ProductCamp Dublin 2016 Behavioural Economics
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At ProductCamp Dublin 2016 I presented a talk on how Product Managers can apply principles of Behavioural Economics to build, message and price better products
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ProductCamp Dublin 2016 Behavioural Economics
- 1. 9 ways that can help you to build, message and price better products © Glen Holmes - 2016
- 2. Behavioural Economics © Glen Holmes - 2016
- 3. 1. The Scarcity Heuristic © Glen Holmes - 2016
- 4. © Glen Holmes - 2016
- 5. 2. Limit your users’ ability to procrastinate © Glen Holmes - 2016
- 6. © Glen Holmes - 2016
- 7. © Glen Holmes - 2016
- 8. 3. Naïve Diversification - Limit your users choices © Glen Holmes - 2016
- 9. © Glen Holmes - 2016
- 10. © Glen Holmes - 2016
- 11. © Glen Holmes - 2016
- 12. 4. Nudging © Glen Holmes - 2016
- 13. © Glen Holmes - 2016
- 14. © Glen Holmes - 2016
- 15. © Glen Holmes - 2016
- 16. © Glen Holmes - 2016
- 17. 5. People are crap at determining value! © Glen Holmes - 2016
- 18. © Glen Holmes - 2016
- 19. 6. Create Excitement © Glen Holmes - 2016
- 20. © Glen Holmes - 2016
- 21. 7. How you frame something impacts people’s perception. © Glen Holmes - 2016
- 22. 8. Proper timing is crucial to control outcomes.
- 23. 9. The Jargon Heuristic. © Glen Holmes - 2016
- 24. © Glen Holmes - 2016
- 25. Thank You! https://www.linkedin.com/in/glen-holmes-6057741a © Glen Holmes - 2016
Hinweis der Redaktion
- Well the word ‘behavioural’ refers to the introduction of other social sciences into economics: psychology, sociology, and political science. It’s a revolution in economics that has taken place over the past twenty years or so. I think it’s bringing economics into a broader appreciation of reality. Economics was actually more behavioural fifty or a hundred years ago
- A grocery store in Iowa had a 10% off promotion for Campbell’s soup. Some days, a sign next to the cans read “Limit of 12 Per Person”, while other days there was no limit. Customers bought 7 cans on average when the limit was enforced, compared to an average of 3 cans on days with no limit. Cognitive biases trick people into believing that it is exclusive
- Use the scarcity heuristic to compel users to sign up to feedback groups. Make them feel that they are part of an exclusive group
- Read Procrastination of enjoyable experiences – Suzanne Shu (UCLA): Her studies found that, with Groupon coupons that expire within 3 months, 6% of people redeem the coupons in the first 2 months, majority redeemed it in the last 3 weeks
- The Fear of Missing Out compels us to behave irrationally
- Time limits increase our belief of scarcity. They inhibit our ability to procrastinate and increase the FOMO
- The naïve diversification heuristic states that people tend to make choices that are more diverse when multiple options are presented to them at once, rather than sequentially
- Death by choices – have a default setting
- On average American Apparel increased conversion by 12% every time they naïvely diversified (grouped options into large groups)
- Eventbrite went from 5 to 2 options. Limiting users choices to the most common actions increased engagement and conversion
- Nudge theory (or Nudge) is a concept in behavioural science, political theory and economics which argues that positive reinforcement and indirect suggestions to try to achieve non-forced compliance can influence the motives, incentives and decision making of groups and individuals, at least as effectively – if not more effectively – than direct instruction, legislation, or enforcement. Simply, rather than instructing or asking users to make decisions, nudge them through indirect suggestions
- Schipol Airport, to help men aim better when urinating, placed a fly in the urinal. This encouraged men to aim at the fly and reduce “spillage”. This worked better than a sign saying “Please aim better”
- The South Korea government, in order to increase physical activity amongst the population, used a nudging technique where they paced the amount of calories burned for every step up a staircase. This reduced the escalator traffic and increased the stairway traffic dramatically
- Facebook, and most social media sites, are masters at nudging. The red notification icon doesn’t mandate that you click it, but it is an itch that needs to be scratched. You are compelled to look. This is another example of FOMO… what if something important happened that you need to be notified of? The suggestion of adding my phone number is t “secure my account” as opposed to using it for any marketing reasons
- Devious nudging is prevalent on the web. In this case it seems that the (free) update button is disabled and users should click on Upgrade. However; the update button is clickable, but users are nudged to click on the upgrade (paying) button. Think about this in the context of your product. Don’t be devious but think about how you can encourage users to discover features are get through the flow of your application as easy as possible.
- If you were buying a shirt for €50 and in a shop about 1km away it was €25 would you walk to the other store to save €25? Most likely yes. But if your were buying a laptop for €2000 and in a shop 1km away it was €1975 would you walk to save €25? Probably not! Yet the effort and reward are the same. We think relatively when making decisions. In cognitive economics we have discovered that people can be easily convinced that something is true. The difference between a €75 bottle of Châteauneuf-du-Pape and a €25 bottle of Cotes-du-Rhone is a ditch! They are both made from the same grapes, on the same soil, in the same region. Yet the vineyards that produce Châteauneuf-du-Pape convince us that it is 3 times better. You are architects of your own value. To not always engage in a race to the bottom on price
- Uber, in it’s original launch, focused on the high end of the market. It didn’t compete on price but on experience. It offered a luxury service to a niche. It then moved into the mass market and competes on both service and price. It architected its value by focusing on a niche and then expanding. You don’t always have to focus on the mass market. If you do be prepared to compete on value
- Virgin Galactic charges $250,000 for people to spend six minutes in space. They don’t even know if this is feasible yet! The benefit of the purchase is the anticipation
- There have been 400,000 Model 3 reservations since its unveiling in March 2016. Tesla have enough capital from pre-orders to commence production. It’s convenient to have a brand name behind you to build excitement but how can we, as product managers, use the anticipation heuristic to help build better products? I have sent out mails to customers with potential features listed. These aren’t “vote for your favourite feature mail” but are sent as psuedo marketing mail. I then track which ones customers read about or are most interested in. I check the community forums to see who is talking about the candidate features to determine which one creates the most excitement
- If some tells you that they are going to show you a hilarious cartoon and you look at it, most likely you will laugh. Whereas if someone simply shows you the exactly same cartoon you may or may not laugh. That is because how you frame something dictates the experience In Hooked, how to build habit forming products, Nir Eyal, uses an example of punch cards. In an experiment, one group received a blank punch card with eight squares, while the other group received a punch card with ten squares — with two free punches. Although both groups still needed to purchase eight car washes to redeem the free wash, the second group with two free punches had a 82% higher completion rate. This is called the Endowed Progress Effect. If you have a profile completion, or workflow in your product, you can use the endowed progress effect to encourage users to complete the task
- Notifications are becoming more and more prevalent in software products. Too many can be annoying but what can be even more detirmental is when you notify your users. In Thinking, Fast and Slow, Daniel Kahneman mentions an experiment cited in the Proceedings of the National Academy of Sciences, with eight parole judges in Israel. The judges devoted an average of 6 minutes deliberating on each case, and 35% of requests were approved. But after eating, the judge’s approval score increased to 65%. The approval rating steadily dropped the longer the time since eating, to about 0% right before a mealtime. This applies to users too. Don’t notify a user that there not updating their CRM just before lunch! Studies show that the best time to send out marketing emails is a Wednesday morning, as people feel that they are closer to the weekend and have just had breakfast!
- Copy is incredibly important, too often product managers think of features and UI, without thinking of the importance of the words that we use
- https://www.usertesting.com/blog/2013/06/26/stubhub-increases-conversions-rates-and-revenue-with-usertesting/ Fidelity Finance had a major issue with users signing up to their 401K package. Despite numerous user tests which showed that the sign up process was simple, and analytics to suggest that people were discovering the feature easily, they had a low conversion rate. The 401K sign-up was in an area of their website that was labeled “Risks and Investments”. When they changed this to Investments the sign-up rate rocketed. The negative connotation of the word “Risk” made users uneasy to sign up