Behavioral Economics 101For Product Design

Action Design DCAugust 12, 2014

Steve Wendel (In: sawendel) Principal Scientist, HelloWalletZarak Khan (In: khanzarak) Senior Consultant, Booz Allen

Help your users overcome obstacles

What is it?

Thorndike et al. 2012 (American Journal of Public Health)

500 Million Dollars in Savings on Energy Bills…

…And a billion dollar valuation

Why? Are we just that lazy?

What’s Behavioral Economics?

Core Lessons for Product Design

How Habits Fit In

Behavioral Methods for Product Design

Topics

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About Steve

And Zarak

Maybe someday I’ll grow up to be a management consultant and wear vests every day!

What is it?

Well, maybe not so thoughtful

The first behavioral economist?

Behavioral economics meets the public

And practitioners

Who uses it?

What’s Behavioral Economics?

Core Lessons for Product Design

How Habits Fit In

Behavioral Methods for Product Design

Next Up – Core lessons for product design

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Bag of Tricks

4 Big Lessons

1: We have two independent systems

2: We’re imperfect

3: Choices are relative, contextual & social

4: Friction Matters

Lesson 1: Dual processes - a rider & an elephant

Marketing that appeals to emotion

Lesson 2: We’re just not perfect.

attention

willpower

memory

handling complex decisions

So build accordingly.

attention

willpower

memory

handling complex decisions

In menus or anywhere else

And automate where possible

Lesson 3: We’re unsure & look for clues: comparisons, context, and peers

“9 out of 10 people in your area have already paid their taxes”

Especially in pricing

Lesson 4: Minor frictions matter. A lot.

And can be used practically in products

What’s Behavioral Economics?

Core Lessons for Product Design

How Habits Fit In

Behavioral Methods for Product Design

Next Up – How Habits Fit In

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So what’s a Habit?

So what’s a habit?

Adapted from Duhigg 2012

What can they be used for? The good…

And the bad

Building them means taking action, repeatedly

Nir Eyal’s Model

Remember, we’re often on autopilot

What’s Behavioral Economics?

Core Lessons for Product Design

How Habits Fit In

Behavioral Methods for Product Design

Next Up – Behavioral Methods

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A philosophy and a method

There are no magic wands.

We’re always wrong.

Experiments can make us less wrong.

Sorry, none of this works

Because we’re always wrong

So, be less wrong

With experiments – A/B, RCT, ABC, etc.

Controlled Experiments: The Gold Standard

Statistical Models w/ Controls

Summary

Behavioral econ: uses economics & psychology to understand quirks of behavior

We’re all fundamentally limited; design accordingly

Users are often on autopilot (habits, etc.)

Assume you’re wrongand rigorously test interventions

Comments?

sawendel khanzarak

Thank You!

Find the behavioral obstacles

Figure out what to change / try

Component: To Do This: Try This:

Cue Cue Action Tell the User What The Action Is

Increase Power of Cue Create Clear Affordances

Increase Power of Cue Clear the Page of Distractions

Reaction Increase Trust Make Site Beautiful and Professional

Increase Interest & Trust Social Proof

Increase Interest & Trust Display Strong Authority on Subject

Bypass Automatic Rejection Be Authentic and Personal

Evaluation Increase Motivation Prime User-Relevant Associations

Increase Motivation Loss Aversion

Increase Motivation Peer Comparison

Increase Motivation Peer Competition

Increase Motivation Make the Rewards Vivid

Decrease Costs Default Everything

Decrease Costs Lessen Burden of User Action (cheat)

Decrease Costs Reduce information required for user to proceed (simplify)

Decrease Costs Avoid choice overload

Ability Increase Logistical Ability Implementation Intentions

Decrease Resource Constraints Automate

Increase Sense of Feasibility (Self-Efficacy) (Positive) Peer Comparison

Time Pressure Increase Urgency Frame text to avoid temporal myopia

Increase Urgency Remind of prior commitment to act

Increase Urgency Make it scarce Increase Urgency Make it time-sensitive

Want more?

www.designforaction.org

Want more?

Well, four of you. Fame, friends and a free

ticket.

Want more?

$99 for first 25 peoplewho use code “be_dc”

$150 for the next 50

$250 -> $400 for the rest

Capped at 400 people

www.designforaction.org