Behavioural Science for Product Managers

Part 2 — Choices, Nudges and Habits

Behavioral product management applies behavioral science and human psychology to management. Product managers can apply behavioral science from two perspectives to improve the success of the products that they manage.

In the first part we discussed about the assumptions and decisions that Product Managers make as part of their daily activities. How these assumptions and biases that they have negatively influence the success of their products.

In this part we will look at how behavioral science can be used to influence and nudge changes in the customer/ user’s behavior. How Product Managers can use behavioral science to positively influence the choices that customers of their products make.

When planning their products, product managers should take into account that people make irrational decisions. Keeping this in mind, they can apply psychological research to build products around those irrationality. It also uses psychological principles to guide customers to the behaviors that the PMs wish them to take.

However, product managers should be conscious that the most popular method of learning this information — through customer feedback — can lead to inaccurate conclusions. This is because humans are irrational beings. We don’t always know our reasons for acting or believing a certain way. The context of a situation can alter our opinions.

Understanding the limits of users’ self-reporting, Product Managers should rely less on what they learn in customer interviews. Instead, they should take a more proactive approach, based on what they know about human psychology to guide and even change their users’ behaviors.

“Our irrational behaviors are neither random nor senseless — they are systematic. We all make the same types of mistakes over and over. The product opportunity lies in helping people not make those mistakes.” — Dan Ariely

Dan Ariely is a behavioral economist at Duke. His research centers on the concept of decision irrationality — why the choices we make are so “repeatedly and predictably wrong.” While studying why and how humans make the kinds of decisions they do, Ariely has gravitated naturally towards thinking about start-ups and product adoption.

He says that, It’s counter-productive to look for ways to make people do things they don’t already want to do. There are so many habits and practices that people want to take on that products can help with — it just requires breaking down what the problems are and then figuring out how those problems might be surmounted with technology. When it comes down to it, we’re not all that irrational at all.

In personal finance, for instance, one of the biggest problems in the United States is the overall savings rate. Between paying off student loans and credit cards, millennial are investing less and less in the stock market and in their own personal savings. Qapital, where Ariely was hired as Chief Behavioral Economist, attacks that problem by using the same psychology that makes it hard to save, to make it easier to save.

Instead of manually having to route funds monthly or biweekly, Qapital lets you create rules — like “save 50 cents every time I pay for something with my American Express” — that lets you save as imperceptibly as you spend.

The problem — that it’s easy to spend, and harder to make yourself save — could be solved simply by redirecting the technology that made it so easy to never save in the first place. And there are many more examples out there of products that affect human psychology in small and subtle ways to enable certain kinds of behavior.

Too often, that truth of product development gets hidden behind a veneer of not just irrationality but quasi-mysticism.

We will look at three very famous theories/ models that have been used by many Product Managers to influence/ nudge their customers/ users and form habits or change behaviors positively.

Fogg Behavior Model

Psychologist. BJ Fogg is the founder of the Persuasive Technology Lab at Stanford University in California. He’s been studying how to change behavior for the past 20 years. Fogg condensed his findings on how to change behavior into a model which he named: the Fogg Behavior Model.

In essence, the Fogg Behavior Model states that behavior will only happen when three elements occur simultaneously. These three behavior change elements are the following:

• Motivation — People have to be sufficiently motivated to change their behavior.
• Ability — They must have the ability to do the behavior.
• Trigger — They have to be triggered, or prompted, to do the behavior.

(Behavior = Motivation + Ability + Trigger)

Here’s what the Fogg Behavior Model looks like:

I came across a couple of quotes in this research paper that are also quite helpful in the product planning stages.

“People with low motivation may perform a behavior if the behavior is simple enough”

In order to simplify the behavior required, there are multiple ways by which you can go about it in your product plan:
— Understand the barriers from the user point of view — is it time commitment, physical presence, access to mental resources or money?
— Break down the desired task into smaller micro-tasks so it is easier for the user to complete them. For an app that encourages fitness, instead of suggesting “exercise for 30 minutes”, it could change to “walk for 5 minutes today” and gradually increase the requirement. The users wouldn’t feel that it is such a difficult task to do
— Focus on your content / message to convey that the task is extremely simple to do. Share relevant support material to drive home the point

In a calorie tracking application, instead of manually typing out the foods, the user might find voice tracking to be simpler. Though his motivation to track his meals everyday might be low, the ability to track them through voice makes it quick and simple.

“If motivation is high enough, people might do extraordinary things–even difficult things– to perform the behavior”

To leverage this trait, the product manager has to identify the specific dimension that’s behind user’s motivation. Is it pleasure/pain, hope/fear, acceptance/rejection?

In the context of a personal finance product that tracks your expenses and investments,
— User segment A might have a lot of hope for their future and have many financial dreams to achieve
— User segment B might fear that their expenses are shooting up and they may not be able to reach their retirement goal.

The motivating factors are different for each of these two segments. The product direction is dependent on which user segment is dominant in their market.

For users with a positive force like “hope”, the product could help in setting intermediate financial goals and motivating through a gamified experience. For users with a negative force like “fear”, the product could enable parking a specific amount in a separate locked account in the beginning of every month, which will indirectly reduce the expenses.

• As a person’s motivation and ability to perform the target behavior increase, the more likely it is that they will perform said behavior.
• There’s an inverse relationship between motivation and ability. The easier something is to do; the less motivation is needed to do it. On the other hand, the harder something is to do, the more motivation is needed.
• The action line — the blue curved line — lets you know that any behavior above that line will take place if it’s appropriately triggered. At the same time, any behavior below the line won’t take place regardless of the trigger used. Why is that? Because if you have practically zero motivation to do something, you won’t do it regardless of how easy it is to do. At the same time, if you’re very motivated to do something, but it’s incredibly difficult to do, you’ll get frustrated and you won’t act.

Nudge Theory

Nudge theory is a flexible and modern concept for:

• Understanding of how people think, make decisions, and behave,
• Helping people improve their thinking and decisions,
• Managing change of all sorts, and
• Identifying and modifying existing unhelpful influences on people.

Nudge theory was named and populariozed by the 2008 book, ‘Nudge: Improving Decisions About Health, Wealth, and Happiness’, written by American academics Richard H Thaler and Cass R Sunstein. The book is based strongly on the Nobel prize-winning work of the Israeli-American psychologists Daniel Kahneman and Amos Tversky.

udge theory is mainly concerned with the design of choices, which influences the decisions we make. Nudge theory proposes that the designing of choices should be based on how people actually think and decide (instinctively and rather irrationally), rather than how leaders and authorities traditionally (and typically incorrectly) believe people think and decide (logically and rationally).

In this respect, among others, Nudge theory is a radically different and more sophisticated approach to achieving change in people than traditional methods of direct instruction, enforcement, punishment, etc.

The use of Nudge theory is based on indirect encouragement and enablement. It avoids direct instruction or enforcement.

Here are some simple examples to illustrate the difference between traditional enforced change and ‘Nudge’ techniques:

Enforced Change

Nudge Techniques

Instructing a small child to tidy his/her room.

Playing a ‘room-tidying’ game with the child.

Erecting signs saying ‘no littering’ and warning of fines.

Improving the availability and visibility of litter bins.

Joining a gym.

Using the stairs.

Counting calories.

Smaller plate.

Weekly food shop budgeting.

Use a basket instead of a trolley.

Nudge theory accepts that people have certain attitudes, knowledge, capabilities, etc., and allows for these factors (whereas autocratic methods ignore them). Nudge theory is based on understanding and allowing for the reality of situations and human tendencies (unlike traditional forcible instruction, which often ignores or discounts the reality of situations and people).

Fundamentally (and properly, according to its origins) Nudge theory operates by designing choices for people which encourage positive helpful decisions; for the people choosing, and ideally for the wider interests of society and environment, etc.

Additionally, Nudge theory offers a wonderful methodology for identifying, analysing and re-shaping existing choices and influences that people are given by governments, corporations, and other authorities. Given that so many of these choices and influences are extremely unhelpful for people, this is a major area of opportunity for the development and use of Nudge theory, even if it were not envisaged as such by its creators.

Hooked Model

Why do some products capture widespread attention while others flop? What makes us engage with certain products out of sheer habit? Is there a pattern underlying how technologies hook us?

Nir Eyal answers these questions (and many more) by explaining the Hook Model — a four-step process embedded into the products of many successful companies to subtly encourage customer behavior. Through consecutive “hook cycles,” these products reach their ultimate goal of bringing users back again and again without depending on costly advertising or aggressive messaging.

The four steps in the Hook Model are explained as follows:

1. Trigger — is something which starts a behavior. A trigger can be External, for example somebody sends you an invite to join a social website like Pinterest, or a trigger could be Internal wherein I have already joined Pinterest, and now each day in the morning when I wake up, I’m obsessed to check what has changed on my Pinterest board, otherwise I feel that I might miss out on today’s Pinterest updates.

2. Action — is the behavior which needs to be performed in order to earn a reward. This action must be easy to perform. In Nir’s words — “To initiate action, doing must be easier than thinking. Remember, a habit is a behavior done with little or no conscious thought.”

3. Variable Reward — Rewards can be categorized into three kinds –

The rewards of the Tribe — include the social acceptance and recognition that we get from our tribe of friends, family and colleagues.

The rewards of the Hunt — pertains to the material rewards that we can gather, which could be physical like money, or virtual like weapons, power-ups etc, in the case of games.

The rewards of the Self — are the intrinsic rewards which we desire like mastery or competence in a particular area or skill, autonomy to make my own choices, meaningfulness of the task that I’m performing, among others.

Why variable rewards?

It has been shown and proven in psychological experiments that if constant and consistent rewards are given for a particular activity, sooner or later the interest to keep performing that activity is lost. Because the anticipation of receiving the reward is greater than the reward itself. The uncertainty of whether one would receive the reward or not is what keeps driving us.

For example, what if Facebook were to keep giving you the same status updates each time, every time, daily! Would you want to keep going back to Facebook? If on every post of mine, I would keep getting the same kind of comments, likes, shares, etc. would I remain interested in posting?

Talking about myself, if I want to buy a phone, I’ve seen that it is far more interesting to research about a phone, hunt for its specs and reviews, anticipate about how I’m going to use the phone and its features, than to actually buy it and use it. In all honesty, I probably use less than 10% of my phone’s features on a regular basis.

4. Investment — is the act of putting in time and effort by a user into the product, by using it to create value for themselves.

Or as Nir puts it — “The more users invest time and effort into a product or service, the more they value it. In fact, there is ample evidence to suggest that our labor leads to love.”

This investment could be in the form of:

1. Data — like our profile data which we add to LinkedIn

2. Followers — like the Twitter users we follow to get more relevant content

3. Reputation — like what we build on Stack Overflow by answering questions and helping other users to earn points

4. Skill — like the investment we do in learning a technology or software like Adobe Photoshop, which becomes difficult to leave for a new one. Because in becoming equally proficient in a new one, it would take a lot of effort

So once a user has made investments, described above, into a product, he is much more likely to continue using the same to protect and build on his investments.

Another interested point mentioned by Nir is how users irrationally overvalue their investment. For example if I put in my blood, sweat and tears in building a piece of furniture, say a table, in all likelihood I would value that table more than a table created by a professional carpenter. I would prefer to use my table in spite of all its shortcomings, compared to a table bought from an expert.

This is something which the ready-to-assemble furniture maker IKEA uses in its business model. It ships disassembled furniture to its customers, with simple assembly instructions that encourages the customer to invest their time and effort to put their furniture together. IKEA today is the largest furniture retailer in the world.

The best form of investment is also what can load the next trigger for the user. An example, which Nir quotes is in Pinterest where, once a user pins a photo, or responds to a thread and makes an investment, Pinterest ensures that now it will start showing related items of interests to the user, so that the user can easily be coaxed into following his items of interest on Pinterest.

References:

http://www.anuradhasridharan.com/2014/04/bj-fogg-model-and-its-relevance-in.html

https://www.businessballs.com/improving-workplace-performance/nudge-theory/

https://daringtolivefully.com/the-fogg-behavior-model

http://blogs.quovantis.com/book-review-hooked-how-to-build-habit-forming-products-by-nir-eyal/

https://www.productplan.com/glossary/behavioral-product-management/

https://taplytics.com/blog/product-manager-guide-to-psychology/