How a Freemium site got me to upgrade

I've been in the market for webinar software and came across Anymeeting.com via a search engine.  A few elements of their business model appealed as examples of behavioural techniques in play.

Freemium model
Adopting an increasingly popular model for online providers, Anymeeting offers both free and premium options for its online meetings and seminars.  The catch with the free option is that you and your participants will see advertising.  Given I will be charging for my webinars and therefore don't want advertising interfering with the experience of participants I have decided to ditch the free service in favour of a subscription.  A couple of advantages of this tiered system; buyers get to trial the service before committing to payment (building confidence and familiarity) and Anymeeting diversify their revenue model by having paid subscribers and advertisers.

Free version with ads 

Upgrade path alleviates pain point

Outcome oriented CTA

We are used to seeing language like 'upgrade to experience benefits...' on sites, but what I liked about Anymeeting was how they expressed it in their call to action (CTA).  Rather than 'upgrade now' or 'subscribe', Anymeeting have gone with "Remove ads", a simple, outcome oriented CTA.  Aside from removing any doubt as to what would happen by clicking through, this CTA also tapped into the behavioural principle of loss aversion where we are more motivated to avoid pain (poor reaction by paying audience to seeing ads) than seek gain.

Helpfully, they also provided a comparison of what your users see in both free and paid versions of the site.

Ads vs None visual

Anchoring and influencing choice
Anymeeting do their best to upgrade buyers from the time they first visit.  Notice how the three program levels are displayed, with the Pro for Meetings package deliberately shaded green to stand out.  If they wanted to minimise free option sign-ups they could have taken things further by choosing a more muted CTA for this program (eg dark grey) to shift buyer attention to the paid alternatives.

Program comparison

You'll also note the use of price relativity between the Webinars program ($69.99) and the Meetings option ($17.99) which would encourage take up of the latter.





Payment terms 
The thing I didn't like?  The payment process for upgrading to a subscription defaulted to a monthly recurrent charge and was not sufficiently clear on how I could stop the payment.  Supporting the buyer at the point of payment with this type of information is important to overcome risk aversion. Sure some buyers (like me) will proceed, but dropouts become more likely and undermine the effort its taken to get them to the point of sale.  Providing money back guarantees is good, but letting the buyer know how they can escape is powerful too.

Lessons for your business
Lessons for your business?  Consider a Freemium model to get people started, rethink how your call to action can be expressed as an outcome, take the lead in how you structure the options you sell and finally, cover off last-minute payment nerves with guarantees and explanations.

(As with all my blogs I have written this piece based on my experience as a customer and have not been commissioned by Anymeeting.)
 
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Behavioural lessons from one of the best websites

My heart began to race.  It was the last one and I knew there were four other interested buyers.  No time to muck around, I better go in for the kill. Where's my credit card?

Welcome friends to the world of booking accommodation online, a goldmine of examples of behavioural economics applied to the customer experience.

Let's look at just three of the techniques used by one of the best exponents, Booking.com.

Sample listing from Booking.com

Create a sense of urgency
No surprise, but part of getting customer commitment is a sense of urgency.  Urgency comes from our fear of missing out, so this is how Booking.com use it;  

• Notice that the number of rooms left is displayed next to the City View room deal. Trust me, when it gets down to 1 you jump pretty quickly.  Chances are you will even stop looking for reviews in your rush to secure the room - the overall rating will do.

Create a sense of normalcy
As much as we deny we are persuaded by what others do, we are.  Being a normal part of the 'herd' is core to our functioning, so here's how Booking.com use it;

• There are 6 other people looking at this hotel - good, because it means I have great taste. But worrying that there are six people looking and only three of the city rooms available!  Urgency strikes again.
• Last booking - others have trusted this hotel enough to book
• Guest reviews - whilst the impartiality of reviews may be questioned, they do carry psychological weight because they are ostensibly written by people like us

Create a sense of value
We need to make estimations of value whenever we are looking to buy.  If the business doesn't control how its price is contextualised we will rely on whatever's in our head - dangerous for any business.  You must therefore anchor the prices relative to others. For example, carry more expensive options to encourage sale of the cheaper option, and always list your original price along with its marked down amount.  Booking.com;

• Notes that the price for the City View room has been marked down, and obviously so.  No good just showing your 'sale price' if you don't also show the original because your customer may not understand how great a deal this is.

I've booked a lot of accommodation over the years and whilst there are many sites - Lastminute.com.au, Expedia.com, Wotif.com amongst them, I keep being drawn back to Booking.com for its interface and communication of information.  Let me know if you agree that it is one of the best, and whether you have used similar behavioural techniques in your business.

PS Why not join the People Patterns mailing list?  Every month you'll receive a short wrap-up of top news from the behavioural sciences and other nuggets of goodness from me. Click here to sign-up.

How private labels are lulling us into higher prices

There has been quite a bit of press lately about the rise of private labels (house brands) in Australian supermarkets like Coles and Woolworths, and speculation about what this means for brand manufacturers.  An IBISWorld prediction cited in The Age has house brands growing from 23 to 30 per cent share of the $70 billion grocery market in the next five years, and companies like Heinz, De Bortoli and Goodman Fielder are publicly lamenting the dominance of house brands.  As most of us visit a supermarket every week, I thought it was worth examining private labels from a behavioural perspective to understand why we are shifting our consumption to house brands. 

How do private labels work from a behavioural perspective?
Private labels are behaviourally persuasive for a few reasons;

• Rules of thumb - in order to deal with the level of stimulation and choices available to us, we operate on auto pilot a lot of the time, using rules of thumb to guide our decision making. Private labels simplify our shopping experience because they create one simple rule - "buy this brand because it is good value".
• Self-herding - private label branding stretches across multiple product categories. The effect is that if I purchase and am satisfied with one category, I will be more prone to repeat my decision for that and extended categories rather than having to trial an alternative brand.  It's worth noting the risk for the private labels here - a poor experience of one category can poison all others. 
• Relativity - to understand whether something is good value, we compare it with similar items.  Our tendency is to stay away from the extremities - too expensive or too cheap - and settle for something that is somewhere closer to the middle.  Amongst others Woolworths have "Woolworths Select" and "Homebrand" and Coles have "Coles" and "Smartbuy"house brands.  This enables them to use one of their brands as their loss leader, leave the supplier's brand as the most expensive and their second brand as the attractive option in the middle. 

How our behaviour is changing the supermarket industry
By influencing individuals, private labels are changing the market in a couple of ways;

• Short-term bias - we are strongly swayed by the immediate rather than long term, and this has significant consequences for the supermarket industry and why brand suppliers are so worried.  We shoppers are buying for now - selecting items that meet our requirements in terms of utility and budget, and house brands are more than ever meeting this brief.  The risk with this behaviour is that through our actions, in this case buying house brands, we are slowly driving brand suppliers out of the market.  We are being lulled into a future of diminished choice, diminished competition and ultimately, higher prices.
• Drop in the bucket effect - along with our short-term bias, it is hard for us to contemplate how our individual purchase decisions can impact the whole supermarket industry.  We think that our actions are simply drops in the bucket that cannot have a broader implication, and this plays right into the hands of the supermarkets who know that engaging an individual is their path to engaging the mass.  

Lessons for other businesses
The rise of private labels clearly shows that shopper behaviour can be changed and new habits formed.  House brands have gone from being a dirty little secret in your pantry to a sign of 'smart' buying.  For all businesses it means that there are opportunities for growth by understanding how to influence consumer behaviour, and what better rule book than the field of behavioural economics to change the game?  See you at the check out.


(Image from http://www.foodmag.com.au/news/demand-for-private-labels-set-to-double-in-2025--r)

Easter Eggxample of Behavioural Economics

Easter Eggs.  If you're ever chatting with someone who isn't familiar with Behavioural Economics or doesn't see the opportunities in understanding the power of irrationality, Egg them.  Let me explain.

We love Easter Eggs. In Australia we consume an average of twenty Easter Eggs for every man, woman and child, and that means it's big business for our chocolate manufacturers.  But in economic decision making terms, our love of Easter Eggs is irrational.  Here's why.

Imagine you visited two different supermarkets.

• The first offered you 100 grams of Cadbury chocolate for $2.98.
• The second likewise offered you 100 grams of Cadbury chocolate, but for $2.15.

You'd opt for the second, right?  After all, it's the same product but you save almost 40%.

Now imagine you are within one of the supermarkets and they have two offers;

• The first is the same offer you took above, 100 grams of Cadbury chocolate for $2.15.
• The second offer is an Easter Egg. 100 grams of Cadbury for $2.98.

Now which do you choose?

Block chocolate vs Easter Egg

Traditional economics, based on rational arguments of supply and demand would have us taking the $2.15 offer every time.  But guess what? We are not always rational.  The fact that the chocolate is shaped like an egg, wrapped in foil, available at a certain time of year and can be given as a gift means that the majority of us will buy the $2.98 Easter Egg and pay a 40% premium.

And Behavioural Economics can help us explain why. 

Relativity

We make judgments about one thing relative to another.  In the examples above, 100g of chocolate that was the same could be judge of the basis of price.  However, when one chocolate was shaped like an egg, the grounds of relativity became different.  Have you ever wondered why Easter Eggs are not in the confectionery aisle?  Because relativity is being confined to the "Easter Egg"  category rather than the chocolate category. (And for anyone who may argue that it would be logistically difficult to have the Eggs in the chocolate aisle I will posit that if Eggs were shown to sell better in the aisle, that 'logistical difficulty' argument would evaporate. It's purely about moving higher margin chocolate, and that is best done when the customer can't easily compare $2.98 to $2.15.)

Social Influence
We are greatly influenced by others around us.  Indeed, that we even have such things as Easter Eggs is a social construct.  To give your child a block of chocolate is just not the same as an Egg.  As consumers we justify the economic irrationality by deferring to such emotional reasons as the magic of an Easter Egg hunt, smiles on faces etc.  And as marketers, that's what we aim to amplify so that our Brands have a reason to be purchased outside purely rational reasons.

And this is a key thing about explaining Behavioural Economics.  All those reasons for paying more can be cited by the consumer as entirely rational because we are great at justifying our decisions. But rationalised isn't the same as economically rational.  Why is this important?  When you next pitch a product or campaign for development, remember it's not just about the 100 grams of chocolate. It's the shiny foil, the social construct, the timing, the gifting, the emotion that your customer will be processing when they are in your aisle.  Get excited because if you can help your consumer rationalise their purchase, the economic rationalisation becomes moot.

And this is the massive opportunity Behavioural Economics presents to marketers, product managers and retailers.  Yours is the opportunity to turn the magic of irrationality into margin for your business.  So tell me, what's your Egg? 

Prices quoted from Woolworths, Moorabbin 8 April 2011