Predicting and Harnessing Irrational Biases

Imagine: Your product dominates your industry, though recently you’ve begun losing market share. The research looks scary: white-labeled A/B testing conclusively shows the competitor’s feature set beats you head-to-head. Your hockey-stick is broken, crawling down toward an inevitable loss of dominance. Customers increasingly choose your competitor.

How could the lens of Choice Architecture guide your response?

In this second post, I need to introduce the fundamental fact of behavioral strategy: If you know the emotions your product evokes, you know the choice they’ll make. My first post (Design as Choice Architecture) sketched 3 domains where behavioral economics can facilitate ‘making good choices.

Today’s topic focuses on How Irrational Behaviors Undermine Self-Interest. My next post examines Why Tracking/Goal-Setting Fails. Our final overview dives into How Belonging is often a social animal’s strongest drive.

THE EMOTION IS THE EXPERIENCE

Rational choosers maximize gains, optimize trade-offs, and are immune to logically irrelevant, visceral reactions. Humans, on the other hand, are predictably irrational. Products almost all seem positioned to make people better off (with more free time, financially security, health, etc). But it wasn’t self-interest that originally got people into a pickle: “The heart has its reasons which reason knows nothing of.”

Focusing on controlling your product’s emotional impact will exercise all your powers as a Choice Architect. From subtle cues to explicit contextual connections, your task is to insure that from first exposure to lasting memory, the emotions associated with choosing your product align with your customers’ needs.

FRAMING

The very crux of choice architecture, simply stated, is the power of framing. A series of demonstrations that defied rational expectations gave birth to the field. Given logically equivalent options, the presentation frame was able to make one choice appear much more appealing.

Which of the following 2 options would you choose?

90% lean 
 vs 
10% fat
12 oz free 
 vs 
36 oz for the price of 24
5-star fitness tracker 
 vs 
5-star fitness tracker PLUS 3-star social sharing

Oftentimes your content is completely baked (as with the inflexible math of the 90%/10% example). Choice architects can still draw upon an entire toolbox of supposedly irrelevant factors, any one of which might help choosers select the preferred option.

LOSS AVERSION

The Nobel Prize in 2002 was given in explicit recognition of the most powerful framing we’ve found: losses hurt far more than an equal gain. When exposed to a potential loss, the upside must typically be at least twice as great to be even mildly attractive.

While the theory is fascinating, this example allows you to gut check it:

Grocery stores in California used to offer a ten cent reward for bringing your own bag. In 2014, the option was re-framed: now shoppers PAID a dime for each bag they didn’t bring in. Do those 2 scenarios (economically and logically equivalent) feel remotely similar? If you’re indifferent between the two, count yourself among the minority of Spocks in a world of Captain Kirks.

Most of us blithely forego potential gains, but hate to let go of what we already have. Our choices are clearly influenced by the way they’re framed.

The pixie dust sprinkled on our own personal possessions is called ‘the endowment effect.’ In future posts, I will reveal a range of design powers that you already possess. I want to make sure you don’t accidentally lose your significant influence over subtle cues.

Let’s return to the scenario we posed at the outset: A competitor’s features are eating your lunch. Fortunately, your design team developed a killer response. Head-to-head research now proves that your product innovation slays. Will you pull the trigger? Or will you surrender your market dominance?

If you’re one of the brave, congratulations. You just launched New Coke, consumer research’s Titanic ship wreck. Indisputably more people chose New Coke in head-to-head tastings. So, what lessons might a choice architect learn and apply?

This textbook marketing flop shines a light on crucial aspects of Choice Architecture:

1- The power of framing overwhelms stated preferences, measured in isolation.

2- Loss aversion is a tidal force. Either control it, or it will control you.

Consider how the test was framed: a parking lot taste-off between a couple of dixie cups. This differs dramatically from sociable drinking. A single sweet sip soon turns cloying. Accurate assessment of choice demands that you pay scrupulous attention to ‘supposedly irrelevant factors.’

When you confuse the logical with the psychological, you’re “a one-legged man in an ass-kicking contest.”

Customer reactions to New Coke went about as smoothly as ‘taking candy from a baby.’ Children are rarely soothed by a bigger, better replacement. Why did Coke utterly fail to anticipate the strong feelings of loss? Basically, market projection bar-charts tend to ignore myriad factors that mess with rational expectations. (Paradoxically, the threat to take away the familiar, goddess-shaped bottle, intensified attachment to Classic Coke.)

As this example shows, the emotions evoked by a product define and drive the chooser’s experience.

Strategy, as a field, overwhelmingly attracts rational agents. McKinsey-types (and startup founders) vest their 401K’s, exercise today to improve their health at retirement, and so forth. Inside their bubble of rationality, it’s inconceivable that most of us don’t feel warm and tingly as a spreadsheet graphs the miracle of compound-interest.

When you appeal to a decision maker’s self-interest, you ignore almost everything that motivates every choice. If you want to connect to a chooser’s heart and mind, you must ask the following questions:

QUICK CHECKLIST FOR APPLYING CHOICE ARCHITECTURE

1- How many different ways can we imagine describing the experience?
2- What control do we exert over the context and frame in which we present our offer?
3- What associations do we want to immediately and intuitively trigger?
4- What connects our offer to sustaining all that people strive to protect and secure?
5- What feelings will people recall, long after they have completed the specific tasks we help them accomplish?

Paul Sas founded Motivation Engineers to deploy principles of behavioral economics in product and software design. I’m always looking to learn from others whose work leverages insights into chooser psychology. Please reach out to talk more.