This is the second part of a blog on the topic of Behavioural Economics, exploring some of the lesser-known “irrational” forces that shape our behaviour.
Have you noticed how successful the 5p bag charge has been? It’s led to an 85% reduction in bag use in the first 6 months since it was introduced. However, did you also know that a trial was conducted in 2010 where customers were offered an equivalent discount on their groceries if they brought in their own bags – the result: practically no reduction in customers taking disposable bags. Now that’s peculiar – surely a 5p charge or a 5p discount should have the same effect? No – and that’s because of a phenomenon called “loss aversion”. This is the fact that we experience losses about twice as vividly as we do equivalent gains.
Do you remember back in the 90s when they launched TVs that had a built-in VHS player? Surely you agree that this is a fantastic product innovation – removing the hassle of needing two different pieces of electronics in your home. Well, not quite. Most people actually tend to view these as less reliable than buying them separately. It’s as if our gut reaction is: it can’t be a very good TV or a good VHS player if it’s doing both – I’ll buy them separately.
This is due to a phenomenon called Goal Dilution, the fact that additional goals (or tasks) tend to undermine the original goal. It’s probably the reason that the Google homepage has never showed any features other than purely its search bar. It must have been tempting, like others did, to add other features like the weather, the news, shopping. But my guess is that someone knew that by only doing one thing – “search” – customers would assume that they must be really good at it.
So don’t necessarily view the “limitations” of your product as a problem, think about how you could make a virtue out of them.
We tend to assume that customers have a set expectation, or a frame of reference, for each of our products, but often they don’t. For example, it was the long-running campaign by DeBeers back in the 1930s that started setting the expectation of how much to spend on an engagement ring. All they did was to run the message: “How can you make two months’ salary last forever?”
Similarly, until recently I had no opinion about how often to buy a new mattress. My gut-feeling would have been to replace it when it’s no longer comfortable… But then I heard the recent campaign by Dreams, stating that mattresses should be replaced every 8 years. Suddenly, I’m thinking about each of the mattresses in my house and which ones need replacing!
So when you’re designing your product, remember that customers may not have set expectations, so you can re-frame the way they view your product in how market it.
As we see in these examples, it’s not always the rational things, like price or features that drive our behaviour. Actually, our environment and other “seemingly irrelevant” factors often has a big impact on our behaviour, meaning that sometimes a small “nudge” can make a big difference.