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.

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.

We call Reciprocity the glue that binds us as a society.

No surprise then that it’s a powerful tool to help people make decisions that are both pro-social and a win-win.

When the Behavioural Insights Team were asked by the UK Government to increase the rates of job-seekers turning up to interviews, they applied the principle of Reciprocity to boost rates.

They changed the text message being sent out from:



“You’ve been booked an interview at Tesco on Friday at 10am”

to:

“Dave,
‍

I’ve booked you an interview at Tesco on Friday at 10am. 


Good luck. 


Roxy”

This shift from a passive tone of voice to an active tone, where Roxy had done something kind for you (and you then wanted to reciprocate by turning up), increased attendance from 10% up to a whopping 27%.

We call Reciprocity the glue that binds us as a society.

No surprise then that it’s a powerful tool to help people make decisions that are both pro-social and a win-win.

When the Behavioural Insights Team were asked by the UK Government to increase the rates of job-seekers turning up to interviews, they applied the principle of Reciprocity to boost rates.

They changed the text message being sent out from:



“You’ve been booked an interview at Tesco on Friday at 10am”

to:

“Dave,
‍

I’ve booked you an interview at Tesco on Friday at 10am. 


Good luck. 


Roxy”

This shift from a passive tone of voice to an active tone, where Roxy had done something kind for you (and you then wanted to reciprocate by turning up), increased attendance from 10% up to a whopping 27%.

407 pedestrians in Brittany, France were approached by a young woman and asked to complete a survey. Before the request, half were offered candy and the other half were not.

The results found that people - especially women - were far more likely to reciprocate and answer the survey after receiving a gift than when not.

Act first.‍

Find ways to initiate reciprocity with consumers.  Merely asking those satisfied to go tell their friends will work (Söderlund et al., 2015).

Make it a ‘common habit’.

When we’re told that a behavior is a social norm shared by others, we’re more likely to reciprocate. Households in USA and India consume significantly less electricity when told that their neighbors are consuming less (Sudarshan, 2014). In the long-term, any consistent, successful behaviors will be adopted as the default for others.

Do it in person.

Reciprocation appears to be more powerful when requests from strangers are made face to face rather than online. This is due to the persuasive impact of immediacy that physicality affords, the higher levels of digital suspicion and the sheer number of emails people receive (Meier, 2016).

32 dog-phobic children were split into 3 groups and shown 8 videos of either one child playing with a dog,  many children with different dogs or no dogs, and then asked to interact with a dog themselves.

Those who watched another child play with a dog performed far better. Those who watched many children also kept this up a month later.

Provide mental shortcuts through the judgements of others; the more people, the more persuasive.  First-time consumers of your product will benefit the most from this approach. 

Persuade with similarity. We're most influenced by those who we deem similar to ourselves. Communicate characteristics relevant to that segment, such as proximity, gender / age, profession or social class to successfully direct behavior. 

Use role-models. Understand the emotional drivers of your audience and seek out positive, aspirational individuals to direct specific consumer decisions and reinforce behaviors.

142 people were split into 3 groups and were shown either 72 nouns, abstract words or pictures on a projector for a split-second each, with 5-second pauses in between. They were then asked to recall as many items as possible.

Results showed that those in the picture group recalled far more than either word groups.

Boost your message.

‍Visual ads are remembered better in the long term than verbal ads, especially when we are under greater cognitive load (Childers and Houston, 1984).

What emotional message can you convey more powerfully with a striking, visual metaphor over mere words?

Boost learning by adding in visual references, and not relying solely on text-based language.

This can help broaden understanding across cultures and age ranges.

Where are you trying to change behavior?

What image do you want to stick in peoples’ heads to simplify understanding?

Make product choices distinct.

Images are internalized twice, both visually and verbally (see Dual Code Theory), so they stick in the brain better than just words.

This holds as long as the images aren't abstract or similar to one another (Reder et al, 2006).

So if you sell a large product range that looks similar, consider modifying their design or how they're presented to heighten relative differences and create a more distinct range of choices.

72 people were split into 3 groups: Humor, Neutral or Contentment and shown a respective video: Mr Bean (a British comedy show), an educational  video or a beach scene. They were then all asked to solve a secretly-impossible puzzle.

Those humored spent 50% more time and made 2x more attempts trying to solve the problem than others.

Make it funny. Consumers have more positive attitudes towards humorous ads and their brands, increasing intentions to buy (Eisend, 2008). However, levels are dictated by product category and how related the humor is to the product.

 Funny stories are more memorable than other positive emotions  like admiration or respect.  Puns are particularly memorable because they force us to simplify our humor delivery to a single line, reducing mental effort (Summerfelt et al., 2010).

Bring humor into the workplace. It helps boost employee satisfaction (Decker 1987), leads to higher productivity (Avolio et al. 1999) and boosts creativity (Brotherton 1996).  Ben & Jerry’s, Southwest Airlines and Sun Microsystems are well-known for their use of humor within organizational culture (Barbour, 1998). 

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.

20 people were split into two groups. Half were asked to read the story of an unknown cosmetics brand & product and shown a photo of the store. Half were not given a story or photo. All were then asked for an estimation of the product’s cost range.

Those in the Story Group saw the item as of higher value and were twice as willing to pay for it.

Use the Fairy Tale Framework. Ensure that your brand story has a beginning, middle and end. Add in a conflict and define one easy-to-summarize message (Fog et. al, 2005). This should be told by identifiable characters who resolve the conflict, restore harmony and allow the brand to be valued positively. Add unexpected twists and finish on an emotional high, often the part most remembered (Guber, 2007).

Create positive persuasion, catching consumer interest and convincing through ‘narrative transportation’, where, once immersed in a story, the viewer’s mind alters (Escalas, 2004a). Stories trigger warmer, more upbeat feelings than regular ads, raise brand uniqueness, allow for product features to be conveyed without feeling commercial and are remembered by consumers in multiple ways: factually, visually and emotionally (Rosen, 2000).

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.

‍

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. 

129 people were split into 2 groups, with half asked to either write about a time when they felt nostalgic or a neutral event. After writing, everyone was given $5 to distribute between themselves and a random other.

The results showed that on average, neutrals only gave away $1.43, whereas nostalgics gave $2.

Understand what nostalgia means for your target audience. Brands, products and campaign messaging can all gain from referring to the past to loosen our wallets. Nintendo are now rereleasing their 1985 NES console, for example.

Use to promote social behaviour. Since nostalgia causes a reduction in one’s desire for money,  it can instead be used to increase charitable donations or promote participation in a charitable event. 

Digital nostalgia is growing, as our online history of archived experiences deepens. The opportunity to capitalize upon this powerful effect will only increase. e.g. Facebook is now reminding us of our past experiences, using nostalgia to keep us emotionally bound to their network.