Shopping behaviour – Page 2 – Behavioural Design

We did an interesting experiment in Mumbai some time back. We got 98 households across a few housing societies in Bandra and Khar to provide us with their electricity bills before the bills reached each member’s house. We then calculated the average bill amount in that particular society.

Let’s say the average was Rs 1,022. For all above-average users, we put a stamp stating that the average in that society is Rs 1,022. Next to their above average amount, we put a frownie indicating that they could do better.

The average number set the social norm and got the above average users to act like their neighbours and reduce their electricity consumption by 1.33 per cent. 1.33 per cent sounds small, but it can power 17,465 villages for one whole year. We called the experiment People Power because it gives people the power to make a difference at no cost.

Human behaviour is contagious. Our actions are often guided by how people around us are behaving. The information provided by the stamp let the above-average users know how much their neighbours were consuming.

That set the social norm and got them to reduce their power consumption. We do as others do. If people see other people littering, they litter too. If people see other people throwing waste in dustbins, they use dustbins too. If people see other people cheating, they cheat too. If people see other people being honest, they behave honestly too.

Behavioural science studies show that people dress in the same styles as their friends, pick dishes preferred by other diners, choose restaurants that are more crowded, are more likely to get fat if people around them become fat, are more likely to quit smoking if their friends quit, pay taxes if others are paying, vote if their spouse votes, and so on. A five-star review on Amazon leads to approximately 20 more books sold than one-star reviews.

This behavioural science principle of ‘social proof ‘ made a popular American infomercial for a home shopping channel change the all-toofamiliar call-to-action line at the end of the infomercial, “Operators are waiting, please call now” to “If operators are busy, please call again”. This simple change led to its sales skyrocketing.

On the face of it, the change seems foolhardy. After all, the message indicates that one may have to waste their time redialing till they reach a sales representative. Yet it worked so brilliantly.

Consider the kind of mental image that’s likely to get generated when you hear, ‘Operators are waiting, please call now’ — scores of bored phone representatives while they wait by their silent telephones — an image indicative of low demand and poor sales.

Consider how your perception of the popularity of the product would change when you hear, ‘If operators are busy, please call again’ — operators going from phone call to phone call without a break, right? That made people think: ‘If the phone lines are busy, then other people like me who are also watching this infomercial must be calling too.

Most people think they are different. But in reality most of us behave the way others do. So powerful is the effect of others on us that television executives love to fill comedy shows with canned laughter.

Experiments by lots of behavioural scientists have found that the use of canned laughter causes an audience to laugh longer and more often when humorous material is presented. People rate the material as funnier. In addition, evidence indicates that canned laughter is most effective for poor jokes.

In another experiment conducted by behavioural scientists Noah Goldstein, Robert Cialdini and Vladas Griskevicius (‘A Room with a Viewpoint: Using Social Norms to Motivate Environmental Conservation in Hotels’, goo.gl/OJT1pb), different kinds of signs were placed in hotel rooms. One of the signs asked guests to help save the environment by reusing their towels.

The second one informed them that the majority of guests at the hotel recycled their towels to help save the environment. The second sign had a success rate of 26 per cent more than the first sign.

A third sign informed guests that majority of people who had previously stayed in their particular room recycled their towels to help save the environment. The third sign had a success rate of 33 per cent more than the first sign.

Now only if hotels could apply the same principle to reducing theft of towels, shampoos, bedsheets, stationary and, yes, appliances too.

Sources: 1. 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 18:429-34 (2007) 2. Kelman, H. C. (1 March 1958). “Compliance, identification, and internalization three processes of attitude change”. Journal of Conflict Resolution 2 (1): 51–60.) 3. Cai, Hongbi, Yuyu Chen and Hanming Fang – Observational Learning: Evidence from a randomised natural field experiment – American Economic Review 99, no.3: 864-82 (2009) 4. Noah J. Goldstein, Robert B. Cialdini and Vladas Griskevicius – A room with a viewpoint: Using social norms to motivate environmental conservation in hotels – Journal of Consumer Research 35:472-82 (2008) 5. David W. Nickerson – Is voting contagious? Evidence from two field experiments – American Political Science Review 102: 49-57 (2008) 6. Nicholas A. Christakis and James Fowler – Connected: The surprising power of our social networks and How they shape our lives (2009) 7. Behavioural Insights Team – erstwhile cabinet office of British Government 8. Gary S. Becker – A note on restaurant pricing and other examples of social influence on price – Journal of Political Economy 99, no. 3: 1109-16 (1991) 9. Chevalier, Judith and Dina Mayzlin – The effect of word of mouth on sales: Online book reviews – Journal of Marketing Research 43, no.3: 345-54 (2006) 10. Gregory S. Berns et al – Neurobiological correlates of social conformity and independence during mental rotation – Biological Psychiatry 58: 245-53 (2005) 11. M. M. Smith and R. G. C. Fuller – Effects of group laughter on responses to humorous materials – Psychological Reports 30:132-34 (1972) 12. R. G. C. Fuller and A. Sheehy-Skeffinton – Effects of group laughter on responses to humorous materials: A replication and extension – Psychological Reports 35:531-34 (1974) 13. T. A. Nosanchuk and J. Lightstone – Canned laughter and public and private conformity – Journal of Personality and Social Psychology 29:153-56 (1974)

Why Behavioural Design is more effective than Advertising at changing behaviour

Published November 8, 2016 by Anand Damani

Advertising is useful for creating awareness of the the brand and making the brand likable through a story. However its too much to expect that viewers would choose that same brand or product when they are actually in ‘buy’ mode. Because today consumers are subjected to thousands of associations everyday and the human brain cannot be expected to revive the desired brand connection at point of purchase or consumption. Behavioural Design, on the other hand, works at this moment of truth and is far more effective at making people act in the desired way. Let us give you an example.

Suppose we wanted to encourage students to drink alcohol in limits and not go overboard. And say we chose advertising as a way to influence them to reduce their drinking. And say we even use the proven persuasive technique of using social norms – people are motivated to behave in line with perceived social norms. So we advertise that 85% of students drink 2 or lesser than 2 drinks when they party. The thinking is that when students know that their peers don’t drink much, it will reduce the amount that they’ll want to drink when they party. And we advertise via posters in colleges in prominent places so that the students would surely notice them.

Though the technique of social norm is persuasive, by the time the students get to the pubs, clubs, parties, wherever drinking occurs, they forget about that piece of persuasive messaging. The disparity between where the students see the persuasive message and where they are when they drink means that the distant voice of the message is likely to be drowned by the here-and-now sounds of cheers, fast music, laughter and an ambience created to shed inhibitions.

It’s unlikely that the same message would work if placed inside the pubs or clubs, especially if students see other students drinking more than 2 drinks. But what if the pubs put playful ‘light cubes’ in students’ drinks. Light cubes that are LED lights enclosed in plastic, emitting flashes of blue and white light, making the drink look like it were flashing the police car lights (blue, white and red in US). That could subliminally remind the students of the presence of cops around and restrict them from going overboard and getting into trouble. That’s why Behavioural Design is more powerful at changing behaviour.

We do what others do

Published November 1, 2016 by Anand Damani

You may be saying to yourself ‘People follow what others do, but I’m different.’ Then again everyone feels like that. And that makes you no different than me.

Most of us learn by following what others do and that’s how societies develop. Also, if we care about what other people think about us, then we’ll go along with the crowd to avoid social exclusion (peer pressure), though we may not be aware of the degree to which we’re socially influenced. Here are few such interesting influences that make us behave in a particular way.

In a real-world experiment tax officials in Minnesota, US gave groups of taxpayers different kind of information. Some were told their tax was put to good use in education, etc. Some were threatened with punishments for noncompliance. Others were given helpful information like how to fill their tax forms, etc. Remaining were told that more than 90% of Minnesotans already complied, in full. This last intervention generated the most impact on tax compliance, proving that desirable behaviour can be increased, by drawing public attention to what others are doing.

In another study conducted by Schultz, 300 households in San Marcos, California were informed about how much energy they had used in previous weeks. They were also given average consumption of energy by households in the neighborhood. In the following weeks, the above-average users, reduced their energy consumption; but the below-average users, increased their energy consumption! If the current action is better than the social norm, then people should not be informed of the norm. An addition of a smiley, to indicate that below-average users’ consumption was socially favored, brought the consumption down again. Our experiment People Power was based on this experiment.

As Behavioural Designers, if we want to change people’s behaviour, we should let people know about what other people are doing. Though if people’s behaviour is undesirable then care must be taken to craft the intervention. The other day we saw an ad of Olay Total Effects anti-ageing cream in a women’s magazine. The headline read as ‘Does life really end at 30?’ while the copy went on to explain in bold letters that ‘82% of married women worry more about cooking the right food for their mothers in law than choosing the right cream for their skin.’ And ‘83% of women worry more about the marks their kids get in exams than the marks on their skin.’ ‘Your priorities may change but why let the skin suffer?’

The ad condemns women’s behaviour but also highlights that the undesired behaviour is common. Women will subconsciously interpret the message to be ‘Majority of women feel that way, so why not me?’ therefore it will be counterproductive for Olay and P&G. We may not admit it, but we do what others do.

Source: 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

What’s the best way of breaking a brand’s loyalty?

Published July 5, 2016July 5, 2016 by Anand Damani

All along marketers have believed that satisfied customers are loyal customers. All along marketers have believed that loyal customers mean profits for companies. But data by behavioural scientists are making us revisit established theories of consumer behavior and marketing.

For example, research by Reichheld and Teal has revealed that between 65% – 85% of people who switch brands are either satisfied or very satisfied. If satisfaction was the key to keeping customers loyal, why are satisfied people switching brands?

Another research by Szymanski and Henard reveals that on its own, satisfaction predicts very little of people’s behavior, perhaps as little as one-quarter.

This actually makes sense. As we have seen by recent previous posts ‘Think you can predict your own behavior?’ and its Part II, strong habits rule over intentions. In the face of a strong habit, we sometimes don’t buy the things we intend to. Instead, we buy what we bought before.

Says Jeremy Dean of PsyBlog when the initial choice is made to buy a product and subsequently made again and again, in the same context, then it’s likely to become a habit. Meaning we make the same choice without considering the options, because deliberation hurts the brain.

Habits can be so strong that according to research by Lal and Bell, habitual shoppers often don’t respond very strongly to incentives like special offers. Which makes creating shopping habits an even more profitable activity especially for brands.

So what is the best chance a brands got at breaking another brand’s loyalty?

The answer is – major life events. Consumer behavior expert Alan Andreasen was one of the first to point out that there are particular moments in people’s lives when their consuming habits are most ready to change. He figured the more major life events people experienced, like changing employer, getting married, moving house or the biggest of them all, having a kid, the more they had changed brands. Major life changes mean change in situations, change in environment, which means old habits get disrupted and the opportunity to break in increases.

Sources: F.F. Reichheld and T. Teal – The loyalty effect: The hidden force behind growth, profits, and lasting value – Cambirdge, MA: Harvard Business Press, 2001

D.M. Szymanski and D.H. Henard – Customer Satisfaction: A meta-analysis of the empirical evidence– Journal of the academy of marketing science 29, no.1 (2001): 16-35

R. Lal and D.E. Bell – The impact of frequent shopper programs in grocery retailing – Quantitative marketing and economics 1, no. 2 (2003): 179-202

Psyblog – www.psyblog.co.uk

Never underestimate the power of social proof

Published March 29, 2016 by Anand Damani

When we are uncertain about a course of action, (and that happens a lot of the times) we tend to look to other people around us to guide our decisions and actions. That’s the behavioural science principle of social proof. Following are two interesting examples of social proof at work and how you could use it to influence other people.

An American infomercial for a home shopping channel changed the all-too-familiar call-to-action line at the end of the infomercial, “Operators are waiting, please call now” to “If operators are busy, please call again”. This simple change led to its sales skyrocketing. On the face of it, the change seems foolhardy. After all, the message indicates that one may have to waste their time redialing till they reach a sales representative. Yet it worked so brilliantly.

Consider the kind of mental image that’s likely to get generated when you hear “operators are waiting, please call now”: scores of bored phone representatives while they wait by their silent telephones – an image indicative of low demand and poor sales. And consider how your perception of the popularity of the product would change when you hear “if operators are busy, please call again”: operators going from phone call to phone call without a break. That made people think that if the phone lines are busy, then other people like me who are also watching this infomercial are calling too.

In an experiment conducted by Robert Cialdini, Noah Goldstein and Griskevicius, different kinds of signs were placed in hotel rooms. One of the signs asked guests to help save the environment by re-using their towels. The second one informed them that the majority of guests at the hotel recycled their towels to help save the environment. The second sign had a success rate of 26% more than the first sign. A third sign informed guests that majority of people who had previously stayed in their particular room recycled their towels to help save the environment. The third sign had a success rate of 33% more than the first sign.

Now only if hotels applied the same principle for reducing theft of towels, shampoos, bedsheets, stationary, appliances and paintings, too.

Source: Noah J. Goldstein, Robert B. Cialdini and Vladas Griskevicius – A room with a viewpoint: Using social norms to motivate environmental conservation in hotels – Journal of Consumer Research 35:472-82 (2008)

How brands get consumers to upgrade

Published May 16, 2016March 22, 2016 by Anand Damani

Often when companies introduce a premium variant of the product, sales of their existing best seller get a boost. Of course the premium variant could eventually go on to becoming the best seller, but by then, usually there is a luxury variant introduced on top of that premium one. Eg. Cadbury Silk has been a successful variant as well as given a boost to sales of regular Cadbury Dairy Milk. When Blue Label was added to Johnnie Walker’s range, Black Label benefited the most. Why does this happen?

According to decision researcher Itamar Simonson, when consumers consider a particular set of choices for a product, they tend to favor alternatives that are ‘compromise choices’ – choices that fall between what they need at a minimum, and what they could possibly spend at a maximum. When consumers make a decision between two variants, most compromise by opting for the less-expensive version. However, if a third variant (Blue Label) were to be offered that was more expensive than the other two choices, the ‘compromise choice’ would shift from the economy-priced variant (Red Label) to the moderately priced variant (Black Label), which is no longer the highest-priced variant. Thus upgrading consumers.

So while laying out the product portfolio it is important to recognize that the brand’s lowest-priced and highest-priced variants provide two important potential benefits for the business. One is that the top-of-the-line products (Blue Label) meet high-end needs of a niche group of current and future consumers. This is well recognized. But what’s not so recognized is that the next-highest-priced variant (Black Label) will more likely be considered attractively priced – the compromise choice.

An important part of the application of the ‘compromise choice’, says Robert Cialdini, Professor of Psychology and Marketing at Arizona State University, “It could happen that the brand faces an unexpected slump in the sales of the highest-priced variant, which might tempt you to stop offering that variant. However, removing that item from the set of consumer choices without replacing it with another top-of-the-line variant could produce a negative domino effect that would start with your next-highest variant of your product and work its way down. Such a shift in your consumer’s compromise choice would land you in a compromising position of your own.”

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

Published May 16, 2016October 6, 2015 by Anand Damani

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?

Why focus groups cannot be relied upon

Published September 2, 2015 by Anand Damani

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.

When more choice leads to lower sales

Published January 13, 2015 by Anand Damani

You may be thinking what a crazy thing to say. After all, which marketer doesn’t benefit from more choices? Take a look at ice-cream parlors. When we visit them we’re often faced with varieties of flavors from chocolates to mint to fruits to natural essences to dry fruits, with so many variants within each flavor depending on the parlor we visit. And the more extensive the varieties of flavors, the better publicity the parlor could generate and could even make it a unique feature of the brand. Moreover the consumers also get to enjoy sampling and choosing the flavors they would like to try. Offering such an extensive choice is helpful when consumers are likely to know exactly what they want and are simply looking for a store or business that supplies it.

But few product categories and companies find themselves in the position of having hordes of consumers salivating at the opportunity to choose from their wide selection of goods and services. More prevalent is the case, that consumers don’t know precisely what they want until they have surveyed what’s available. Take the example of mutual funds in India. There are more than 40 companies providing them with over 4000 schemes to choose from. Now imagine the error-laden short cuts that consumers must be taking to make their choice, if they haven’t already been overwhelmed in the first place.

Behavioural scientist Sheena Iyengar and colleagues Huberman and Jiang analyzed retirement programs of 8,00,000 workers in the US and found that the more choices that were offered, the less likely the employees were to enroll in the program at all. To mention one specific comparison, they found that when only 2 funds were offered, the rate of participation was around 75%, but when the 59 funds were offered, the participation rate dropped to about 60%.

When so many choices are made available, to consumers who don’t know exactly what they are looking for, they find decision-making frustrating due to the burden to having to differentiate so many options to be able to make the best decision. This results in disengagement from the task at hand, leading to an overall reduction in motivation and interest in the product.

In another experiment Sheena Iyengar and Mark Lepper set up a display at a supermarket in which passersby could sample a variety of jams that were made by a single manufacturer. Either 6 or 24 flavors were featured at the display at any given time. Results – only 3% of those who approached the 24-choice display actually purchased any jam. In comparison 30% bought when the choice was between 6 flavors.

If you are in a similar situation or sell many variations of your product, you may want to consider a reduction in the number of options provided by your business in order to increase your sales. Other healthy side-effects could also include reduction in marketing spends that support a smaller portfolio, reduced spending on raw materials, more storage space, etc.

Sources: S.S. Iyengar, G. Huberman and W. Jiang – How much choice is too much? Contributions to 401(k) retirement plans – Pension design and structure: New lessons from Behavioural Finance, Oxford University Press: 83-94 (2004)

S.S. Iyengar and M.R. Lepper – When choice is demotivating: Can one desire be too much of a good thing – Journal of Personality and Social Psychology, 79:995-1006 (2000)

Why rich people bargain with poor vegetable vendors

Published May 16, 2016October 13, 2014 by Anand Damani

We find this situation pretty much every time we go to the vegetable market (anywhere in India). But in reality its not just rich people who behave irrationally, it’s everyone. Two stalwarts of behavioural economics – Daniel Kahneman and Amos Tversky – explain such behaviour with the help of the following example in their paper “The framing of decisions and the psychology of choice” published in Science in 1981.

Suppose you have two errands to run today – to buy a new pen and a suit for work. At a stationary store, you find a nice pen for Rs. 250 (in the original paper the amounts are different and in $). You are set to buy it when you are told that the same pen is for sale for Rs. 150 at another store 10 minutes away. What would you do? Would you take the trip to save Rs. 100? Most people faced with this dilemma say they would take the trip to save Rs.100.

Now you are shopping for your suit. You find a luxurious gray pinstripe suit for say Rs. 5000. You are about to buy it when another customer tells you that the exact same suit is for sale for Rs. 4900 at another store 10 minutes away. Would you make the 10-minute trip? Most people say they would not.

What’s going on here? Is 10 minutes of your time worth Rs. 100 or not? Whether the amount from which this Rs. 100 will be saved should be irrelevant. But in comes the problem of relativity.

We make comparisons which are easy and available locally. We compare a cheap pen with an expensive one and this contrast makes it obvious to us that we should spend that extra time to save Rs. 100. At the same time, the relative advantage of the cheaper suit is very small, so we spend the extra Rs. 100.

Says Dan Ariely, “This is why it is so easy for a person to add $200 to a $5000 catering bill for a soup entrée, when the same person will clip coupons to save 25 cents on a one dollar can of soup. Or a person will find it easy to spend $3000 to upgrade to leather seats when he/she buys a new $25000 car, but finds it difficult to spend it on a leather sofa.”

Now if we can think broadly about which transactions could help us save a lot, and how else we could use that saved money we’ll be using our money and time better. As far as vegetable vendors are concerned, that money you saved by bargaining is relatively a lot for them.

Behavioural Design

We all do as others do (ET)