Behavioral Science in Product Management
My intellectual expedition last week has been immersing myself in Dan Ariely’s books on irrationality. Most of the examples here are from one of his many books, and I urge all of you to read Dollars and Sense, his take on irrationality in personal finance. He also started Irrational Labs, a company that uses behavioral economics to make people happier, healthier, and wealthier. Tweaking product design to bring about the desired change in customer behavior is rewarding not only for the company but also for the customer.
There are so many effects I love in Behavioral Science, but I’ll pick my top 3 and explain its implications on Product Management.
Decoy effect
What would you pick?
Now, tell me what would you pick if an additional option was presented.
Now, the third option seems so much better, right? Turns out in the first case 68% of participants went with the online subscription, but by just adding the decoy, the print only for £125, 84% of the participants went with the Online + Print format. Customers opting into the most premium service (definitely the most profitable) went up from 32% to 84%.
Power of language
Now, read the two prompts below and tell me which one brings out your altruistic self.
- 100,000 kids suffering from malnutrition need your help.
- Sarah needs your help to quench her thirst with the image below
If you picked two, you’re not alone. This is but one of many examples demonstrating the power of words in eliciting desired behavior. The identifiable victim effect describes human aversion to statistics and proclivity to specific identifiable information. So, don’t just tell your potential customer
100,000+ other customers benefitted from using your toothpaste for sensitive teeth.
Tell them that
John, a 30-year-old salesman, now dorns a million-dollar smile while talking to his customers, thanks to your toothpaste. Join John and other 100,000+ happy smiles.
Anecdotes go a long way precisely for its specificity and relatability.
IKEA effect
Why do we love IKEA? Why do we find a sense of satisfaction in following instructions (kinda) and putting together a piece of furniture, when that’s not what we do or where our expertise lies. Why do we tend to value our furniture a little more when we put it together?
Humans tend to add effort costs in the valuation of a product. Your sense of ownership and perception of value is higher when you’ve invested some effort into your product. That’s why LinkedIn asks you to add information and tailor your profile while signing up. Your effort in entering information will increase switching costs, i.e., makes it more costly for you to move from LinkedIn to another platform. However, ensure that it is not too much effort — that would disincentivize people from signing up in the first place.
