Risk Aversion
We don’t like uncertainty and generally stick to what we know
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).
Picture Superiority Effect
We remember images far better than words
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. 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.
Analysis Paralysis
Our capacity to process information and make decisions reduces with each made
42 people were either asked to make 35 'A or B' choices that would inform the design of an academic 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.
IKEA Effect
We’ll pay disproportionately more for something we’ve helped create
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.
Confirmation Bias
We look for information that supports our existing beliefs and ignore what doesn’t
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.
Sunk Cost Bias
We’re unable to let go of our past bad investments, even if it makes sense to do so
108 people were told they were the head of an airline that was either 90% complete on a $10m plane project, or shown an equivalent $1m proposal to research and develop this plane. In both cases, a competitor had created a similar plane of superior quality.
In either case, should they still invest the $1m? Those in the 90% sunk cost condition were far more likely to keep on spending than those who had yet to invest anything.
Remind consumers of past personal efforts or the amount of time spent with the brand to increase feelings of a sunk cost. Reframing past efforts as incomplete or as ongoing progress will also induce the effect and assist sales.
Test your product ideas sooner using a more agile product methodology. This will minimize time, cost and effort wasted on unproven potential failures to which you will become increasingly attached, especially if you’re personally accountable for their success.
Take 15 mins for mindfulness practice - focusing on the present moment and less on the past and future - to increase your resistance to the Sunk Cost bias. (Hafenbrack et al., 2013). Check out the Headspace app.
Collection Bias
We have an emotional need to amass sets of related items
Almost anything can be collected, but to promote collectibility of your products, you should release them in identifiable sets (Carey, 2008). Use names, symbols or colors to connect products. Even subtle additions like a numbering system can turn a mere range of products into a collection.
Self-identity is a primary motive for collecting (Smith et al., 2008), so creating distinction through scarcity (“I have this but you don’t”) is key to increasing consumer status. Hold back or stop supply of certain items to create a secondary market.
Create a community to foster social value of your collection. This provides social acceptance - one of the core reasons people collect (McIntosh and Schmeichel, 2004). Social also heightens resell value.
Release collectibles in waves over time (Bianchi, 1998). This will increase the overall enjoyment of the experience and increase the desire to collect. Never saturate the market with too many sets, variations within sets or too many limited editions (Hood, 2006). Overproduction will kill the magic and therefore consumers’ ongoing desire to collect. Don't make the pursuit too easy to achieve (Csikszentmihalyi, 1990), but also not so large a task as to be out of the reach of your audience (McIntosh and Schmeichel, 2004).
Goal Priming
When we’re reminded of our aims, we're more motivated to reach them
The food choices of 89 people both dieting and not dieting were analyzed in a cafe. Diners were given a menu with either information highlighting low-calorie options or not (the control).
Results showed that dieters primed with the reminder of their future goal consistently made healthier food choices than unprimed dieters.
Who is the target group?
They could be people who are motivated to protect the environment, improve productivity at work or improve the quality of their lives. Note: they must have already stated a desire for this goal. Your prime will merely aim to nudge their existing Commitment to meeting their own aspirations.
Where can you trigger these long-term motivations?
As well as environment, timing also matters, so make sure that you do so very close to the actual decision point, i.e. at the start of a meeting, at the ordering counter or on the inside of a restroom door.
Boost with the Spacing Effect.
What's the specific behaviour that you're allowing them to perform to help move them towards their long term goal?
It has to be obvious and easy to do, such as clearly identifying an eco-friendly substitute, bolting on a salad or opting for an equally-priced, dairy-free option.
Availability Bias
Our judgements are heavily influenced by what comes to mind more easily
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.
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).
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.
Product-Person Bias
We look for and value human connections in our products
146 people were asked to view one of four cell phones that had buttons made to look like a smile or a frown with either upturned or downturned eyes. They were then asked to rate how much they liked that particular phone.
Those who saw a friendly face liked their phone far more than those who saw a sad, negative face.
Make it human.
Doing so will speed up familiarity with abstract or complex products (Hart, 2013), or for new or lonely customers (Hart & Royne, 2017).
Where can you add warm humanness to your product?
Go all in.
In 2009, price comparison site Comparethemarket changed its fortunes overnight by introducing Aleksandr, a talking Russian meerkat. With his own language, highly active social media presence, soap opera, merchandise and even a pseudo-autobiography, he’s one of the most talked about ad campaigns in recent UK history.
Unboxing as ‘birth’.
Consider Flymo's Robotic Lawnmower. Many owner reviews on Amazon gave their 'new family member' a name, but Flymo could build this smoothly into the unboxing experience. How can you design for a subtle human bond at first sight? Doing so may create a stronger Ownership Bias and may lead consumers to take greater care of their product, along with being more tolerant of any of its characterful 'shortcomings'.
We're hardwired to overvalue things we can get right now, over those that are delayed.
Payment provider Stripe have designed for this with Instant Payouts - allowing customers to get immediate access to their cash in 30 minutes (even at weekends) instead of waiting 2-3 business days. A 1% fee is charged for the convenience.
Where can you design for immediacy in a way that people will provide unique value? What features do you already have that could be particularly time-sensitive?
Goals shared can act as a powerful collective motivator. New accountability apps like FocusMate provide a service to connect two people, share goals up front on video and spend the next hour working towards them.
How can you being people together to share their goals and reach them together?
There are many ways to convey scarcity. If you have a range of products that are all similar in visual characteristics, consider exploring how a limited edition can feel especially valuable through the use of contrast. A rare black item amongst an otherwise white collection.
Where can you use contrast both dramatically and sparingly to harness its unique power?
Risk Aversion
We don’t like uncertainty and generally stick to what we know
Risk Aversion
We don’t like uncertainty and generally stick to what we know
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).
Picture Superiority Effect
We remember images far better than words
Picture Superiority Effect
We remember images far better than words
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. 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.
Analysis Paralysis
Our capacity to process information and make decisions reduces with each made
Analysis Paralysis
Our capacity to process information and make decisions reduces with each made
42 people were either asked to make 35 'A or B' choices that would inform the design of an academic 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.
IKEA Effect
We’ll pay disproportionately more for something we’ve helped create
IKEA Effect
We’ll pay disproportionately more for something we’ve helped create
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.
Confirmation Bias
We look for information that supports our existing beliefs and ignore what doesn’t
Confirmation Bias
We look for information that supports our existing beliefs and ignore what doesn’t
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.
Sunk Cost Bias
We’re unable to let go of our past bad investments, even if it makes sense to do so
Sunk Cost Bias
We’re unable to let go of our past bad investments, even if it makes sense to do so
108 people were told they were the head of an airline that was either 90% complete on a $10m plane project, or shown an equivalent $1m proposal to research and develop this plane. In both cases, a competitor had created a similar plane of superior quality.
In either case, should they still invest the $1m? Those in the 90% sunk cost condition were far more likely to keep on spending than those who had yet to invest anything.
Remind consumers of past personal efforts or the amount of time spent with the brand to increase feelings of a sunk cost. Reframing past efforts as incomplete or as ongoing progress will also induce the effect and assist sales.
Test your product ideas sooner using a more agile product methodology. This will minimize time, cost and effort wasted on unproven potential failures to which you will become increasingly attached, especially if you’re personally accountable for their success.
Take 15 mins for mindfulness practice - focusing on the present moment and less on the past and future - to increase your resistance to the Sunk Cost bias. (Hafenbrack et al., 2013). Check out the Headspace app.
Collection Bias
We have an emotional need to amass sets of related items
Collection Bias
We have an emotional need to amass sets of related items
Almost anything can be collected, but to promote collectibility of your products, you should release them in identifiable sets (Carey, 2008). Use names, symbols or colors to connect products. Even subtle additions like a numbering system can turn a mere range of products into a collection.
Self-identity is a primary motive for collecting (Smith et al., 2008), so creating distinction through scarcity (“I have this but you don’t”) is key to increasing consumer status. Hold back or stop supply of certain items to create a secondary market.
Create a community to foster social value of your collection. This provides social acceptance - one of the core reasons people collect (McIntosh and Schmeichel, 2004). Social also heightens resell value.
Release collectibles in waves over time (Bianchi, 1998). This will increase the overall enjoyment of the experience and increase the desire to collect. Never saturate the market with too many sets, variations within sets or too many limited editions (Hood, 2006). Overproduction will kill the magic and therefore consumers’ ongoing desire to collect. Don't make the pursuit too easy to achieve (Csikszentmihalyi, 1990), but also not so large a task as to be out of the reach of your audience (McIntosh and Schmeichel, 2004).
Goal Priming
When we’re reminded of our aims, we're more motivated to reach them
Goal Priming
When we’re reminded of our aims, we're more motivated to reach them
The food choices of 89 people both dieting and not dieting were analyzed in a cafe. Diners were given a menu with either information highlighting low-calorie options or not (the control).
Results showed that dieters primed with the reminder of their future goal consistently made healthier food choices than unprimed dieters.
Who is the target group?
They could be people who are motivated to protect the environment, improve productivity at work or improve the quality of their lives. Note: they must have already stated a desire for this goal. Your prime will merely aim to nudge their existing Commitment to meeting their own aspirations.
Where can you trigger these long-term motivations?
As well as environment, timing also matters, so make sure that you do so very close to the actual decision point, i.e. at the start of a meeting, at the ordering counter or on the inside of a restroom door.
Boost with the Spacing Effect.
What's the specific behaviour that you're allowing them to perform to help move them towards their long term goal?
It has to be obvious and easy to do, such as clearly identifying an eco-friendly substitute, bolting on a salad or opting for an equally-priced, dairy-free option.
Availability Bias
Our judgements are heavily influenced by what comes to mind more easily
Availability Bias
Our judgements are heavily influenced by what comes to mind more easily
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.
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).
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.
Product-Person Bias
We look for and value human connections in our products
Product-Person Bias
We look for and value human connections in our products
146 people were asked to view one of four cell phones that had buttons made to look like a smile or a frown with either upturned or downturned eyes. They were then asked to rate how much they liked that particular phone.
Those who saw a friendly face liked their phone far more than those who saw a sad, negative face.
Make it human.
Doing so will speed up familiarity with abstract or complex products (Hart, 2013), or for new or lonely customers (Hart & Royne, 2017).
Where can you add warm humanness to your product?
Go all in.
In 2009, price comparison site Comparethemarket changed its fortunes overnight by introducing Aleksandr, a talking Russian meerkat. With his own language, highly active social media presence, soap opera, merchandise and even a pseudo-autobiography, he’s one of the most talked about ad campaigns in recent UK history.
Unboxing as ‘birth’.
Consider Flymo's Robotic Lawnmower. Many owner reviews on Amazon gave their 'new family member' a name, but Flymo could build this smoothly into the unboxing experience. How can you design for a subtle human bond at first sight? Doing so may create a stronger Ownership Bias and may lead consumers to take greater care of their product, along with being more tolerant of any of its characterful 'shortcomings'.
Early invitees
