and losing things feels worse than getting them feels good.

As one of the grand concepts that underpinned a lot of the early ideas within behavioral science, Prospect Theory is a beast with many aspects to it, such as Loss Aversion, Framing, Certainty, and Risk.

But for now, take your practical understanding a step further by reading the Aggregation Effect and Segregation Effect Nuggets.

Prospect theory is explained with a graph. Negative losses and positive gains recorded on the horizontal are set against a vertical intensity of feeling for those losses or gains.

As we gain more, we feel less for each gain. In contrast, even a small pain (shown in red) feels a lot more negative than an equal-sized gain feels good.

Package pain. Consumers will feel less overall pain from any costs incurred when you package and deliver them all together rather than when they're felt as separate, smaller pains.

Spread out rewards.

Instead of offering larger, chunkier benefits to consumers, break these down into smaller pieces, spreading them out across time.

$10 given 4 times feels more valuable overall than $40 given once.

Offer mixed product bundles.

We feel less good with each thing we consume. Therefore, the first can of soda tastes better than the fourth.

This means we'd get more complimentary value from a bag of chips instead.

Look for ways to offer relevant, mixed product bundles to offset diminishing consumer sensitivity.

Information has a wonderful way of looking very different, depending on how it’s communicated.

From turning glasses half empty into those half-full, as Designers, we have a great role to play in using framing to help people see things differently and hopefully, for the better too.

Framing is one of your most powerful behavioral tools. Everything can be reframed, depending on what you want.

For example, online second-hand clothing marketplace Vinted has devised a clever strategy to reframe the commonly-used “Service Fee” as a “Buyer protection fee”.

‍
By reframing it as buyer protection and clearly communicating how this amount is calculated, this assurance goes beyond merely paying for the item.

Now, customers will also feel confident that they’re taking extra steps towards safeguarding their purchase.

Information has a wonderful way of looking very different, depending on how it’s communicated.

From turning glasses half empty into those half-full, as Designers, we have a great role to play in using framing to help people see things differently and hopefully, for the better too.

Framing is one of your most powerful behavioral tools. Everything can be reframed, depending on what you want.

For example, online second-hand clothing marketplace Vinted has devised a clever strategy to reframe the commonly-used “Service Fee” as a “Buyer protection fee”.

‍
By reframing it as buyer protection and clearly communicating how this amount is calculated, this assurance goes beyond merely paying for the item.

Now, customers will also feel confident that they’re taking extra steps towards safeguarding their purchase.

96 people were told they’d be given some ground beef to taste, with half told it’d be  “25% fat” (negative frame) and half told it’d be “75% lean” (positive frame). They were then asked to rate the quality of the beef out of 7.

‍Those presented with a positive frame rated the beef as higher quality than those presented with a negative one.

Create a frame using context, words or imagery to help others  to see things according to your needs. 

Wildly different perceptions are made possible by reframing the same evidence.

Reframe statistics as factually-accurate positives against competitors. 

Facts are dramatically reinterpreted when set amongst different data. 

• Create an opportunity to act.

We’re more likely to take up a special offer when the marketing message is framed as a potential loss than a gain (Gamliel and Herstein, 2012). 

Faced with a set of options, when we’re not sure what’s the “right” choice, Defaults offer a helpful guide.

They help people avoid expending vast amounts of cognitive energy to decide between what could be a large number of options.

This is especially the case for those who don’t know much about the products or services, where Default options can take away the fear of getting that first decision wrong.

They're also a powerful remedy to any potential Analysis Paralysis, and are particularly helpful when making multiple choices one after the other.

Consider that you’re buying a computer, with a range of possible customisations to various parts.

If there were no default choices set, we’d quickly become overwhelmed with what was the right choice in each step.

If you have complicated product ranges or customisations, are you setting helpful Defaults? If you are, think hard about whether these need improving to reduce effort further.

But also, a word of warning.

Defaults can be terribly misused to force people into decisions that they don’t want.

Take people down the wrong path and you’ll quickly trigger Reactance; an angry feeling where people will want to reclaim their independence, often doing the opposite of what you Default them to.

Ensure that your Defaults have peoples’ own intentions in mind and don’t deviate too far from what people would do of their own choosing.  

What Defaults are you setting? How can these be improved to help smooth out decision-making and guide people to better  outcomes, either for themselves (e.g. helping them save more money) or for the wider group (e.g. defaulting meeting times to 15 minutes instead of 30).

Defaults are set everywhere. They’re powerful and have a big influence on behavior with little effort.

Faced with a set of options, when we’re not sure what’s the “right” choice, Defaults offer a helpful guide.

They help people avoid expending vast amounts of cognitive energy to decide between what could be a large number of options.

This is especially the case for those who don’t know much about the products or services, where Default options can take away the fear of getting that first decision wrong.

They're also a powerful remedy to any potential Analysis Paralysis, and are particularly helpful when making multiple choices one after the other.

Consider that you’re buying a computer, with a range of possible customisations to various parts.

If there were no default choices set, we’d quickly become overwhelmed with what was the right choice in each step.

If you have complicated product ranges or customisations, are you setting helpful Defaults? If you are, think hard about whether these need improving to reduce effort further.

But also, a word of warning.

Defaults can be terribly misused to force people into decisions that they don’t want.

Take people down the wrong path and you’ll quickly trigger Reactance; an angry feeling where people will want to reclaim their independence, often doing the opposite of what you Default them to.

Ensure that your Defaults have peoples’ own intentions in mind and don’t deviate too far from what people would do of their own choosing.  

What Defaults are you setting? How can these be improved to help smooth out decision-making and guide people to better  outcomes, either for themselves (e.g. helping them save more money) or for the wider group (e.g. defaulting meeting times to 15 minutes instead of 30).

Defaults are set everywhere. They’re powerful and have a big influence on behavior with little effort.

161 people were told that they’d just moved to a new US state and that here, the default was (or wasn’t) to be an organ donor. They were then asked to accept or change this donation status.

Results showed that only 42% donated when the default was to opt out, but 82% when defaulted to opt in.

Defaults are powerful. They’re chosen because consumers take mental shortcuts (especially when tired) and because there’s implied trust that they’re the ‘right’ choice. Defaults also act as a reference point against better or worse options. (Dinner et al., 2011). 

Defaults can be set around anything: from the standard package you offer to new subscribers, to the pre-set top-up amount for your mobile wallet, to whether each order of pizza should come with salad. Each default can dramatically affect conversion levels and behavior.

Get the balance. Ensure your defaults feel natural and in line with consumer aspirations. The more extreme the default you set (i.e. defaulting to the most expensive option), the more effort consumers will expend weighing up the cognitive / emotional costs of not choosing the default, impacting their experience and reducing overall trust.

During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments.

Once an anchor is set, other judgements are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor.

For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable, even if they're still higher than what the car is really worth.

Studies have shown that anchoring is very difficult to avoid.

For example, in one study students were given anchors that were obviously wrong. They were asked whether Mahatma Gandhi died before or after age 9, or before or after age 140.

Clearly neither of these anchors are correct, but the two groups still guessed significantly differently (choosing an average age of 50 vs. an average age of 67).

During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments.

Once an anchor is set, other judgements are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor.

For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable, even if they're still higher than what the car is really worth.

Studies have shown that anchoring is very difficult to avoid.

For example, in one study students were given anchors that were obviously wrong. They were asked whether Mahatma Gandhi died before or after age 9, or before or after age 140.

Clearly neither of these anchors are correct, but the two groups still guessed significantly differently (choosing an average age of 50 vs. an average age of 67).

Participants were asked to quickly estimate - within 5 seconds -  the answer to one of two same calculations, anchored either low or high.

Those with the low anchor guessed 512 on average, whereas the high guessed a much higher 2,250. The correct answer was 40,320.

Put the highest price first

This will make subsequent prices appear cheaper in comparison and increase sales.

For instance, on the wine list shown, instead of putting the expensive items at the foot of the list, rearrange them in descending price.

Alternatively, if higher, show your competitors' prices first before revealing your comparative value.

Don’t set your anchor price too high

If you do, the natural inclination to anchor other options against this price will diminish.

Be realistic. Keep it within an appropriate region of your other prices in order for your anchors to be effective.

Audience matters.

Anchoring effects  weaken for those with higher cognitive ability (Bergman et al., 2010) and those with prior product-buying experience (Alevy et al., 2011).

682 colonoscopy patients were split into two groups, with one undergoing a longer procedure but with a period of less discomfort added on at the end.

After, patients were asked to recall the total pain felt. The peak-end group reported 10% less pain and a 10% increase in attending a follow-up procedure.

How do you want to be remembered in customers’ eyes?‍

How do you want to leave them feeling? What little touches can you add to your product or service to leave customers feeling amazing and want to share with their network?

Create a Customer Journey Map

Identify positive experiential opportunities to exploit and painful weaknesses to remedy.

Some pains may be small or cheap to fix, yet play a big part in a person’s memory.

Negative experiences are a hidden opportunity...

...to re-establish a positive peak and / or end. Things will go wrong, whoever’s at fault, so allow flexibility and an authentic humanity to surface, not just to save the relationship but to allow the brand to shine.

Handle a problem well enough and that’s what customers will remember, not the problem itself.

435 people were asked to go to a restaurant and split into four groups. They were then either given a surprise free dessert or not, and then finally either given an explanation of the reason for the surprise or not. All were then asked to rate their level of delight.

Those given the explanation rated the surprise as more delightful than those who weren’t.

Surprise sparingly.  The more frequent the surprise, the less positive it will make customers feel. Give your staff creative autonomy to make small, personal & unexpected gestures that strike deep. 

Provide an explanation for the surprise to suppress future unrealistic customer expectations, avoid mistake misconceptions and heighten the sense of personalization. 

Reframe problems into surprises. During a busy Christmas, Lush (a UK soap store) had a long queue, which an elderly lady holding one item had joined. A shop assistant noticed, pointing out the queue length and that she didn’t need to pay. After he insisted she accept, she hugged him and left the shop with the free item. Another customer then told him that witnessing his kindness  had made her day. Both will recall compassion, positive surprise and stress relief in future perceptions of the Lush brand.