Last week I was lucky to have the chance to present a talk in
Melbourne about some basics of behavioural economics. It was a great
night and lots of fun.
Many of the questions at the end were about how to use these basics in
business. I thought it might be worthwhile to revisit here some of the
really important ways to do that.
When it comes to making choices, people are generally very willing to
copy others. We all like to feel comfortable and know that we aren’t
too different from everybody else. So, if a bunch of other people
decided on a particular choice, we’ll feel that it’s ok to follow them
and make the exact same choice. Provided the choice worked out well
for them, that is.
For your business, that could mean that you might highlight how
popular a particular item is. Or a website could highlight that other
people are online purchasing at that exact moment. Demonstrating that
other people are willingly buying from you, and that some items are
really popular increases the level of comfort that people will
instinctively feel as they browse. This taps into the power of social
And when it comes to decisions, people are always willing to receive
help. The easiest decisions that people ever make are the ones that
have already been made for them.
Here is where a default choice can really help.
Consumers today have a massive amount of options to choose from. This
is true in pretty much any market. Competition is fierce and consumers
benefit. One way they benefit is by having more choice.
However, more choice can lead to confusion.
Information overload can actually restrict the ability to make a
choice. Present too many options to a person and it’s quite likely
that they will want to take some time to evaluate things rather than
make a quick choice. They’ll rather go away and think, and probably
end up doing nothing. Paralysis by analysis.
Instead of laying all options out, presenting a default choice
increases the chance of that same choice being accepted. This is due
to a couple of reasons.
The default can be presented as the most popular option, taking
advantage of the social proof factor. Also, once the default choice is
put at the front of someone’s mind they feel a degree of ownership of
that choice. The default option has then become subjectively a
‘better’ choice than it might otherwise have been, simply because of
that small degree of ownership. Some loss aversion is also at play
too, making drifting away from that default choice less likely.
Next time you’re shopping on-line, pay close attention to the way that
any options are presented.
You’ll definitely see these principles at work.