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.

City Planners of Garden Grove, California installed Active Radar Speed Signs at 5 locations to provide real-time feedback on the speed of 58,000 drivers. LEDs would also flash if drivers exceeded speed limits by more than 5MPH.

After installation of the feedback systems, average speed dropped 22% from 44 to 34mph.

First, determine the behavior to change. Measure, capture and store the relevant data. 

Communicate it back to the individual in a relevant, context-sensitive way that ultimately provokes an emotional reaction.

Provide clear consequences for action or inaction. It’s critical to get the right balance between not being too subtle and not being too intrusive or authoritarian (which we filter out).

Lastly, allow for opportunities to immediately rectify the behavior - which should also be tracked - completing the loop and eventually changing the behavior pattern.  Remember to reward compliance as much as you penalize inaction to increase effectiveness.

77 people were asked to choose between an entirely certain win of $30 and an uncertain 80% chance of winning $45.

78% of people opted for the significantly smaller, certain reward, despite the risk-adjusted payout being higher for the uncertain reward (0.8 * $45 = $36).

Certainty is valued highly.‍

What ways can your business create reassurance or guarantees that make consumers feel safe?  How can you use exclusive certainty to reward and foster a sense of status with your brand?

Stick to your promises!

Letting consumers down, even once, will trigger uncertainty in the quality perceptions of your brand. If making claims about being the best at something, don’t ever give consumers reason to question that and turn a selling point into an unsustainable headache.

Reframe uncertain offers to appear certain.‍

The uncertain frame here requires consumers to calculate proportional savings, but the certain frame removes this by showing certainty of a zero-priced third lemon.

11k people were offered a new job that had a 50% chance of doubling income for life, but it wasn't without risk, with an equal chance of it falling by either 20, 33 or 50%. Questioning started with the 33% gamble; if people took it, they were asked if they’d take the bigger 50% gamble too. But if they didn’t, they were asked about the smaller 20% one.

Results put people into four risk categories showing the majority were not willing to take any risk at all.

Focus on an improvement metric. 

We prefer the certainty of what we’re used to, so the benefits of switching to a new product need to feel substantial.

Outline a goal (relative performance, efficiency etc.) to anchor your product strategy around.

Doing so will reduce uncertainty and boost comparisons against better-known, lower risk alternatives.

Offer a trial or free sample...

...to create familiarity and reduce the risk around a new product.

This sets the cost of new product usage at zero, during which the consumer will adjust their future preferences.

Utilize your brand umbrella.

For any new sub-brands, reduce risk by clearly indicating the relationship to existing, familiar brands you own (Erdem, 1998).  

Product brands take note. Risk aversion is higher for material purchases than for experiential ones such as restaurant meals or holidays (Roche et al., 2015).

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.

47 subjects were given around 20 small, manual tasks to complete, one at a time. Experimenters randomly interrupted completion of half of these tasks. After, subjects were asked to recall as many tasks as possible.

There was a 90% higher recall of incomplete and interrupted tasks than those completed.

Make important task completion frictionless. If customers leave your site without finishing their order, make it effortlessly easy to get that completion feeling, such as allowing for completion with a single click, tap or swipe. 

Focus on completion’s emotional release. Providing reward incentives for task completion actually demotivates consumers. Instead, remind them not just of the product they’ve not yet bought, but of the feelings that this ‘purchase task’ will unlock. 

Make known campaigns incomplete and interactive. Greater familiarity with an advert increases consumer ability to complete an interrupted ad message. Active participation also boosts ad memory (Heller, 1956). So if your popular campaign’s reaching its end, consider a special second follow-up version that allows for active participation in completing the ad message. 

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”.

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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). 

205 people were shown a description of a digital camera printed in a font that was either easy to read (high fluency) or hard (low fluency).

Results found that when easy to read, only 56% delayed choosing the camera, next to 71% when hard. Why? Fluency breeds familiarity, which we value greatly, because it’s unlikely to be harmful (Zajonc, 1968).

Keep it short. Whether for marketing, nudges or political persuading, low syllable, easy-to-conceptualize slogans will feel dramatically more intuitive for consumers. Next to a competing message, they’ll believe the one that’s easier to understand (Schooler & Hertwig, 2005).

Repeat. Repeat. Repeat. The mere act of repeating your message will increase its familiarity, which itself increases the extent to which it’s seen as true (Reber & Schwarz, 1999). Keep it consistent across your team and put it everywhere.

Keep product benefits concise. Consumers actually like a product less the more positive traits they bring to mind (Menon & Raghubir, 2003).  This is because they start to associate your product with greater complexity and lower fluency. 

Whilst we all like to think we make rational, optimal decisions, sometimes, our impulses get the better of us.

In an attempt to preserve our cognitive capacity, we make what’s called fast, reactionary “System 1” judgements. 



These might not be very good at all for us.

Let me explain.

Consider you’re stressed out after a long day, and launch your favourite social media app to unwind. You see someone sharing a wild conspiracy theory that you know to be untrue.

You’re angry, and quickly write out a frustrated comment that criticises this person, using strong language that would offend.

At this point, hitting “send” would cause a lot of damage you can’t come back from.

This is where our slower “System 2” thinking becomes vital.

Here, reflective thought is the order of the day. It’s more cognitively-expensive to think about what the deeper implications of hitting “send” would be. However, now would be a good time to do so.

Social media apps are increasingly providing us opportunities to do just this. Banks could do the same. “Are you sure you want to withdraw all your savings?”

Providing users a “cooling off period” for impactful moments now can allow for better decisions that help us more in our future.

Whilst we all like to think we make rational, optimal decisions, sometimes, our impulses get the better of us.

In an attempt to preserve our cognitive capacity, we make what’s called fast, reactionary “System 1” judgements. 



These might not be very good at all for us.

Let me explain.

Consider you’re stressed out after a long day, and launch your favourite social media app to unwind. You see someone sharing a wild conspiracy theory that you know to be untrue.

You’re angry, and quickly write out a frustrated comment that criticises this person, using strong language that would offend.

At this point, hitting “send” would cause a lot of damage you can’t come back from.

This is where our slower “System 2” thinking becomes vital.

Here, reflective thought is the order of the day. It’s more cognitively-expensive to think about what the deeper implications of hitting “send” would be. However, now would be a good time to do so.

Social media apps are increasingly providing us opportunities to do just this. Banks could do the same. “Are you sure you want to withdraw all your savings?”

Providing users a “cooling off period” for impactful moments now can allow for better decisions that help us more in our future.

2,064 male students from 9 schools in Chicago were enrolled in a two-year-long program that encouraged system-two slow thinking on how to manage situations of conflict.

Participation in the program reduced total arrests by 35% and violent crime arrests by 50%.

Add a little friction. ‍

We constantly weigh up effort vs rewards, so seeing one long sign-up form can lead us to make a fast system-one decision not to do so.

A process that’s Chunked, features reflective Goal Primes and clearly shows the product benefits will work better. 

Provide warnings for damaging decisions.

Instagram have launched "comment warning", live-analysing a comment and notifying of potential offense, without removing the Autonomy to post. This allows for reflection and avoids Reactance.

Build in reflective periods for big decisions.

Knee-jerk, short-term decisions can harm our longer-term goals. E.g., financial firms can help us make smarter decisions about withdrawing all our savings by building in a reflective delay, especially when such decisions conflict with our prior Commitments and goals.

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88 household individuals were split into three groups and  asked to either wear a badge supporting a  charity, asked to wear one along with another family member or not to wear at all. That same evening, all groups were then asked for a financial donation to the charity.

Those who were first asked the small request were far more likely to go on and donate money than those who weren’t.

Start with a question promoting reflection on one’s values. Their answers will create a desire to be consistent with their beliefs.

Have people perform a small related action. e.g. People who put a small “Drive carefully” sign in their window are more likely to follow the instruction than those who merely say they will. Frame it as a social norm.

Prime the ‘helpful’, ‘cooperative’ ‘supporter’ with positive feedback prior to a future request. 

Make the target request a continuation of the initial one. The more similar the activity, the greater success. Also balance your request sizes. If the initial request is too big, people won’t do it, never getting to the target request. But too-small tasks will widen the gulf between the two.

212 Iowan households had their energy use tracked for a year with the aim of reducing it. Half who agreed to reduce were told their name would be shown publicly in the local paper.

Those publicly committing demonstrated a 15.5% larger average reduction in energy use over winter.

Anchor any request with a leading question that supports others’ positive judgements of themselves or their past decisions.

Start with a small request that allows the respondent to remain consistent with their answer to this question. Commitments are self-reinforcing and build over time, so build slowly on this initial commitment with further, larger requests such as a future product purchase.

Make it public. Declaring an opinion to others on a subject or product will compel consumers to remain consistent with and even strengthen this opinion in future, especially if written down. e.g. asking others to tweet why they love a product will strengthen attachment to it, as well as fostering social proof for others.

88 students were told about an exercise training camp and split into 2 groups: either having a choice about  the four fitness programs on offer or having one randomly assigned. They were then asked to rate their anticipated satisfaction of the program out of 9.

Those given some autonomy reported higher levels of anticipated satisfaction than those who weren’t.

Choice = autonomy = certainty. 

For instance, giving people a choice to still use the old version of your software platform for a given timeframe will reduce anxiety and uncertainty.

Product type matters.

‍People desire autonomy for pleasure purchases (i.e. vacations) more than for practical ones (i.e. business trips).

Place more focus on the former in order to maximise feelings of control and consumer satisfaction (Botti & McGill, 2011).

Change behavior with the ‘4As’.

Feeling that any change originated from within is vital.

‍Ask about the behavior, advise them impartially of the facts and of better routes, but that they must make their own choice.

If keen to change, assist them to make a commitment to do so by a given date, and arrange a follow-up to support this behavior change.

274 people were shown 10 t-shirts, split into 4 groups and then asked to rate the shirts on either likeability, casualness, colorfulness or how much it matched with a cap. They were then asked how fun the task was.

Those given the ability to express their like or dislike rated the task as much more fun than the other groups. Simply, we value ways to express how we feel.

Personalization pays.

Bold, scaleable self-expressive features increase loyalty and sales.

Coca-Cola’s #ShareaCoke campaign - switching out the product name for a person’s name - led to a 10% rise in 2014 sales and a 7% spike in Facebook growth.

An Australian store sold 400,000 customized jars of Nutella for $10 each, becoming their top seller.

Tie it back to emotions.

Though there are successes like Kraft Heinz personalized soup “Get Well Soon ___”, with consumers happy to spend five times more, know that personalization has upper bounds on price and has less impact as it becomes more common.

Like Heinz, the smartest brands will tie personalization to underlying product emotions - care and sympathy in this case.

What emotions do you want end consumers to feel? Use personalization to help express these publicly.  

52 people were split into two groups and given IKEA boxes: either fully-assembled or unassembled that  they were asked to put together.

Those tasked with assembling their box were willing to pay a 63% premium for it during the subsequent bidding process over those given the pre-assembled boxes.

Provide personalization options early in your order flow to engender a sense of ownership and significantly improve conversion. Apple do this with their customizations for a new computer, as do new car showrooms. How can you add a low-risk, satisfying sense of creation into your existing products or services, especially around your USPs?

Don’t create choice overload and stress with too many pre-purchase customizations. Similarly, keep any post-purchase building effort simple, fun and low risk.  What core parts of your product manufacture should always remain out of customer hands?

Frame involvement as a value-add experience and not a labour-cost-saving exercise. How much this is felt may depend on your brand, your product and what you allow to be crafted by customers. 

80 people were asked to choose between two used cars with an equal number of positive and negative traits. Two days later, they had to recall which features were for their car and which were from the other.

The results showed that they incorrectly chose more positive features for their choice and more negatives for the car they didn’t choose.

Remind customers of their good choice.

Embrace rationalization and use this to help people feel great about their choices.

Post-purchase, don’t just send an order confirmation, send an order celebration, like Fitbit do. Finish on a Peak!

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Use as a platform for further steps.

‍Choices can also be validated by unlocking a new set of actions.

Joining the club, getting drip-fed how-to guides, booking an event ticket or sharing a referral code are all tasks that help support previous choices. Harry’s does this very well with its shaving advice.

What next steps do you want a new customer to take?

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• Prime and capture positive sentiment.

‍Send a follow-up email a short period of time after product use with a simple call-to-action, such as a one-click star rating button with Social Proof evidence.

42 people were either asked to make 35  'A or B' choices that would inform the design of an educational course they were attending, or instead to just read the course material. Both were then tasked with solving math puzzles and were timed until they gave up.

Those who had to make the choices beforehand persisted for less time on the puzzles and also got fewer right.

Protect your decision capacity.

Prioritize your day around and take breaks before making harder decisions. For example, restaurant inspectors can reduce errors by scrutinizing sites at higher risk of failure at the start of the day (Ibanez & Toffel, 2017).

Create product contrast.

‍When no option in a set offers a distinct advantage from the others, we're most at risk of not choosing at all (Dhar, 1997). How can you improve your choice architecture to offer variety that actually makes deciding easier? 

‍

Order matters for revenue.

‍Prospective Audi owners given a high number of customization options early on more readily accepted, higher-priced defaults in later steps (Levav, 2010). Though be careful not to trigger Reactance by pre-selecting defaults that are seen as too expensive.

‍

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).

468 people were randomly assigned to one of ten groups and shown a website list of ten hotels, each with the hotels in a different order. They were then asked to choose one.

Regardless of their group, more people chose hotels placed at the start and end of the list.

Position matters.

‍Why? Initial options are prioritized in our memory (Primacy effect). Then, we see a pattern, switch off in the middle and only at the end do latter options held in short term memory (Recency Effect) influence the decisions we make, so put your best stuff at each end.

End on a high.

‍Advertisers promoting benefits of their product should combine recency with the Peak-End Rule, finishing with a significant or unique feature to enhance recall, conversion and seal the deal with a positive Surprise.

Order = opportunity.

‍For ecommerce or aggregation sites, consider monetizing product positioning for the start and (paradoxically) end of your lists. Alternatively, design for and highlight conversion fairness with random ordering.

36 medical students were first asked to diagnose six clinical cases (Phase 1). They were then asked to diagnose a further eight, four of which were similar to Phase 1, but were actually different (Phase 2). Their accuracy for successful diagnosis was rated out of four.

Average diagnosis scores were 17.5% lower for Phase 2 cases that were similar to those in Phase 1.

Create pre-experiences.

‍During product development sessions, prime attendees with prototypes to first tell a detailed story of an imagined future. This will increase innovative ideas by reducing both incremental thinking  (Liedtka, 2015) and inferior ideas brought about through Ownership Bias and any Sunk Costs.  

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Conduct reflective reviews.

‍After results are in from product experiments, reviewing the specific causes behind both failures and successes is critical. This will help you understand any assumptions or misdiagnosis brought about by merely relying on what comes easily to mind (Ellis and Davidi, 2005). 

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Include real customers in retrospectives.

‍Combining reflective reviews with real customer feedback will boost team performance (Schollaert, 2009) and help suppress the perils of your team's own Confirmation Bias.

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67 people were asked if they prefer Coke, Pepsi or have no preference, split into taster groups and given 3 rounds of both in either unlabeled or labeled cups.

Taste preferences were split evenly when the drinks were unlabeled, but when labeled, they exhibited a strong taste preference for Coke, underlining the bias of brand attachment in consumer choice.

Test your assumptions. Decision-Makers often start new projects under judgements that are both unproven and erroneous. Bring key Decision-Makers together to list assumptions honestly. Use these as a basis for testing the validity of the idea in its simplest form. This avoids unnecessary costs further down the line. See the Lean Startup Model for further details.

Consider conflicting alternatives to strengthen your strategic decision-making process. Seek impartial feedback from trusted others who are less emotionally invested in the chosen route than you.

Repeatedly point out what you do well, especially with attention to small details around customer care or craftsmanship in process. Consumers will begin to notice and start to look for further evidence to support these newly-held beliefs.

218 people were split into 3 groups, given either a coffee mug or a chocolate bar and told they could swap their item for the other; or given neither and told they could choose either.

Those who’d been endowed with either item were far more likely to stick with it than those who were given neither.

Perceived ownership is powerful, allowing consumers to attribute increased value and emotional connection on what you’re offering, creating a strong desire to buy that increases over time.

It’s driven by a price gap between how much we’re willing to pay for an item and the price we’re willing to sell it for. This is due to a mix of Loss Aversion, Framing (i.e. buyer or seller) and the evolutionary advantage of overvaluing our tradable possessions. Doing so increases our resources and chances of survival.   

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Allow people to feel ownership of a product prior to purchase. Examples include: making it effortless to add that product to their basket, visually personalizing a product early in the ordering process, highlighting how soon it could be at your door or allowing free week-long test drives of that car you’ve always wanted.

150 teachers  in Chicago were either offered a cash incentive up front or after their students’ math test, with better results leading to more money. Subject to results, the money-up-front group would suffer deductions for unmet targets to create a feeling of loss aversion.

Teachers receiving  money up front were found to have much better results than those rewarded at the end.

Increase conversion with trial offers. Though some consumers might not be willing to pay the market price for your product, they may pay the market price to avoid it being taken away.

Offer delayed payments to shift consumers’ judgements from paying to get the product to paying to avoid losing it. For instance, a month delay in paying subscription fees. This means that any extra budgetary cost is then re-estimated as a question of how it can be fitted into an existing budget.

Replace faulty products immediately with an identical or superior model (Novemsky & Kahneman, 2005). Doing it quickly will limit the pain of loss aversion, which builds over time (Strahilevitz and Loewenstein, 1998).

153 people were asked to choose between a 5-star restaurant 25 mins away and a 3-star restaurant 5 mins away. A third decoy restaurant option was then added of 4-stars  at 35 mins away.

This decoy shifted preferences from the closer, cheaper restaurant towards the 5-star option.

Determine your target.

‍What is the product you want to sell more of, next to a lower-margin competing product? Build your decoy product around this with a price or attributes that inadvertently highlight the target's attractiveness.

Don't overwhelm.

‍Offering too much choice or highlighting too many competing attributes where neither option is clearly more attractive will trigger Analysis Paralysis, making consumers' decision processes more difficult.

How is your target clearly more attractive?

Test different decoy values to optimize the effect.

Huber et al., (2014) suggest that decoys work best when it’s really easy and quick to see the dominant product, when pre-decoy desire is roughly split between target and competitor and when people don’t strongly like / dislike the decoy.

There’s a reason this Nugget is #1 in our library.

The concept of Scarcity lies at the core of economics, and greatly influences perceptions of value, status and our competitive desire to attain certain items over others.

Unfortunately, it's also one of the more poorly-applied concepts out there, along with Defaults and Loss Aversion.

‍

Mastering quantity scarcity‍

An airline stating that there's 
“Only 3 seats left” may well be using accurate data and not simply using faux-scarcity to artificially suggest that there's less supply of seats than there actually is.

However, from the user's perspective, the buildup of mistrust around the use of scarcity means cynicism is higher, so one must be careful with information presented.

Similarly, hotel websites telling you that “30 other people are looking at this item” engineer stress to compel people into action without changing supply yet highlighting demand in a manipulative way.

Instead, use quantity scarcity to focus on the craft and high quality of what you're selling.

Make your scarcity feel valuable, not stressful.

‍

Mastering time scarcity

Ensure that any time restriction is highlighted primarily for the purpose of maintaining the quality of your product or service, and not merely to cause stress that could be avoided.

As an example, use time scarcity to launch unique or experimental products that are only available within a particular window (say a week, month or season).

This use of time scarcity is positive and encourages brand exploration, used creatively to highlight your unique value.

There’s a reason this Nugget is #1 in our library.

The concept of Scarcity lies at the core of economics, and greatly influences perceptions of value, status and our competitive desire to attain certain items over others.

Unfortunately, it's also one of the more poorly-applied concepts out there, along with Defaults and Loss Aversion.

‍

Mastering quantity scarcity‍

An airline stating that there's 
“Only 3 seats left” may well be using accurate data and not simply using faux-scarcity to artificially suggest that there's less supply of seats than there actually is.

However, from the user's perspective, the buildup of mistrust around the use of scarcity means cynicism is higher, so one must be careful with information presented.

Similarly, hotel websites telling you that “30 other people are looking at this item” engineer stress to compel people into action without changing supply yet highlighting demand in a manipulative way.

Instead, use quantity scarcity to focus on the craft and high quality of what you're selling.

Make your scarcity feel valuable, not stressful.

‍

Mastering time scarcity

Ensure that any time restriction is highlighted primarily for the purpose of maintaining the quality of your product or service, and not merely to cause stress that could be avoided.

As an example, use time scarcity to launch unique or experimental products that are only available within a particular window (say a week, month or season).

This use of time scarcity is positive and encourages brand exploration, used creatively to highlight your unique value.

146 people were asked to rate identical cookies that were either presented in a jar as scarce or in abundance. They were then asked how likely they would be to want to eat a further cookie.

When scarce, the cookies were rated as more desirable and having a higher value. They were also seen as more valuable when going from an abundant state to scarce than when always scarce.

Scarcity comes in 4 flavors:
Quantity, Time, Access & Rarity.

Control quantity.
‍To increase perceived value of your product, release it in smaller and diminishing quantities, emphasizing its finite nature.

Restrict time.
When the clock is ticking and we’re overwhelmed, we take mental shortcuts that speed up decision-making.

Motivate customers by emphasizing the limited time remaining in which to act.

Limit access.
Restricting access to your products or services will increase desire and perceived value. Do this selectively for certain features and / or customer segments.

For instance, you might want to design valuable, unique rewards that are only unlocked for very special efforts on the part of the customer.

‍

310 US Amazon Prime customers were split into 2 groups, either on a free trial or on a paid membership. They were then queried about attitudes towards and value perceptions of Prime and its benefits.

Those on the paid subscription reported greater loyalty, perceived value and exhibited a higher monthly spend than those who were on the free trial.

This is driven by two core effects:

1) Sunk Cost Bias where we seek to justify past, non-recoverable costs (of membership access) with our current actions (more spending), even when it’s not in our best interests. 

2) A desire to remain consistent with our past commitments - “I’m a Prime customer now.” 

Create a members club. Putting a price on entry heightens our analysis of the benefits of joining in a way that we wouldn’t if it were free. Limiting access to certain products or benefits can signal higher perceived quality (Zeithaml, 1998) and an increased willingness to buy.

Amazon entice with convenience (‘free’ one-day shipping), priority (30-min Early Access Lightning Deals) and exclusive choice (a vast music, video and book library). What benefits would your own customers pay for? What feelings can gaining access promote?

With the rise of wearable devices, personal quantification is easier than ever. It's not a surprise that self-tracking has a large adherence in a competitive, comparative culture where the individual is constantly improving his performance in every possible measure.

But it has a cost.

One of the responsibilities of product creators is to understand and examine the resultant behaviours that modifications to the product design will trigger. By adding certain features or changing their salience, you will inevitably change the behavioural dynamics.

It’s well studied that external rewards undermine intrinsic motivation, but now we know that the act of tracking can also impact it by reminding us of the output, making the activities seem like work. Thus, not everything that can be measured should be measured.

Peter Drucker said “What gets measured gets managed, even when it’s pointless to measure and manage it, and even if it harms the purpose of the organization to do so”.

It’s a warning from the father of management that it’s not often taken to heart, and this study reminds us of it.

With the rise of wearable devices, personal quantification is easier than ever. It's not a surprise that self-tracking has a large adherence in a competitive, comparative culture where the individual is constantly improving his performance in every possible measure.

But it has a cost.

One of the responsibilities of product creators is to understand and examine the resultant behaviours that modifications to the product design will trigger. By adding certain features or changing their salience, you will inevitably change the behavioural dynamics.

It’s well studied that external rewards undermine intrinsic motivation, but now we know that the act of tracking can also impact it by reminding us of the output, making the activities seem like work. Thus, not everything that can be measured should be measured.

Peter Drucker said “What gets measured gets managed, even when it’s pointless to measure and manage it, and even if it harms the purpose of the organization to do so”.

It’s a warning from the father of management that it’s not often taken to heart, and this study reminds us of it.

95 university students spent the day leisurely walking. In the measurement group they were given the choice to wear a pedometer. In the control group, everyone used a sealed shut pedometer. Afterwards, they rated how much they enjoyed walking.

Measuring led participants to walk more but decreased how much they enjoyed it – even for those who chose to be measured.

Consider what you want your users to feel.

While measurement may improve performance, it comes at the expense of enjoyment. By adding a measurement option, the behaviour will feel like work instead of fun.

Understand why users engage in an activity when deciding whether to measure it.

Sometimes the benefit of achieving more may outweigh the cost of users enjoying the experience. Does the end you’re looking to achieve justify the means of measuring its progress?

Switch the motivation type by becoming pro-social and giving meaning to the measurement.

For example: If you reduce your calories, you could send the equivalent of those excess calories to someone in need of food.

Prior data can set reference points that demotivate us

Our personal motivation can suffer in the face of prior data, setting unhelpful reference points about future expected efforts.

For instance, consider the following: "I can see that I ran 10k 3 times in a row, so if I don't run 10k this time, I feel that I'm doing worse. But I just don't feel like I can do 10k today, so I won't go at all."

However, in absolute terms, you're doing more in total by doing any more running at all, whether that's 1k, or even 100m, so you're best off ignoring the data and doing *something*.

A good counterbalance to this is to focus instead on the *experience* that running provides. This removes the quantifiable reference point and frees us to just enjoy the act for what it is. And who knows, maybe we'll end up running longer than 10k in the process!

2230 people were tracked over a 19-year period and were asked to record their life satisfaction. All at some point during the study got married.

Results showed that despite average happiness peaking in the years surrounding their marriage, it eventually returned to the baseline.

Create unexpected secrets (Lyubomirsky, 2010).

As soon as your once-new product or service ceases to draw attention, it'll fail to be appreciated. What bundles, new variety or joyful hidden details can you build in and communicate to offset this?

Highlight new possibilities.

What ways can your product change customers' lives to set them on a new positive hedonic path? For example, a healthy snackbox subscription could add in recipe cards, unlocking a second-order effect of healthy food-pairing.

Reduce pain with certainty.

‍We revert to the mean faster for negative experiences when they're short and predictable. Banks offering loans shouldn’t just draw on the habitual pain of repayment but also seek to build a positive sense of closure around the joyous certainty of the final repayment.