CHAPTER 22 | BEHAVIORAL ECONOMICS IS LIKE TOILET PAPER
We're creating a PDF checklist for the most applicable tenets of behavioral economics. It’s to be used when you ask yourself, “Am I pulling all the levers?” Contact us for that.
FYI when micro economics is not involved, this is all choice theory. For instance, there’s a “centrality preference” that means if there are four stalls in a bathroom, most people will choose the middle two. These are the stalls that use the most toilet paper.
This is the list of top behavioral economics heuristics that impact marketing, in alphabetical order, second in the BE series.
COMMITMENTS & CONSISTENCY
It makes people “follow the crowd in step” with ways that are consistent with prior commitments or behaviors
CREATIVE LEVER Graphic progress indicators, small asks
USE Onboarding, subscriptions, soliciting donations
TIP/TRAP Small asks lead to bigger asks. This is how to get someone hooked on habit while creating loyalty. It happens all the time in mob and crime movies, in that favors are repaid. The repayment is small at first. Before you know it, you’re a mule with cocaine in your butt getting on a plane for Iceland.
Which may be how you feel when a provider makes it excruciating hard to cancel your subscription to eco-friendly washing machine detergents.
It does confuse the issue when non-profits ask that you donate monthly to help them stabilize their infrastructure, which is true. Non-profits depend on consistent giving, rather than one-time-only giving, to hire staff. $10 a month is actually worth more to them than $120.
EXAMPLE “You’ve already started setting up your account. It’s only a few steps to finish.”
EFFORT HEURISTIC
When you think that the more time something takes to create, the more valuable it should be
CREATIVE LEVER Credentials, symbols, icons, badges
USE Luxury brands, expensive products within a category
TIP/TRAP You have to show the work, which is often in slow motion or close up with a halo in any motion or still photography. Knowing your audience is especially important here, especially male/female triggers.
The heuristic is absolutely true, in that if something takes a lot of time to do, the person doing it should be paid more for their efforts. Often they are not. Artists may take 40 hours to do a painting, but if if they value their time at $100 per hour, that’s a $4000 painting, plus materials. Reasonable or unreasonable?
EXAMPLE “Hand crafted in small batches.”
ENDOWMENT EFFECT
Losing something is more powerful than gaining something, even if the dollar amount is equal
CREATIVE LEVER Customization, trials, guarantees, earned equity
USE SaaS, automotive, curated “boxes” in fashion, subscriptions
TIP/TRAP People do not like to lose something or have something taken away. You see this in politics, in that “my opponent will take away your right to (fill in the blank)” even though it may be replaced with something better or more valuable. This is an extremely powerful heuristic that is a freight train strait to your subconscious toddlerhood.
Customer service people often have scripts based on decision trees for people who want to cancel; these scripts are often based on ownership, accrual of time and investment. And those curated fashion boxes that joyfully appear with “your style” factored by season? All you have to do is send back what you don’t want and you won’t be charged? Seems innocent and convenient, right?
EXAMPLE “If you cancel your cable you’ll lose the free month you accrued.”