After presenting a few
established psychological effects in Decision Making Psychology I believe it is
time to present a case study of how these effects are used in “real life”. In
this light, I will present the “Linked in case study”.
I assume that everyone reading
this blog knows about or has an account on Linked in (professional) social network.
Similarly I would assume that most of you have a basic account and are not
users of the paid accounts. However, if you decide to upgrade your account then
you will have to make a decision that will be strongly influenced by the people
who designed the decision environment.
In order to see the “decision
environment” you can log in your Linked in account and click on the top page
link that says “Upgrade” Next I’ll present a picture (screen shot) of that page. (Click to enlarge)
Next I’ll present what I believe
to be the elements of decision design used. This presentation will be done in a
somehow non-intuitive order, so please bear with me and read to the end.
First, and not the most obvious,
what type of linked in account is best is quite hard to evaluate since,
especially first time users of premium accounts, don’t have much of an idea what
they need or even what the features actually mean. This is a case of Ambiguity
and we know that psychological effects in Decision Making occur especially when
there is ambiguity.
If one would look at the bottom
left of the picture she would find a link that says “Show more”. If that link
is clicked on, then instead of 5 attributes (features) of each account one
would see 11 attributes. Why do you
think that not all features are presented from the beginning? It might be that
those features are not important, but if it is so, why even include them in the
list. I believe that many people don’t even click on the “Show more” link and
those who do are motivated by their wish to get more or “Full information”. However,
the reality is that seeing more attributes of a “product” in fact increases the
ambiguity and leads to “information overload”. Both ambiguity and too much information
to process are causes for the use of heuristics (rules of thumb) and the occurrence
of decision making psychological effects.
One proof that the high (11)
number of attributes is meant to make comparisons more difficult is that for 5
out of 11 attributes there are no differences between the three types of
accounts. For 2 more attributes there is no difference between two of the three
options.
Second, (some of) the attributes
of each “product” have quite ambiguous names such as: “Zero in on profiles with
Premium Search Filters”. What does that really mean? If one does a “mouse over”
there will be a text box that appears and explains what it is. See next picture
as an example. (Click to enlarge)
But again, what does that really
mean? And moreover, do I need it? How many filters do I really need? The more
the better, but is it worth the extra price?
Similarly the attribute “See more
profiles when you search” has three options (one in each type of account): 300,
500 and 700. But how many extra profiles in your search do you really need?
Third, offering three types of
accounts (plus the ambiguity and information overload mentioned above) creates
all conditions for the “compromise” effect (or the “Not Too…, But not Too…”
effect). As you remember from the post that described it, the compromise effect
leads to the choice of the “middle option”.
So Linked in wants you to choose the “Business
plus” account.
Fourth, one option is already
preselected and surprisingly or not it is the same “Business plus” account that
is set as a “default choice”. As we already know from “Just leave it like that”
the “default option effect” is very strong and most people don’t change a
default setting or choice.
Thus Linked in not only makes you
think that you want the middle option of “business plus”, but encourages you to
make that choice by setting it as a default.
Fifth, we know (from previous
posts on this blog) that people do what other people do (check “Despite 30People Witnessed a Crime No One Intervened”) and even more so people like to
conform to social rules. Thus, Linked in inserted the word “Recommended” in red
and capital letters above the “Business plus” account.
Now, not only Linked in
made you think that you want the “Business plus” by using the compromise effect,
and not only did it make it easy for you to choose it by setting it as a
default choice, but even more it makes you feel that it is a good decision
because it is “Recommended”. One simple question: “Recommended by whom?”
Sixth, the “Business plus” option
is highlighted by making the background grey instead of white. One might think
that the highlighting is due to the fact that this option is preselected, but
when selecting another option the highlighting does not change and the “Business
plus” is still highlighted. This highlighting draws the attention and visual
focus toward the preferred option of Linked in which is “Business plus”.
Seventh, the sequence in which
the account options are presented is very interesting. Usually we tend to start
from the cheapest and least complex to the most expensive and complex. However,
Linked in does something very smart by reversing the sequence. This reversed
sequence from the most complex and expensive to the least complex and cheapest
makes use and creates conditions for the occurrence of some psychological
effects that some have been presented on this blog, others not. First, there are
priming and anchoring effects. By presenting first the most complex and
expensive account type the person that sees the options has already been primed
with a high value. This creates an interesting effect, namely that the “Business
plus” seems a very good deal compared to the “Executive” (most complex and
expensive type of account). It is cheaper than the first option read (the executive).
If the order would have been from the cheapest (“Business”) to the most
expensive, then the “Business plus” would seem expensive in comparison with the
first option read (The “Business” which is the cheapest and least complex type
of account).
The sequence from the most
complex and expensive to the least complex and expensive leads to the appearance
of “loss aversion” (people hate losing) which was presented in “Hard to saygood bye”. Since a person would see first the benefits (features) of the most
complex account, he or she would perceive the decreasing benefits of the second
and third account as losses. For example the first feature of the three types
of accounts is “Contact anyone directly with InMail”. For the most complex and
expensive type of account (Executive) the amount per month is 25. For the
second most complex (and what Linked in Recommends) “Business Plus” it is 10,
while for the cheapest and least complex type of account (Business) it is 3.
Basically people are “primed”
with having 25 “direct InMail” and if they go to a less complex and cheaper
account they “Lose” out of that amount. If the sequence of account types would
have been the other way around (from the cheapest to the most expensive) then people
would have “Gained” more “direct InMail”. We know that losses hurt about twice
the amount of pleasure given by a gain, thus it is much smarter to make people
believe (consciously or not) that they are losing something by going for the
cheaper option.
At the same time, we’ve seen that
Linked in wants to sell the “Business plus” and not the “Executive” type of
account, this meaning that the use of loss aversion might lead people to go
more for the “Executive” account. I believe that this is not a real danger and
here is why. The “Business plus” account is 45% cheaper than the “Executive”
and this means a lot… maybe people don’t think that they need 25 “direct InMail”
each month (by the way that represents more than one per working day – 22 working
days in a week). Moreover, there is a very interesting sequence in decreasing
the “amount of an attribute” in the three options sequence.
If we look at “Executive” vs. “Business
Plus” we see that the difference in the amount of “Direct InMail” (25 for
Executive, 10 for Business Plus) is of 60%. However, when we look at the “Business
Plus” vs. “Business” (10 for Business Plus, 3 for Business) the difference is
70%. Similarly for the amount of other attributes, the relative difference increases
more steeply from the second to the third option in comparison with the
decrease from the first to the second option.
Moreover, the relative difference
in price is not as steep as the difference for benefits. The “Business Plus”
costs 45% less than the “Executive” while the “Business” costs 50% less than
the “Business plus”. So even if someone would do a thorough “cost – benefit analysis”
the most reasonable option would be the “Business Plus”. Now, you might think
why I have used relative measures and not the absolute “Cost per unit of
benefit”. The answer is that people are very bad at processing absolute values
and think in more relative terms. You can check this out in “Despite Having
Huge Salaries, Top Managers Have Immense Bonuses”.
Eighth, the price for an annual contract
is expressed in “Per month”. The main effect here is that it makes it easy to
compare with the price for the monthly contract which obviously is higher. By
making this comparison easy it “helps” people make a choice. Now, the choice is
obvious because one is better (cheaper) than the other. At the same time I
believe that many people are drawn in to get a yearly contract and maybe they
don’t really need it. The second effect that occurs here is called “Pennies per
day” and it basically means that prices are presented as a small regular
payment and not as a big overall cost. In the case of the “Business Plus
account” the price for the annual contract is 29.95 Euros / month, but, in fact
the price is 359.4 Euros / year. Of course 29.95 / month seems much cheaper
than 359.4 / year.
Another thing about presented
prices is that they are excluding VAT which means that to each price presented
in bigger font sizes and bolded 19% (at least in The Netherlands) should be
added. Now this might not be such a big issue for companies since the VAT is
deductible, but for people that actually pay themselves it is a bit of an
issue. At the same time, it is true that the price including VAT is presented
in smaller font size and the customer does not have to compute it him/her-self.
At the end of this analysis the
conclusion is that Linked In wants to sell as many “Business Plus” accounts
with an annual contract.
Before ending this post, I’d like
to make some observations. I have absolutely nothing against Linked In and in
fact I believe it to be a very nice service. The analysis was done from a
strictly professional perspective on decision making.
I do not know why Linked in wants
to sell that type of account. It could simply be that market research has shown
that this is what fits best the needs of most premium account users.
Using Decision Design techniques
is neither immoral nor illegal. The advantage of “Libertarian Paternalism” is
that it still allows for free choice. In more simple words, even if Linked In
encourages the choice of “Business Plus” it does not restrict the liberty of
choosing one of the other two types of accounts.
I believe that the above
presented case study on Linked In is a very good example of Decision Design (or
Choice architecture) that makes use of many “tools” and at the same time it
allows for freedom of choice.
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