There’s a big difference between Rs. 499 and Rs. 500

There's a big difference between Rs. 499 and Rs. 500

Even though you know on a conscious level that there is no important difference between those two numbers, our perception of them is radically different because our brain is not very good at equating those digits with a real world quantity. One study suggests it’s because our brain is reading the price like it reads everything else: left to right. It puts a higher value on the first thing we see so no matter what comes after that, we still wind up relating it to the first digit. No matter how much you tell yourself otherwise, Rs.499 still registers as “in the Rs.400 range” rather than “essentially Rs.500.” Or $4.99 still registers in the 4 range than 5.

In one of the most telling experiments, Rutgers University professor Dr. Robert Schindler and his colleagues did a real-life test with a women’s clothing catalog few years ago. The clothing line normally advertised items ending in 99 cents. For the experiment, the researchers divided the 90,000 customers into three groups. One group got catalogs with the traditional prices, one got prices ending in .00 and one got prices ending in .99. The 99-cent catalog significantly outperformed the .00 one, Dr. Schindler said, recording 8 percent higher sales even though the average price decrease was only three-hundredths of a percent.

A 99-cent ending “makes the price ‘feel’ less,” Dr. Schindler said, “and it goes deeper than just appearances. If you give people two ads for a blouse, one priced at $22 and one at $21.99, people are more likely to judge the $21.99 item as being on sale. “And there’s an emotional kick to getting a discount that makes a difference to consumers.”

Retailers also look at 99-cent pricing from the opposite direction, said Britt Beemer, chairman of America’s Research Group, which interviews up to 15,000 people a week to gauge consumer behavior and marketing techniques. “Let’s say your item is $49.99 vs. $49,” Mr. Beemer said.

“There is no perceived difference for most consumers between the two. The consumer looks at the dollar number and forgets the right-hand digits.” From the seller’s standpoint, then, the $49.99 price can yield them almost one extra dollar for each item, with no perceived difference in the price on the part of the buyer. Pretty handy for the US economy, I must say.

Having said that I think that premium retailers and brands, that don’t wish to be associated as a discount label, should have their prices end in round numbers because that will perhaps speak of ‘quality’ more than ‘discount’. What do you think?

Haath laga ke dekh (Try touching me)

Haath laga ke dekh

Hello from New York. We’re here to attend MakerCon and MakerFaire and meet interesting people like authors, professors, makers, inventors, innovators, chip designers, product designers, design thinkers and of course behavioural scientists. More on that later.

Continuing with the blogpost, translated in English ‘Haath laga ke dekh’ means ‘Try touching me’, used here in a challenging tone and manner. You’ll hear a lot of it at crowded places like railway stations, bus stops, inside trains and buses where people jostle for space and there’s an invariable brushing of elbows and shoulders. Leading to mock fights of the ‘Hungama’ Bollywood movie-type, where men challenge one another saying ‘Haath laga ke dekh’.

But in this post we’ll be focusing on the positive aspect of touching. How and why touching can sub-consciously lead to positive outcomes. By touching we mean, a gentle brief touch to the forearm, for example, not the touchy-feely kinds.

In the study ‘The Effect of Touch on Women’s Behaviour’ by N. Gueguen, French men randomly approached 240 young women by saying, “Hello. My name is Antoine. I just want to say that I think you’re really pretty – I need to go to work now – but if you’d give me your number – I’ll call you later – and we could have a drink together someplace.” If the women refused, they’d say, “Its not my day. Have a good evening.” If they got her number, they’d tell her it was just a study, and the women would laugh. With half the women, the young men added a light one-second touch to the woman’s forearm. The other half were not touched. I know what you are thinking – what would happen if it were India? But stay with me on this one. I’ll give you other examples to illustrate the point too.

Outcome: When the young men didn’t touch, their success rate was 10% and when they touched, it was 20%. Why did it happen? Women didn’t think like Antoine is such a good toucher. It happened because on a sub-conscious level, touch imparts a subliminal sense of caring and connection. Social neuroscientist pioneer Ralph Adolphs says that nerve fibers especially in the face and arm are directly connected to areas of the brain such as the insular cortex, which is associated with emotion.

Subtle touching, like briefly on the arm, has provided a positive outcome in many researches and experiments – from increasing tips for servers in restaurants and bars, to the servers suggestion to order a particular dish being accepted more often, to the increase in percentage of shoppers in a supermarket purchasing the food they sampled, to the proportion of shoppers in a mall willing to answer a survey, to a 2010 study of Basketball in Berkeley that found that the number of high fives, chest bumps, hugs, etc. correlated significantly with the degree of cooperation among teammates and wins.

Haath laga ke dekh. Try touching, this time used in a persuasive manner 🙂

Why focus groups cannot be relied upon

Why focus groups cannot be relied upon

Marketers rely a lot on traditional research like focus groups to understand consumer’s motivations toward their brand, product and category. Researchers ask people for their opinion about their product, packaging or concepts to pick insights about their appeal, and get wonderful feedback that is sincere, detailed, and emphatic but has little relation to the truth.

Imagine you’re coming back from a party that was at a lavish penthouse of an industrialist. You say you had a lovely time and I ask you what you liked about it. You say “the drinks”. But did your joy really come from talking to the attractive woman who wrote the latest fictional best seller? Or was it something you really relished like the food? Or was it something subtler, like the quality of the music? Or the scent of citrus that filled the house? Or was it the fact that you got to network with influential people?

Leonard Mlodinow, author of many books including ‘Subliminal’ says, when we come up with an explanation for our feelings and behaviour, our brain searches our mental database of cultural norms and picks something plausible. In the above case, your brain might have asked ‘Why do people enjoy parties?’ and chosen ‘the drinks’ as the most likely hypothesis, if ‘drinks’ happen to conform to a set of standard reasons, expectations, cultural and societal explanations for a given preference.

In a study mentioned in ‘Subliminal’, women were shown four pairs of silk stockings that were absolutely identical, except that each had a different and very faint scent applied to it. The women were asked to choose their favourite and they found no difficulty in telling why one pair was better than the other. They spoke of perceived differences in texture, weave, feel, sheen and weight. Everything but the scent. In reality, stockings with one particular scent were rated the highest, much more often than the others, but the women denied using scent as a criterion. In fact only 6 out of the 250 women even noticed that the stockings had been perfumed.

Truth is we most often don’t understand our own preferences. Despite that, we usually think that we do. And when asked to explain why we feel a certain way, most of us, after giving it some thought, have no trouble supplying many reasons that sound plausible.

It’s a market researchers nightmare – you can’t even trust people to know what they prefer, leave alone why. That’s why we rely on the knowledge of the human brain, human physiology, cognitive neuroscience, behavioural economics and proven experiments conducted by the best in the world to understand human behaviour and create Behavioural Design solutions.

Small ideas make a big difference

Small ideas make a big difference

There are lots of small everyday things that could benefit from being designed better. Things we take for granted in everyday life. But when designed well, things just work, leading to enhanced experience, satisfied customers, appropriate actionability, increased sales, etc. This post is about few of such small everyday ideas.

Like handles on doors. If there is a handle on the door, the tendency is to pull it. But almost all doors have a handle on the side it says push, too. If the door needs to be pushed, why have a handle? Simply keep it flat and we’ll push it.

When composing emails, wish there was a reminder to attach our files, when words like ‘attached’ or ‘attachment’ were found in the composed email.

‘No Parking on Odd dates 1 3 5’ and ‘No Parking on Even dates 2 4 6’ tend to be so cumbersome. We need to first think about what date it is today, then figure that its ‘No Parking’ on that side, which means we can park on the opposite side. Instead what if we had ‘Parking on Odd dates only’ and ‘Parking on Even dates only’.

Because there are two traffic signals in view at all times, one after the zebra crossing and one much ahead on the other side of the junction, we Indians always push ahead wanting to be first (in whichever race that is) therefore not stopping at the zebra crossing and not allowing pedestrians to cross. So to get cars to stop at the zebra crossing, only one traffic signal needs to be there, placed just before the stripes begin.

Instead of having to choose from financial retirement plans with complicated numbers, what if we could choose, by looking at pictures of different homes (1, 2, 3, 4 BHK) that could be bought with different levels of retirement income.

I often get asked about what mega-pixel camera on the phone is good. Fact is that we don’t understand what mega-pixels mean. What will be useful to us is the information of what mega-pixel matched what size of print. But we know this one won’t happen, else phone and camera manufacturers won’t be able to convince us to mindlessly upgrade.

Remember using the plastic card key in your hotel room to start and switch off the power. Wouldn’t it be convenient to have one in our home, so that we could start/switch off the power with one stroke and do away with the nagging feeling of not having turned off the geyser or gas or some other appliance after leaving home?

The tendency is to think of these design ideas as small (insignificant) ideas, but they are the ones that make for the most awesome product, service experiences and of course get us to behave.

Don’t look at your stock portfolio too often

Don't look at your stock portfolio too often

Here’s why.

In 1997 the founding figures of behavioural economics – Daniel Kahneman, Amos Tversky, Richard Thaler and Ariel Schwartz did an interesting experiment. They got participants to manage a small portfolio by investing in two mutual funds over a simulated period of twenty-five years. One mutual fund had a low average return but was fairly safe, didn’t vary much month-to-month and rarely lost money much like a bond. The other had a higher rate of return but also high variance, so that it lost money about 40% of the months muck like a stock fund. They divided the participants into groups that received information about the stocks going up or down in value – monthly, yearly and every five years. They could also change their allocations monthly, yearly or every five years. Participants started with hundred shares and could allocate them to any of the two mutual funds in any proportion. At the end of the simulation, participants were paid an amount proportional to how well the shares performed.

Since it was a simulation of a length of twenty-five years, people in the five-year condition got feedback and could change their allocations only a few times, compared with hundreds of times for people in the monthly condition.

Intuition says that the group that received information about the stocks every month and could change the allocation should have performed the best right? You guessed it. It’s wrong.

Participants who got performance information once every five years earned more than twice as much as people who got monthly feedback.

In the long run, the best returns came from investing more money in the higher return-higher variance stock fund, since it made up for the short-term losses. Occasional monthly losses were canceled out by the gains. But in the monthly condition, when people saw losses in the stock fund, they tended to shift their money to the safer bond fund, thereby hurting their long-term performance. They got more feedback, more information, but it was short-term, which created an illusion of knowledge – that the stock fund was too risky. But people who received information every year or every five years didn’t see the difference in variability. They only saw the stock fund outperforming the bond fund.

The same thing happens in real life investing as well. Brad Barber and Terrance Odean studied six years of trading records of 60,000 accounts from a brokerage firm and compared returns of those who traded frequently and those who traded rarely. Frequent traders think they have lots of knowledge and that they can anticipate the market. But the most active traders earned one-third less per year than the least active ones.

Sources: R. Thaler, A. Tversky, D. Kahneman and A. Schwartz – The effect of Myopia and Loss Aversion on risk taking: an experimental test – Quarterly Journal of Economics 112:647-661 (1997)

Barber and T. Odean – Trading is hazardous to your wealth: The common stock investment performance of individual investors – Journal of Finance 55:773-806 (2000)

The smartest thing on the idiot box

Behavioural Design on National Geographic channel

Behavioural Design is on National Geographic Channel.

Behavioural scientist Daniel Pink is doing a show called Crowd Control. Its a series of experiments that use behavioural science to solve public problems like how to get kids to not pee in the pool, how to get people to follow instructions in emergency flight landings, etc.

It’s on National Geographic Channel on Mon-Thur 10pm India time.

Because it’s a TV show, they’ve had to factor in the entertainment quotient. That’s why few of the solutions are not scalable. Nevertheless they make for some of the smartest ideas you’ll see on TV.

See the edited video clips of the experiments right now here.

Talk on Investor behaviour (Franklin Templeton)

Talk on Investor behaviour for Franklin Templeton

We spoke on Investor Behaviour at Franklin Templeton’s Independent Financial Advisor convention in Bali on 12th December.

Our presentation was about investor’s biases, heuristics and rules of thumbs. We also conducted a live auction that brought alive our irrational behaviour amongst the audience who participated in it.

The rest again is confidential material. But we will be posting many articles on behaviour – consumer, employee, shopper, investor, public that we promise.

Have an awesome year.

 

 

First ever TEDx – Q&A for VJTI

First ever TEDx talk Q&A for VJTI

We were invited for the first ever TEDx – Q&A session for VJTI engineering students and makers, on 17th September 2014 at the VJTI campus (VJTI is one of the premier engineering institutes of India having received funding from The World Bank). A big thanks to TEDxGateway’s campus connect initiative. What an awesome time we had answering questions from curious minds at VJTI about Bleep, its future, human behaviour, behaviour change, Behavioural Design and the role of technology in Behavioural Design.

Students of VJTI were shown our TEDxGateway talk on Bleep and Behavioural Design immediately followed by a Q&A session that seemed like it would have lasted hours because the questions just wouldn’t stop from the enthusiastic crowd. But of course we had to have a maximum time limit of an hour. Here are highlights of the Q&A session.

Questions naturally began about Bleep and its future. We explained to students that Bleep being a product that solved a social issue and not an individual problem, is the responsibility of the Government of India. Which is why we aren’t selling Bleep to individual customers who we believe will hardly form any numbers. Plus Bleep won’t help car manufacturers sell more cars so they won’t install it voluntarily either. After some question and answers most seemed to accept our answer but some still seemed optimistic that Bleep could be sold to individuals. May be it was their optimism bias. May be one day we’ll be proved wrong.

Students asked whether Bleep could prove to be distracting and cause accidents in emergencies. We informed them that we had tested Bleep for over 3800 km and no accidents had occurred. We also told them that according to Jeff Muttart’s study (a traffic-accident reconstructionist) in emergencies people don’t use the horn and therefore Bleep will not go off and distract them further. Jeff Muttart has pored over hundreds of surveillance videos of real-life car crashes and near-crashes. His study shows that emergency horn use is not associated with decreased accident involvement. He found that drivers never steered and honked at the same time, and usually they didn’t honk at all. About half of emergency honks were meant to chastise and came only after the danger was over. The other half were just preludes to a crash. “It really didn’t serve any purpose at all. It was just, Hey, by the way, I’m going to hit you.”

(Muttart, J., “Factors that Influence Drivers’ Response Choice Decisions in Video Recorded Crashes,” SAE Technical Paper 2005-01-0426, 2005, doi:10.4271/2005-01-0426)

Someone asked “But what will happen to people’s honking behaviour once Bleep is removed from the car?” We told them that we haven’t done the post study, but we jokingly said, “First let Bleep come into our cars. Then we’ll see what happens if its not there anymore.”

The most interesting part of the session was the discussion about Behavioural Design and behaviour change. We sensed that the students found it to be a new, unique and intriguing concept. We spoke about irrational behaviour, difference in attitudes and behaviour, why we cannot solely rely on will power for behaviour change, why most educational campaigns don’t work, how we create false memories, why we use Behavioural Design and not work towards increasing people’s self-awareness and how collaboration between engineers and designers can design new products that facilitate behaviour change.

One of the curious students having read about People Power (click on the link to read about it) before attending the session, asked us to speak about the experiment. So we obliged and told them about how human behaviour is contagious. Like right there in the auditorium once the first student raised his hand to ask a question, seeing him one by one the others followed. Soon we were asked if we had solutions for littering, spitting, eve teasing, not talking on the mobile while driving and so on. May be one day we may.

Meanwhile we told them that we had a solution for another behaviour change. We spontaneously made an offer to VJTI students and makers that we’d be happy to hire a person who could help us create a product on a project that could potentially change an aspect of our behaviour. If you are an electronic engineer, maker and are interested to change human behaviour, email us with your work at anand@brief-case.co

People Power – Our second behaviour change experiment

People Power - Our second behaviour change experiment

Power Crisis in India

India currently suffers from a major shortage of electricity generation capacity, though it is the world’s fourth largest energy consumer after United States, China and Russia*. A 2012 report by the IEA estimated that nearly 25 percent of the population lacks basic access to electricity, while electrified areas suffer from rolling electricity blackouts.

McKinsey reports that the residential consumption will grow at 14% over the next 10 years, requiring India to generate power five to ten fold compared to what was generated in the last 10 years, putting a huge strain on power generation in India.

While increasing power generation faces many issues, one way we can reduce the power gap is through conservation.

 

Ineffective education-based campaigns

Many educational energy conservation campaigns and messaging like ‘Keep your AC at 24°C’, ‘Switch off appliances when not in use’, ‘Save electricity, Save money’ or ‘Be a good citizen’ or ‘Save the planet’ are being tried by different organizations and people across India, but none have proved to be successful at getting people’s to reduce their electricity consumption. Educational campaigns often don’t lead to action because they rely on an outside entity that warns you of the dire consequences of your behavior or tells you what is the ideal way of behaving.  And that often makes people defensive, because we never see ourselves as the ‘bad’ people who waste electricity. Moreover several scientific studies have proven that we humans are often not aware of our own behaviour. Its like we know that we should not overeat, but we do so quite often.

 

The 6-month long experiment

So instead of relying on traditional thinking, we implemented a study (with modifications) done in California by Schultz and colleagues. We conducted our 6 month long experiment amongst 98 households across posh residential societies in Bandra-Khar, Mumbai, India. Permission of the Secretary of each residential society was taken to conduct the experiment. We collected the households’ electricity bills before they reached each member’s house. We then calculated the average bill amount in that particular society. Lets say the average was 1022 rupees. For all above average users, we put a stamp stating that the average in that society is 1022 rupees. Next to their above average amount, we put a frownie indicating that they could do better. The bills that were below average were delivered without any intervention. The households were not informed about this experiment.

 

The results of the experiment

The units consumed by the household in the month was taken as the measurement of electricity consumption. And reduction in electricity consumption was a measure of units consumed in the month compared to units consumed in the same month last year.

Over a period of 6 months, the average reduction in unit consumption by above-average users was 1.33% compared to an average increase of 6.02% in unit consumption by non-stamped users.

1.33% reduction on a national scale can power 17,465 villages for one year.

Over this period of 6 months, we found an average of 50% of above-average users (stamp intervention group) reducing their electricity consumption, compared to an average of only 39% of non-stamped users (no intervention group) reducing their electricity consumption. The base rate for above-average users was lower before the experiment began.

 

The behavioural science behind the effectiveness of People Power

Human behaviour is contagious. We often look at how others around us are behaving and act accordingly. We go along with the crowd to avoid social exclusion. Though we may not be aware of the degree to which we’re socially influenced.

In fact we people don’t see ourselves as easily influenced by those around us. If we were to ask people what would make them change, we suppose they will rank “what others are doing” last. But when we tested what really works, following the herd has proven to be very persuasive.

In the experiment, we didn’t tell anybody what to do. We just told them what people like them were doing.

And when we check out the typical electricity bill, we see that it’s a disaster of line items. So we contextualized information in a way that was motivating for people to conserve power. The information provided by the stamp let the above average users know how much their neighbors were consuming. That set the social norm and got them to reduce their power consumption.

People Power – A simple intervention that gives people the power to make a big difference at no cost.

People Power has got featured in Fast CompanyThe Times of IndiaDNA and has 1,50,000+ views on The Logical Indian.

 

Sources:

People Power is based on the study by Schultz, P. Wesley, Jessica M. Nolan, Robert B. Cialdini, Noah J. Goldstein and Vladas Griskevicius, “The Constructive, Destructive, and Reconstructive Power of Social Norms”, Psychological Science 18 (2007): 429-34

*EIA – U.S. Energy Information Administration Report updated March 18, 2013; Wall Street Journal 2 Jan 2012 and McKinsey’s report, ‘Powering India – The road to 2017’

Calculation of 1.33% on a national scale can power 17,465 villages – [Total energy (in GWh) consumed in India = 852903 (as per Govt. of India, CEA, July 2013). 1 Gwh = 10,00,000 kwh.Total energy (in kWh) consumed in India = 852903000000. Per capita consumption of energy (in kWh) in rural India (y) = 100 (Ministry of New and Renewable Energy, Govt. of India 2012 and World Energy Outlook 2011, IEA). 1.33% of Total energy (in kWh) consumed in India (x) = 11343609900. Total rural population that can be served with 1.33% of energy savings (x/y) = 113436099. Divide the result by 5 and we get number of rural households = 22687219. According to the 2011 census of India, 68.84% of Indians, around 833.1 million people live in 640,867 different villages. So average population per village comes to 1299. Divide the above result (22687219) by 1299, we get number of villages = 17,465.]

Bonus: Check out one of the most famous experiments in studying conformity under group pressure – the Solomon Ash experiment here.

The science behind Facebook’s experiment

Priming influences us subconsciously

Read about Facebook’s experiment? The one in which they manipulated which posts showed up on the news feeds of 6,89,003 Facebook users. For one week, some users saw fewer posts with negative emotional words than usual, while others saw fewer posts with positive ones. People were more likely to use positive words in Facebook posts if they had been exposed to fewer negative posts throughout the week, and vice versa. Read about it here.

Love it or hate it, here’s the science behind the experiment.

Our behaviour is often influenced by sub-conscious cues. Priming shows that people’s behaviour may be altered if they are first exposed to certain sights, words or sensations. In other words, people behave differently if they have been ‘primed’ by certain cues beforehand. Priming seems to act outside of conscious awareness, which means it is different from simply remembering things.

Here are few other fascinating priming-related researches. Social psychologist John Bargh et al got participants in the first group to unscramble five words like ‘he it hides finds instantly’. For this group the random words were just to keep them busy, but for the second group, the sentences had lots of words, which were stereotypically associated with old people – old, lonely, grey, careful, wise, stubborn, courteous, etc. Then the two groups of people were made to walk a 9.75-metre strip. Those who’d been fed old-related words took a full second longer to cover the distance, than those who hadn’t.

Those primed were reminded about the idea of being old. Because we have habitual ways of thinking about old people – this idea got activated subconsciously and they acted in line with these stereotypes without even realizing it.

But we can improve people’s performance by just the same method. In another research, Asian-American participants were invited to take a test. Before they did, some were primed with the words that would activate stereotypes about Asian people, namely superiority at maths. This was done by flashing words on a screen for less than a tenth of a second: too quick to be perceived consciously, but slow enough for the subconscious to register.

Asian-Americans who had been primed with the stereotype got almost twice as many of the questions right as the other group. When researchers saw the data closely they found that after bring subliminally primed with an Asian-American stereotype, Asian-Americans attempted more questions. As if the stereotype made them try harder – a habit of persistence.

In another research asking participants to make a sentence out of scrambled words such as fit, lean, active, athletic made them significantly more likely to use the stairs, instead of lifts.

Says Jeremy Dean of www.psyblog.co.uk, “Everyday we are bombarded with subtle and not so subtle cues of how to behave. We process these automatically and subconsciously, and over time these impulses emerge as our habits, which we start performing without conscious thought.”

Feel like sipping some cocktail by the beach?

 

Sources: John Barg, M. Chen, L. Burrows – Automaticity of social behavior: Direct effects of trait construct and stereotype activation action – Journal of Personality and Social Psychology 71, no. 2 (1996): 230

M. Shih, N. Ambady, J.A. Richeson, K. Fujita, H.M. Gray – Stereotype performance boosts: the impact of self-relevance and the manner of stereotype activation – Journal of Personality and Social Pyschology 83, no.3 (2002): 638

Wryobeck and Chen (2003) Using priming techniques to facilitate health behaviours. Clinical Psychologist 7:105108.

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