Stephen Wendel's & Zarak Khan's presentation at Action Design DC on 12 August 2014, giving an introduction to behavioral economics and how it can be applied to product design.

1. Behavioral Economics 101
For Product Design
Action Design DC
August 12, 2014
Steve Wendel (In: sawendel) Principal Scientist, HelloWallet
Zarak Khan (In: khanzarak) Senior Consultant, Booz Allen

2. Help your users overcome obstacles

3. What is it?
Thorndike et al. 2012 (American Journal of Public Health)

4. 500 Million Dollars in Savings on Energy Bills…
…And a billion dollar valuation

5. Why? Are we just that lazy?

6. What’s Behavioral Economics?
Core Lessons for Product Design
How Habits Fit In
Behavioral Methods for Product Design
Topics
1
2
3
4

7. About Steve

8. And Zarak
Maybe someday I’ll
grow up to be a
management
consultant and wear
vests every day!

9. What is it?

10. Well, maybe not so thoughtful

11. The first behavioral economist?

12. Behavioral economics meets the public

13. And practitioners

14. Who uses it?

15. What’s Behavioral Economics?
Core Lessons for Product Design
How Habits Fit In
Behavioral Methods for Product Design
Next Up – Core lessons for product design
1
2
3
4

16. Bag of Tricks

17. 4 Big Lessons
1: We have two
independent systems
2: We’re imperfect
3: Choices are relative,
contextual & social
4: Friction Matters

18. Lesson 1: Dual processes - a rider & an
elephant

19. Marketing that appeals to emotion

20. Lesson 2: We’re just not perfect.
attention
willpower
memory
handling complex decisions

21. So build accordingly.
attention
willpower
memory
handling complex decisions

22. In menus or anywhere else

23. And automate where possible

24. Lesson 3: We’re unsure & look for clues:
comparisons, context, and peers
“9 out of 10 people in your area
have already paid their taxes”

25. Especially in pricing

26. Lesson 4: Minor frictions matter. A lot.

27. And can be used practically in products

28. What’s Behavioral Economics?
Core Lessons for Product Design
How Habits Fit In
Behavioral Methods for Product Design
Next Up – How Habits Fit In
1
2
3
4

29. So what’s a Habit?

30. So what’s a habit?
Adapted from Duhigg 2012

31. What can they be used for? The good…

32. And the bad

33. Building them means taking action, repeatedly
Nir Eyal’s Model

34. Remember, we’re often on autopilot

35. What’s Behavioral Economics?
Core Lessons for Product Design
How Habits Fit In
Behavioral Methods for Product Design
Next Up – Behavioral Methods
1
2
3
4

36. A philosophy and a method
There are no magic wands.
We’re always wrong.
Experiments can make us less wrong.

37. Sorry, none of this works

38. Because we’re always wrong

39. So, be less wrong

40. With experiments – A/B, RCT, ABC, etc.
Controlled Experiments:
The Gold Standard
Statistical Models w/ Controls

41. Summary
Behavioral econ: uses economics &
psychology to understand quirks of behavior
We’re all fundamentally limited;
design accordingly
Users are often on autopilot (habits, etc.)
Assume you’re wrong
and rigorously test interventions

42. Comments?
sawendel khanzarak

43. Thank You!

44. Find the behavioral obstacles

45. Figure out what to change / try
Component: To Do This: Try This:
Cue Cue Action Tell the User What The Action Is
Increase Power of Cue Create Clear Affordances
Increase Power of Cue Clear the Page of Distractions
Reaction Increase Trust Make Site Beautiful and Professional
Increase Interest & Trust Social Proof
Increase Interest & Trust Display Strong Authority on Subject
Bypass Automatic Rejection Be Authentic and Personal
Evaluation Increase Motivation Prime User-Relevant Associations
Increase Motivation Loss Aversion
Increase Motivation Peer Comparison
Increase Motivation Peer Competition
Increase Motivation Make the Rewards Vivid
Decrease Costs Default Everything
Decrease Costs Lessen Burden of User Action (cheat)
Decrease Costs Reduce information required for user to proceed (simplify)
Decrease Costs Avoid choice overload
Ability Increase Logistical Ability Implementation Intentions
Decrease Resource Constraints Automate
Increase Sense of Feasibility (Self-Efficacy) (Positive) Peer Comparison
Time Pressure Increase Urgency Frame text to avoid temporal myopia
Increase Urgency Remind of prior commitment to act
Increase Urgency Make it scarce
Increase Urgency Make it time-sensitive

46. Want more?
www.designforaction.org

47. Want more?
Well, four of you.
Fame, friends and a free ticket.

48. Want more?
 $99 for first 25 people
who use code “be_dc”
 $150 for the next 50
 $250 -> $400 for the rest
 Capped at 400 people
www.designforaction.org