The Top 10 Slap Down: Why you need Behavioural Economics

Strap yourself in for my top ten reasons why you need to know about Behavioural Economics.  More slap down than count down, prepare to be insulted!

You need Behavioural Economics because...

1. You're arrogant
You think other people succeed because of the situation but you succeed because you're ace.  But when things go wrong, it's the situation for you but a deep personal flaw in others.  After all, you never cut people off in traffic, but get cut off all the time.   (a.k.a. Actor Observer bias)

2. You're lazy
When you don't know what to do, you do nothing.  Inertia is your friend and default is your home. The easiest position is to stay with what you know. That's why you haven't changed banks...car insurance...partners yet.  (a.k.a Status Quo)

3. You take short cuts
Who can be bothered with all that thinking? Do what you've done before or just make some assumptions.  If you remember seeing that brand advertised, then it must be reputable.  If one product is more expensive than another, it must be better.  You'll order wine from the middle of the price range because you don't want to look stingy.  (a.k.a. Heuristics or Rules of Thumb)


4. You delude yourself
You love your thinking so much that whenever you look for evidence to support your point of view you can find it easily. (a.k.a Confirmation bias)

But when someone else puts forward an idea, it always seems to have more down sides. (a.k.a. Not Invented Here Bias).

5. You're a sheep
When you don't know what to do you follow what other people are doing.  Ever lined up in a queue without knowing what it was for?  Gone to a restaurant because it always seemed busy? Bought ill-fitting fashion?  An SUV?  (a.k.a Herding)

6. You're scared
Losing is scarier than winning. Bird in the hand and all that.  Safer to do nothing (as per point 2) or demand over the top guarantees before you'll make a move.  Stayed in a job too long?  Held on to an investment even though it was tanking?  Gone to a petrol station out of your way because you want to  save $2 with your shopper docket? (a.k.a. Loss aversion)

7. You're superficial
You operate most of the time at a superficial, top of mind level.  Listing 3-5 reasons you like or dislike something is easy because but beyond that gets tricky. It causes you a bit of mental anguish because you start to second guess your 'gut' feeling.  (a.k.a. Availability bias)

And you want rewards NOW!  Just like Veronica Salt in Willy Wonka (I want it now Daddy!) you hate to wait because you are not very good at imagining what the future will be.  (a.k.a. Short term bias)

8. You're not in control of your own mind
You set the alarm and then hit snooze. You intend to go to the gym but stay glued to the couch watching the Big Bang Theory.  You know superannuation is important but somehow can't find 10 minutes to read the brochure.  You are constantly fighting with yourself as your mind processes intent and actual behaviour.  This inner turmoil exhausts you so you revert to short-cuts (see point 3) and status quo (see point 2). (a.k.a. System 1 and System 2 thinking)

9. You fall for obvious tricks
You buy the yogurt that is 97% fat free instead of the yogurt that has 3% fat.  You pay for broadband plans with data quantities you will never reach.  You buy the shirt because it is marked down to half price.  You know you know that you are being tricked by the way something is communicated, but you can't help falling for it.  (a.k.a. Framing)

So that is you.  But don't worry, it's you and me and everyone else because we are beautifully complex, emotional and cognitive beings and being irrational is what we do.  The important lesson for anyone in business is that you need strategies and systems geared around this irrationality so you can best meet the needs of your market.  It's pretty clear that many businesses have not yet come to terms with the opportunity Behavioural Economics presents, so it's your chance to shake off your status quo bias, squash your fear of losing and instead grab on to a field that can deliver significant competitive advantage.

Oh. I almost forgot.


10. You need completion
You see a gap and you need to fill it.  A list of 10 with only 9 items becomes annoyingly distressing.  Failing to finish means you miss out on the entirety of the experience, so you go through with it even if there is no point.  (a.k.a. Completion)

Happy irrationality.

PS If you like my blog, I'd love you to consider supporting my fundraising trek of the Larapinta trail. Every bit helps so to find out more, visithttps://www.gofundraise.com.au/page/BriforICV Thank you!

Keeping abreast of customer lapse

A reminder to us all that a serious message can sometimes be best conveyed using humour; say hello to the "Your Man Reminder" app that has been released by Rethink Breast Cancer to encourage women to check their breasts regularly.

The genius is that the reminder is not a dull outlook alarm or exclamation on the calendar, it's your choice of "hot guy" that will talk you through the process.

According to Rethink Breast Cancer, "Your Man Reminder App includes the following fun features:

• Customize – Update the App to fit your personal liking, with features that let you chose your man, his pose and more.
• Hot Messages – You’ll love the attention your man gives to you, with messages like “Any guy would be lucky to have you” and “Give your breasts some TLC.” 
• Reminders - Tailor your calendar schedule with settings for weekly, monthly or surprise reminders directed by a sexy man of your choice.
• Education - The App includes a special “signs and symptoms” tab to hone in on the importance of early detection. 
• Get Checked – Use a variety of scheduling options such as doctors’ appointments and many more."

There are two key lessons from the Your Man Reminder app.  First, the app is an evocative example of how to overcome inertia by creating an entertaining, enjoyable experience.  And the same technique can be applied to any subject.  Car tyres, taxation, health checks, superannuation...the opportunity is to link typically dull but necessary tasks with something fun or unusual. 
Perhaps a slightly less fun example, but the "Change your clock, change your smoke alarm battery" campaign has proven to be an effectuive way in Australia of triggering a low awareness need (battery replacement) with an event (daylight savings) to overcome inertia. 

For your business, this can make a difference to your cash flow by minimising the risk of customer lapse. Imagine the positive impacts for a car mechanic who gets people to turn up for their annual service rather than procrastinating for 14-18 months (over three years that can mean securing one additional service)? Or a dentist that has clients returning every 6 months rather than every 3 years? 

The second lesson from Rethink Breast Cancer is in how they have structured their donation section to take advantage of our tendency to accept status quo.  Note how the donation is defaulted to monthly rather than once off which would improve their chances of that option being accepted.  They could have taken this a step further and defaulted the amount to $20 rather than $10 to encourage higher donations through our tendency to accept the default terms.  Further, they could have also applied the behavioural principle of herding to influence the amount donated. To take advantage of this they could have shown that the average donation was, for instance $25 (as long as it was truthful of course), and kept a running count of how many people made a donation.  Seeing how many others had donated and what they had spent would have been very persuasive.

So hopefully those clever Canadians at Rethink Breast Cancer have inspired you to use behavioural strategies to tackle business objectives. I am certainly looking forward to seeing more apps like the one they have created. 

For more information on the app (and the guys) check out the clip on YouTube www.youtube.com/watch?v=VsyE2rCW71o

The app is available http://itunes.apple.com/us/app/your-man-reminder/id467911146?mt=8