Monday, April 30, 2012

The effort/reward equation: Have you got it right?

Is clicking through to your website worth my time?  If I give you that personal information, what do I get in return?   Is the price you are offering good enough for me to create yet another account?

These are the types of questions your customers will be considering in relation to your online business. I call it the effort/reward equation.  Quite simply, the effort/reward equation is the calculation we all do in our heads to decide whether the effort required (our input) is worth the reward on offer (the product or service you are presenting). 

When effort > reward
Upon visiting your website, customers who find themselves thinking “too hard, too slow, too complicated, or too invasive”, will abandon the process because effort is exceeding reward.

When reward > effort
Customers who think there is a fair exchange of their effort for reward will do business with you.  Take it a step further and exceed their expectations and you are on the path to a long and loyal customer relationship.

If only simple was simple
Sounds simple, doesn’t it?  Just make your website easy and you’ll be fine.

But so many websites get it wrong. Take the exhausting text-heavy, content overloaded Telstra website layout in Figure 1 below for example. We can only imagine the discussions by committee that went into the development of this customer-facing shocker. The rewards better be big to offset the effort required! In contrast, look at the easy to navigate, highly visual Optus page in Figure 2 where effort and reward are in balance. 

Figure 1. Telstra Mobile phone website

Figure 2. Optus website 

Applying Behavioural Principles to reduce effort

To ensure you minimise the effort side of your effort/reward equation, you should utilise two significant behavioural principles; our aversion to loss and our drive to complete.

1. Overcoming loss aversion
We are geared to avoid the pain of loss more than we are built to seek gain so if your sign-up page or shopping cart gets too hard (loss of my time and effort), the gain (product) won’t stack up and the process is likely to be abandoned.  

Tallying the reward
As you think of your website, write down the ‘reward’ a customer gets by dealing with you.  Go beyond the product features, this should include every reason a customer benefits.  It could include prestige, security or peace of mind, convenience, discount, quality and/or satisfaction of ticking something off their task list.  Wow, maybe you should charge more?!  But wait.

Tallying the effort
Now write down anything you are asking the customer to give up – their time, mental space, patience, personal information, alternative suppliers, money, other ways to spend their money - in order to do business with you.  A bit harder, isn’t it? We tend to forget that our customers put in emotional, physical and mental effort when making a purchase decision and our job is to reduce this.

Customers need to gain more than they lose
Now that you’ve an idea of what a customer has to give up in order to gain the reward, here’s the bad news. The gain has to be significantly more than the loss because our aversion to loss is much stronger than our willingness to seek gain.  Significance will depend on your product but be guided by common sense. If it takes me 10 minutes to troll through your cumbersome website to save $10, then it’s not worth it. If it takes me a minute to fly through, then we’re in business.

2. Give customers a running start
We are driven to complete things that we’ve started, so make starting really easy! There are some things you can do to help.
  • ·   Give customers a head-start by pre-populating as much data as possible (eg email address, item they have been interested in). Check out to get some ideas.
  • ·       Chunk the process into steps and let your customers know how easy it will be to complete them. Visit to see a great example.
  • ·       Let them shop your site before having to sign-up. Once they’ve found something they like, that’s a great time to capture their desire for the reward (product) with a simple shopping cart experience. is site worth trying for its cart process.
  • ·       Structuring the process so it does not appear to be burdensome.

For example, compare being faced with a fairly lengthy sign-up page for Gmail in Figure 3 ( with one that is structured in sections that reveal themselves in a cascading fashion in Figure 4 by Aviary (

Figure 3. Gmail signup
Figure 4. Aviary signup

When you sign-up with Aviary, you are asked only for Username, Email and Password, making it seem a much less complex experience than Gmail.  Then, once you’ve typed your email, the rest of the fields subtly reveal themselves.  By this stage you’ve committed yourself to the process, have already completed half of the form and are therefore highly likely to continue. 

Your role in balancing effort and reward
If you are in marketing, sales or own your business, chances are you have spent most of your time thinking about the customer’s reward side of the equation. Now is a great time to revisit the effort you are asking of customers because effort is ultimately what determines the customer outcome.  Keep it simple and you will reap the benefits for your business.

Interested in finding out more?  Email me at for an obligation free chat about your business.

Friday, April 27, 2012

Behavioural Economics Twitter highlights 21 Apr - 27 Apr 2012

Sat 21 Apr - Fri 27 Apr 2012

The summary is posted weekly by @peoplepatterns.  
This post contains a summary of tweets noted in the past week that mentioned behavioural/behavioral economics. Where possible, re-tweets and tweets without links been removed to condense the list.

Tweets with Behavioural Economics (UK spelling)

Daniel Kahneman, on how behavioural economics is likely to improve consumer protection in the United States

Materials from  event " & Policy-Making: Rational Need or just Fashionable?" now available:

RT  Behavioural economics by : why you'll prob agree w this column  <Love Daily Mail comment!

Behavioural economics with Daniel Kahneman | 

Don't rely on asking them because you will get an unconsciously misleading answer | 

Do we really think for ourselves? Digest new behaviouraleconomics book 'I'll have what she's having' in my review.

The impact of saliency on German politics - The Pirates of the Web  economics

Free sample behavioural economics preso available now.