Look Beyond What You See! Loosing on One Hand, sometimes, Comes with Larger Gains on the Other

Not very long ago, I wrote a post regarding the not so fortunate habit of small entrepreneurs of focusing on loses on small mental accounts and ignoring the wider picture: Shooting yourself in the foot with loss aversion and mental accounting.

Recently I came across a very interesting article about the psychology of returning products (open in a new tab and read later).

Getting returns can be the worst thing possible for a small-shop keeper because she loses the profit on a previous transaction and, often, has to incur a larger loss due to the impossibility of re-selling the returned product. Moreover, receiving returned products involves some additional costs such as a dedicated employee, shipping etc.

In my country of birth – Romania – for several years after the fall of communist dictatorship, many shop keepers held a no return policy even if the product was faulty. In many cases this happened even after it was illegal to do so. Merchants didn’t want to take any loss on previous transactions.

Yet, according to the article mentioned above, things aren’t as bad as a (psychology naïve) shop keeper might think. Actually, making easier for customers to return a product (even if it has no “technical” fault), is good for business. Longer time spans in which a buyer can return a product and no questions asked policy are, in fact, good for business.

The psychological mechanisms at play are numerous and rather complex:

Endowment effect: the longer I have a product the more I value it because it’s mine,

Managing anticipated regret: because it is easy to change my decision – return the product – I feel less potential future regret with the purchase, thus I go along with it,

The affect heuristic: I don’t feel bad when I return a product, thus I like the merchant more etc.

In a nutshell, adopting more customer friendly return policies will increase the number of occasional transactions that are unprofitable (bring loses), but overall, more people will buy and profits will increase.

On a different line of thought, in Romania (my country of birth) smoking was banned in all public indoor spaces (except for jails). I know that in most civilized countries such bans existed for many years, but we’re a bit behind.

When the bill was still under debate, many restaurant and bar owners complained that if such a ban would be enforced they will lose a lot of business.

While it is very plausible that some smokers will go less frequently to bars and restaurants, there is another side to the story. Many of the 75% of Romanians who don’t smoke avoided going into smoky bars and restaurants. Some of them might go out more often and restaurants and bars can get business from them.  

We don’t know yet how restaurant and bar businesses will be affected by this complete ban on smoking (the law will be enacted starting March), but judging by the base rates – 25% of the population smokes while 75% doesn’t – I think that there is a good chance that the ban will be good for business.

The two situations described in this post: returning products and a complete ban on smoking in restaurants and bars can be seen as unrelated. Yet, there is an underlying commonality: We humans have a (bad) tendency to think that what we see is all there is. When a change takes place, we focus on the immediate imaginable things that will happen.

Both shopkeepers and restaurant owners focus(ed) on the immediate losses their businesses (would) suffer. Only after scientific research and deliberate thinking the opportunities (gains) became visible.

Look beyond what you see!

The Self-Defeating Fight against Vaccination Refusal

In reaction to the persisting decrease of vaccination rates in developed countries, public authorities, the media and non-profits counteract with information campaigns. In my opinion, this approach is self-defeating because it ignores the phenomenon’s behavioral realities.

1. Raising awareness is typical for information campaigns.

Articles with headlines such as Wealthy L.A. Schools' Vaccination Rates Are as Low as South Sudan's are well intended, but ignore the effect of social proof. When unsure what to do, people use others’ behaviors as cues for their own behavior. When faced with information on the increasing number of parents who refuse vaccination, others might interpret the message as: it’s OK not to vaccinate your children since others are doing this.

In many developed countries the overall situation is not as dramatic as some headlines indicate. The ideal vaccination rate is 95%+ which ensures herd immunity. The actual vaccination rates are somewhere in the 80-90% range. Healthcare professionals are worried mainly because of the trend and because of the real danger of losing the herd immunity.  As I understand the societal benefits of vaccination are not linear. Simply put, the societal benefit of improving vaccination rates from 80% to 85% is smaller than getting it from 90% to 95% (where heard immunity is achieved).

While from an epidemiological point of view a vaccination rate of 80% is worrisome news, from a behavioral science perspective things aren’t as dramatic. While most news focus on the increasing number of children who are not vaccinated, the upside is that the very large majority of children (in the USA) are vaccinated.

Saying that 20% of children are not vaccinated can be reframed as 80% are getting vaccines!   

In other similar situations, this type of simple reframing proved extremely effective in achieving behavioral change. Just as an example, many people have no problem buying a ham that is 97% fat free, but they would be very reluctant to purchase ham that is 3% pure fat.

Couple this reframing with social proof and you have a nice tool for reaching the goal of increasing vaccination rates.

Whereas headlines need to be dramatic in order to get clicks (or sell newspapers), public information campaigns need to be effective in achieving behavioral change – in this case get more children vaccinated.

Instead of relying on alarmist messages, why not simply say that the great majority (80%) of parents (in USA) do vaccinate their children.

Social proof and reframing of information can be used in even less favorable circumstances. A few months ago, I heard on the radio a commercial aimed at increasing the flu-vaccination rate. Unfortunately, the commercial said something like: “If you are one of the 65% of Americans who don’t get the shot, you can get the flu”.

Beyond the obvious errors in communication (from a behavioral science perspective), the reality of the numbers seems discouraging. When only (approx.) 35% of people get a vaccine, it is hard to leverage social proof – the great majority of people is not doing what is desired.

There is, however, a silver lining: 35% of the US population (311 million) is roughly 100 million people. Very likely, saying that over 100 million people (fellow Americans) get the flu shot is more convincing than 65% of Americans don’t get the flu shot.

   

2. Doctors are spokespeople in pro-vaccination campaigns.

The use of medical doctors as authority figures (recommenders) in communication has a long history. Doctors (or actors dressed as doctors) have recommended anything from detergent to cigarettes and from pharmaceutic drugs to diets.

While in many commercials using medical doctors as recommenders proved to increase the communication’s effectiveness, in the case of pro-vaccination (or anti anti-vaccination) campaigns is not exactly appropriate.  

Doctors’ presence and messages are reassuring for people who favor vaccination. However, those who are reluctant to vaccination don’t perceive doctors as authority figures, thus the message’s impact is severely diminished.

Simply put, in the eyes of (some) people who refuse vaccination, regular medicine is not trustworthy and so are medical doctors. Maybe herbalists, alternative healers etc. would be more credible.  

3. The rational message favoring vaccination is inadequate for tackling highly-emotional (false) concerns.

Strongly related to using medical doctors as advocates for vaccination is the messaging of pro-vaccination endeavors. Doctors dressed in their uniforms speak about the scientifically proven benefits of vaccination and talk about the serious dangers of not using this simple and effective prevention tool.

Although correct, this rational message is highly ineffective for those who oppose vaccination. Many anti-vaccination arguments have a high emotional load. Nobody (falsely) claims vaccines to cause kidney-failure – a serious condition with a low emotional load / fear-factor. Yet, all anti-vaccination advocates mention that vaccines can cause autism – a condition that has a high emotional component or fear-factor. By the way, vaccines don’t cause autism, but at one point someone made a false claim they did and the research has been proven to rely on faked data and the paper was later retracted. Yet, the legacy of fear left by that paper stands.

4. Vaccination’s benefits are Non-Events & the Availability Heuristic

The benefit of vaccination is very difficult to observe because it is a non-event – something that doesn’t happen. We humans are terrible at understanding non-events and in the case of vaccination things are even worse than in other situations.

Taking a step side-ways, I think we can all agree that a fire-fighter who goes into a burning building and saves a person (or cute puppy) is a hero worthy of public praise.

At the same time, the huge majority ignores other people who (indirectly) save many more lives from fires – the fire-safety inspectors: The bureaucrats who come with checklists and regulations, who generally are grumpy and somehow annoying because they keep insisting on even small features of compliance to fire-safety regulations.

These people save lives not by entering burning buildings, but by ensuring the conditions to prevent fires altogether and / or decrease the damage caused by fires.

The vaccination situation is somehow similar. Preventing a disease is not the same with curing one. A doctor who cured a patient with smallpox will receive many thankyou notes and will be held in high regard, but the nurse who gave thousands of anti-smallpox vaccines, thus preventing the disease, is still anonymous.

Earlier I mentioned that the situation is somehow similar. The high effectiveness of mass vaccination in preventing diseases, in fact, makes it more difficult to see the benefits of vaccination.

Let’s go back to the firefighter – fire-safety inspector illustration. The (paradoxical) reason for complying with fire-safety regulation is that there are enough (?!) fires to make the danger salient in our minds. Either in real life or in movies, fires are frequent enough to remind us that preventive action is needed.

In the case of vaccination things are a bit different. In developed countries recent cases of smallpox, poliomyelitis etc. are extremely rare. Mass vaccination led to having two-three generations free of such diseases and their devastating consequences. While during our (great-) grandparents’ childhood it was common for families to lose one or more children to diseases such as poliomyelitis, nowadays such instances are (almost) inexistent.

This is when the availability heuristic comes into play and distorts decision making on accepting vaccination.

The availability heuristic means that we judge the probability of an event based on the salience and frequency of memories of that event. We know of a lot of killings by firearms and very few suicides by guns, thus we perceive that there are more killings than suicides by firearms. The reality, however, is different: there are more suicides than killings by guns (at least in the US).

Because instances of terrible diseases that are prevented by vaccines are extremely rare and inconspicuous, we erroneously perceive the risk of not vaccinating a lot smaller than it actually is.

Here’s where movie makers can lend a hand. Instead (alongside) of scaring people with terrorist plots, doomsday scenarios etc. they could include more instances of people suffering and dying from poliomyelitis, smallpox etc.

5. Costs are in the present and benefits are in the future

   

Most people prefer 100$ now over 110$ in one year from now. This is an illustration of a psychological phenomenon called discounting future outcomes.

Vaccinations’ (non-event) benefits occur in the future (1-20 years) and, subsequently, are discounted in the present. The discomforts of vaccination– parents have to take their child to the clinic to get the shot, normal minor side-effects (fever, local swelling etc.) – are in the present.

The false dangers of vaccination allegedly occur very soon after getting the shot (in the present, not in the distant future).  

While it is impossible to change the nature of non-events and to eliminate the discounting of future outcomes, there are several things that can be done.

First, to tackle time discounting we can bring the benefits in the present. Naturally, vaccination’s benefits cannot be brought in the present (more so since they are non-events), but decreasing costs (hassle) in the present could be a great approach. In addition, although it might seem unethical, we could offer incentives in the present for getting vaccinated.

Second, to tackle the issue of non-events, we could try to make the immediate benefit more concrete by offering tangible rewards. As mentioned earlier, we could increase the frequency and salience of the dangers of non-vaccination and movies are the best way (at least in my view).

Workshops & Seminars on Using Behavioral Science in Health & Wellness  

 

What Is NOT Happening: The Wisdom of the Insect Screen

When we analyze a situation (or simply are awed by it), we look at what is happening and, naturally, try to understand why. When designing something or when working on a new product / service, we focus on what it enables us (people) to do.

This is all perfectly natural, yet it is only (I dare say, small) part of the picture. When analyzing a situation we need to try and see What is not happening. Of course, pigs don’t fly and aliens don’t land in your backyard, but these are extreme examples. Whenever something happens, many (related or not) other things don’t happen. If it is too abstract, it will make lots of sense in a couple of paragraphs.

When designing / working on a new product or service the focus is on what it will enable people to do (better). Very rarely, we focus on what the product or service will prevent people from doing. This is only natural, but, nonetheless, what a product / service prevents from happening is at least (equally) important.

The Wisdom of the Insect Screen

On a personal note: For a long time I had in mind the notion of what isn’t happening and non-events on a very abstract level, but only recently found a great, down to earth, illustration: The Insect Screen.

When my wife and I moved to the Washington DC area (USA), we didn’t fully realize the issue with insects (it was early March and there was snow). Virginia is a warm and humid area – a paradise for bugs. When we picked the apartment in which we now live, we took for granted the insect screens at the windows. For those who don’t know, an insect screen is a fine-metal-wire-grid fixed on the outside of (opening) windows that allows for the circulation of air and prevents insects from entering.

That’s all good and rather simple. It’s not rocket science and makes perfect sense. Moreover, the product – insect screen – does what it is supposed to do: it prevents insects from entering the house. It also enables people to open windows without having to be concerned about flies, mosquitos and other bugs creating nuisance.

The insect screen, however, has further implications. While it was designed to keep insects out, it also makes it difficult for things to get out of the apartment through the windows.

A couple of days ago, a Facebook friend posted that her cat took a dive from the 6^th (7^th by American standards) floor. While I’m glad that the cat is alive (though a bit shook-up), I have to say that this accident wouldn’t have happened if the windows had (fixed) insect screens.

In my country of birth (Romania), though not only, many people living in apartment buildings have a habit of throwing out trash out the window. While most often this restricts to cigarette buds, shaking out carpets, blankets or table cloths, sometimes it happens to be larger items such as trash bags. Many apartment buildings have small yards around them, but these behaviors happen even in buildings that are facing directly to the sidewalks of large streets and passers-by might get some breadcrumbs on their heads.

These negligent, inconsiderate and even anti-social behaviors would be impossible if windows would have (fixed) insect screens.    

On a more positive note, while insect screens are designed to keep out insects, they also keep out other things such as leaves, flying plastic bags, birds and even large rain drops. Insect screens are impotent when there’s a large rainstorm, but if the rain is mild, you can still keep windows opened without having to worry about moping the floor.

If a banal product such as the insect screen has so many non-event implications, shouldn’t you think creatively on what your product’s non-event implications are?  

Behavioral Science Meets Marketing Communication and UX Design

On September 21^st I gave two workshop sessions on how behavioral science can improve marketing communication and UX design, respectively.

I very much enjoyed giving the two half-a-day workshops to the very nice audience at LiveHealthier – a corporate wellness company just North of Washington DC. Both workshops were well received by the audience in both enjoyment of the sessions and usefulness.

Here’s what Amy Troop SVP, Consumer Experience at LiveHealthier said about the training:

Nick Naumof conducted two sessions for our consumer marketing and product development teams on applying the theories of behavioral science to marketing communications and UX design.

Participants found it to be time well spent and came away with immediate applications for the learnings in their day-to-day work.

Thanks, Nick, for all your efforts in crafting a meaningful program for our team!

Thank you Amy, Demetrius and Sasha for the great support in organizing this session! Thank you to all participants who made the day delightful.

Here you can find details on my Learning Programs on how behavioral science and behavioral design can make your products & services work with human nature.

You can take a look at my dedicated programs on behavioral design for banking  and health & wellness.

How Should Be People Riding the Metro Be Called? - On Primed Identities in Washington DC Metro System

While choosing the place where we live in the Washington DC Metro Area one of the must-have criterions was to be on the metro (subway) lines. Apart from being city-people Europeans who actually prefer public transport to driving, there were some very pragmatic reasons behind our decision.

One thing that surprised me while riding the Washington DC Metro was that people who are using the subway system are referred to as “Customers”. In Europe people using any type of public transportation (e.g. subways, trains, airplanes etc.) are referred to as “passengers”.

In the beginning I was very puzzled about calling metro-riders customers instead of passengers. Slowly I got used to it, but then I started to wonder what the implications are.

What you call someone has an impact on how that person thinks and behaves. We all have multiple identities in the sense of different roles we play. We are professionals, voters, parents etc. Calling someone a parent primes (makes it salient in the mind) the individual’s prototypical parent identity.

The same happens when calling someone a passenger or a customer. As I see things a passenger is primarily someone who travels by train, metro etc. On the other hand, a customer is primarily someone who buys something or pays for a service.  

Indirectly reminding people (passengers) that they are paying for the transport service might have some positive implications in the sense of steering them to be a bit more demanding on the quality of the service they receive.

In the case of the Washington DC Metro, however, I think it is a bit unfortunate to refer travellers as customers instead of passengers. This is because the main quality of the DC Metro System is that it exists. Beyond that, I can’t really say that it is a good service. Trains are a bit old, uncomfortable and noisy. The subway stops are depressingly grey. Most importantly service interruptions, delays and incidents are not exactly uncommon. In the two and a half months I have been occasionally using the Metro there were one derailment, one power outage, one train malfunction and lots of delays.

You might think that such issues are not uncommon in a large Metro system, but Washington DC’s Metro is not all that big. It way smaller than Metro systems in London, Paris and New York.

http://www.wmata.com/rail/maps/map.cfm

In conclusion, it is not necessarily a good idea to remind me how that I am paying (quite a lot) for a service that is OK-ish. Please call me a passenger and not a customer. 

Is it Wrong to Take the Elevator to the Gym?

When I go to the gym, unconsciously (habitually) I take the elevator. My usual work-out is around 35 minutes (+/- 5) and the main purpose is to burn some calories (I’m not into body building).

Quite recently I realized that my habitual / mindless behaviour is, in a way, awkward. I live on the 10^th floor and the gym is in the opposite building (just across an alley) on the 12^th floor.

If I would be a perfectly (economically) rational  creature, I would go down the stairs from the 10^th floor to the ground floor, go out of the building and then go up the stairs 12 floors.

Since I am going to burn calories by means of making physical effort, subsequently sweating, several potential reasons for taking the elevator are automatically excluded. I’m taking the elevator not because I want to preserve energy – avoid effort. For sure I’m not trying to preserve my good looks (i.e. avoid sweating) since I am going to sweat at the gym.

Saving time could be a plausible explanation for my irrational behaviour, but I seriously doubt it. I could simply take the stairs (both down and up) and cut my gym work-out time by 10 minutes. I assume the overall calorie burn-out would be similar. Moreover, I don’t count (monitor) burned calories, so, for sure, this is not the reason.

The more realistic reason for me taking the elevator to the gym is that I formed a habit: go out of the apartment to the elevators. This is because of convenience – going with the elevator is easy and rather fast.

Moreover, the elevators in the building are very salient: there are four of them positioned in the very centre of the building, in a spacious hall. On the other hand, the stairwells are almost hidden and the doors are grey – taking the stairs is clearly not the natural thing to do.

Beyond the habit explanation, there is, I believe, a more profound explanation.

In psychology of money there is the phenomenon of mental accounting – discovered by Richard Thaler. In a nutshell, mental accounting means that we associate different amounts of money with various expenses and we label “this” money for “this expense”… we have “holiday money”, “retirement fund”, “beer money” etc.

Moreover, it is very hard for us humans to shift money from one account to another, or to integrate accounts. If you want to learn more on mental account check out this post: 

I believe that we think using mental accounting when it comes to any type of fungible resource. In my case of taking the elevator to the gym, I do not find it natural to use my energy (effort) to get to the gym, but I have no problem in spending lots of effort in pointless weight-lifting and pedalling on a fixed bike.

In other words, I find it difficult to spend the gym effort on climbing stairs.

This type of automatic thinking goes beyond awkward getting to the gym behaviour.

I remember that a few years ago, I asked someone for a favour that would have taken about 20-30 minutes of work. As a reply I received a long email telling me how he was too busy to make the effort. The answer (probably) took at least 15 minutes to write…

Nudging Rich and Nudging Poor

In the very short time since I moved to the USA, I was fortunate enough to have met a gentleman who works (worked) at the World Bank in research and applications of behavioural economics in development policies. It was very fortunate since we met because he was selling a car and my wife and I were buying one.

While we were waiting for the car to be inspected by a mechanic we had a wonderful chat on behavioural science and its applications. We shared perspectives, points of view, experiences and illustrations of behaviourally informed interventions.

For me this short chat was an eye opener on the differences in Nudging across countries.

When it comes to differences across countries, the first thing that comes to mind is Culture and subsequently, Cultural Differences.

Culture, however, is not the (main) cause for the differences that exist in applying behavioural science in rich and poor countries. (I’m oversimplifying, I know). The main cause is the (invisible) infrastructure that exists in rich countries and, quite often, lacks in poor ones.

In the Western World we have infrastructure that we take for granted and, to some extent, we have become blind when it comes to it. Many western-world nudges and behavioural design features are built on this (seemingly) invisible infrastructure.

The example of the Fly in the Urinal  nudge (Featured in the book Nudge and detailed in this article), it is a wonderful illustration on the how western-world nudges are built on the western-world infrastructure.

The Fly in the Urinal intervention is aimed at tackling a sanitation / health problem – spillage of urine in public toilets.

As you can imagine, sanitation and subsequent health related problems are not specific to the western world; such problems are present everywhere and the western world is (maybe) the least affected by them.

What is essential here is that the Fly in the Urinal intervention assumes that there is a sewerage system.

I know this sounds weird, but it is true. Moreover, I have to admit that I have never thought about this underlying pre-condition of the fly in the urinal intervention. I guess I’m not the only westerner Behavioural science guy who has taken this for granted.

Whereas for westerners the presence of sewerage systems is natural, according to the World Bank Report 2015,

 About one billion people defecate in the open. (see page 17)

For this behavioural problem which brings health problems, flies (in the urinal) will not work. (Flies will appear naturally, but they will only worsen the problem).

The design of behavioural interventions definitely is context dependent and infrastructure might play a bigger role than culture.

How (Not) To Design a Lottery

Early this year, the Romanian Government, through the Finance Ministry, decided to organize a lottery of receipts. The aim was to encourage Romanians to ask for the receipt at (small) shops, restaurants etc. The goal was to tackle tax evading done by small businesses.

Naturally, the rules of the lottery couldn’t focus only on small shops and restaurants (equal opportunity), therefore all receipts were accepted in the lottery.

About two weeks ago there was the first draw of the lottery… and here’s where things started to go bad.

As in any lottery there are two components: (1) the prize and (2) the probability of winning.

The prize of the lottery is 1.000.000 lei (local currency) which is approximately 220.000 Euros. That’s not bad, all in all.

The probability of winning is rather difficult to understand, but, in this case is rather simple. The lottery is organized each month and the random algorithm determines: (1) a day and (2) an amount. For example, the winning receipts are all receipts from February N^th that are of X lei (the decimals don’t count). X can be between 1 and 999 lei.

Applying a simplistic computation, the probability of winning the lottery is 30 (number of days in a month) * 1000 (approximation of the number of possible amounts on a receipt). This means that the chance of winning the lottery is 1 in 30.000.

This might look like a small chance, but in reality it isn’t (at least when it comes to lotteries). In a country of about 18.000.000 people it is very likely that there will be lots of winners… at there were… between 8 and 9 thousands people who registered with the tax authority to claim their prize in the two weeks after the first draw.

Just as a note, in this first draw receipts from 50 days were able to win, thus the chance of winning the lottery was 1 in 50.000.

Assuming that there will be a total of approx. 10.000 winners, this means that each of them will receive a prize of 100 Lei on which the state will take 16% tax, leaving each winner with 84 Lei (less than 20 Euros).

Personally, I don’t have any kind of (positive) expectations from governmental officials. However, I would have expected from people with an Economics degree (they work in the Ministry of Finance) to know how to compute probabilities and to know the Expected Utility Model. Moreover, the (former) Minister of Finance who promoted this lottery has a PhD. from Harvard University.

Here’s how a lottery should be organized:

You need a very large prize that comes with an extremely low (e.g. 1 in 20.000.000) probability of winning. The very large prize with a very low chance of winning creates appeal – it has a magnetic effect that draws people into the lottery in the illusory hope of having a life-changing sky-fallen amount of money.

You need a large number of small prizes with small (e.g. 1 in 10.000) probability of winning. These small, but rather likely wins create availability – hey, my cousin’s neighbour wan 200 Lei last month at the lottery. They also keep alive the hope of winning the large, but highly unlikely prize.

 Details matter much more than many of us think…

To Be Clear on Ambiguity

One recent trend in writing on applied behavioural science focuses on exceptions on the findings of behavioural science. Simply put, when what we know on Behavioural Science doesn’t work at all or as expected.

Here are some nice illustrations of this trend.

BE careful - A littleknowledge can be a dangerous thing By Crawford Hollingworth

Beyond WEIRD: Investigating Cultural Biases inBehavioural Science – webinar by Brainjuicer.

(Please Open them in new tabs and continue reading ;) )

                                                         

In a nutshell, the idea is that sometimes the effects discovered by behavioural science are very small or non-existent.

This, however, is not a surprise if one knows the fundamentals of behavioural science, namely the role of ambiguity (fuzziness).

Most of the times, people rely on contextual cues only if there isn’t clarity regarding the issue at hand. For example, anchoring works because people don’t know the exact value that has to be estimated. If I ask you what the number of cat breeds is, I bet none of you know the exact answer and this is only natural. In this case presenting anchors such as 30 or 3000 will influence your estimation simply because there is incredible fuzziness regarding how many breeds of man-exploiting cute furry creatures (cats) are out there.

Remaining in the area of anchoring: if we ask an illiterate five-year-old child from East Africa in what year did WWII end, then providing anchors will strongly influence the child’s answer (that is unless he simply says “I don’t know”). However, if we ask WWII veterans the same question, then providing anchors will have zero effect. Moreover, the veterans will be offended by the lack of knowledge of the people asking the question.

Similarly to anchoring, other contextual influences work ONLY (mostly) when there is ambiguity. For example, using mental accounting and default opt-ins for re-routing some of the tax return money into savings (mentioned in the article BE careful - A little knowledge can be a dangerous thing By Crawford Hollingworth) did not work because for the ones most in need (low income – less than 50.000 USD/year/household) there wasn’t any fuzziness on what to do with the money. Low income people are very well skilled in managing tight budgets and any sum of money is allocated (budgeted) well in advance.

I believe that if households with a larger income would get some money back and not expect it, the default opt in on savings would work quite well simply because there is some ambiguity on what to do with the (sky fallen) money.

On the social influences avenue, the most powerful social influence works because there is ambiguity. Social Proof (which is distinct from Social Pressure – what Solomon Asch investigated) works because we infer that others know something we don’t know. If we choose to buy the most popular internet subscription plan, we do so simply because we don’t know which plan best fits our needs.

On the other side of things, I know what shoe size I have (43) and I will never buy shoes of a different size (e.g. 42) regardless of how many other people buy 42 size shoes.

Here’s a wonderful illustration of how the context strongly influences judgment. It works because there is ambiguity… lots of it.  

Showing IKEA print to Art experts by lifehunterstv

Behavioural science is a gold mine for service design and customer experience – Interview with Nicolae Naumof on Adrian Swinscoe’s blog

Two weeks ago I gave this interview for Adrian Swinscoe’s blog. In it I explain my view on applying behavioural science in service design.

Naturally, I speak on what is behavioural science, what drives human behaviour and plead for a simple, two steps approach on applying behavioural science in service design: (1) Use the scientific literature on human behaviour to come up with behaviourally informed interventions and (2) test them, because no one knows the (absolutely) correct answer.

Interview can be listened here (30 mins or so): - open in new tab ;)

Interview and full transcript on: Adrian Swinscoe’s blog 

In a gold mine, you will not find gold bars …

More on applying behavioural science in service design www.Naumof.com

Reason to Believe or Reason to Not Doubt?: A Behavioural Science Perspective on Branding

In branding and, more specifically, brand communication there is the concept (element) called reason to believe.

In a nutshell, reason to believe is the argument supporting a (the) claim made by a brand.

For example, a product line from the cosmetics brand Nivea claims to help women to prevent / reduce wrinkles. This sub-brand is Nivea Q10 or Nivea Q10 Plus.

The claim of helping with wrinkles is supported by the argument (reason to believe) that these cosmetic products have the Coenzyme Q10.

If we see people (consumers) as rational agents, the marketing / branding communication endeavour should go as follows:

The brand makes a claim – promises a benefit for the consumer. In the example above this is dealing with wrinkles.

Next, the brand backs this claim with a very strong rational argument:

The brand helps you with wrinkles because it contains the Coenzyme Q10.

It is (more or less) assumed that the target audience – the consumers – know what Coenzyme Q10 does and acknowledges its benefits.

In behavioural science jargon, this communication endeavour is focused on convincing System 2 that the brand claim (promise) is genuine and backed by strong arguments.

At first glance and holding in mind an idealistic view of human nature, this logic makes sense. Our consumers are rational agents and we (the marketers) need to convince them that what we promise will actually happen to them.

Nonetheless, this is (almost) completely wrong.

We know that people have two systems of judgment, quite unappealingly named System 1 and System 2.  We also know that the default way of reasoning is System 1 which is based on relatively simplistic rules of judgment (heuristics). System 2 is the number crunching, rational arguments and effortful reasoning way in which we process information. And System 2 is called “2” because it is the secondary judgment system. To put things simply, it needs to be activated.

What is often ignored in presentations, talks, books etc. on System 1 and System 2 thinking is how these judgment modes interact. I will not develop the topic here (I did it in my first book It Makes (No) Sense). What is relevant for this post, is that System 1 and 2 work together in detecting serious anomalies in the information processed. They work like a smoke (fire)-detector. If things are within tolerable boundaries, nothing special happens. However, when there is smoke, the alarm is activated and System 2 starts checking for problems.

Going back to branding communication, talking to System 2 by presenting solid arguments to back-up a claim (promise), is deeply flawed for two (major) reasons. First, System 2 might very well not be activated, thus the communication effort might very well fall on deaf years. Second, more often than not (and more often than we like to admit) marketing communication should not talk to System 2. This is because System 2 might wake up and start looking for problems in the claim and its backing… and most often it will find enough of them.

So, what about reason to believe?

If we are to adopt a behaviourally informed marketing approach, we should see the Reason to Believe as Reason to Not Doubt.

I know, it sounds a bit awkward, but give it another few minutes.

While on the surface reason to believe and reason to not doubt might take the same form (shape), in depth they are significantly different.

Reason to not doubt is that plausible (enough) argument that makes you (the client) not doubt what the brand is claiming. In other words, it is that piece of information that keeps System 2 sleeping.

Sometimes (too often, if you ask me), Reason to Not Doubt is more of a smoke screen or as we say in Romanian Dust in the eyes, that makes the bull-shit detector (System 2 in a critical mode) not activate.

I will come back to the Nivea and the Coenzyme Q10 example and explain how reason to believe is, in fact, Reason to Not Doubt. But, first, I’ll explain the point with an example from the dating world.

Let’s assume that He and She had some initial (social) contact. He calls Her to ask her out on a date. She is not very impressed by Him and wants to reject Him.

Knowing this, let’s assume that He calls Her to ask her out.

“Hi (a lot of bla bla) … Would you like to go out on Thursday?”

She answers: “No”

Now, in His mind the alarm system is activated. Why isn’t she willing to go out on a date? Did I make a bad impression? Doesn’t She like me? You can figure out the rest.

But, as we know, ladies want (usually) to reject gentlemen in a rather soft manner.

Now, let’s assume that She answers with:

“Sorry, I can’t. I’m busy”

The “I’m busy” part is (sort-of) a Reason to Believe. But as most of us know, the “I’m busy” is not a very plausible reason why She is not willing to go on a date.

O.K.  Now, let’s assume that She answers with:

“I can’t go out because I’ll be with my boyfriend and he’ll not be very happy if I would cancel and go out with you instead”

In this case, the thought going through His mind will be: I’m barking at the wrong tree. There will be no doubt that she is not an available mating partner.

But here’s the thing / beauty of Reason to Not Doubt.

He doesn’t know if She really has a boyfriend, or even if She does, there is no certainty that She will be with her boyfriend at the suggested time of the date. Nonetheless, 99.999% of Hes will not actually investigate whether She said the truth. He will simply back-off because there isn’t any reason to doubt her claim …

Things are relatively similar in the marketing communication endeavours. If a brand simply makes a claim such as It helps you with the wrinkles, the immediate reaction might very well be: Yeah! Sure… I have never heard that before.

When backing a claim such as It helps you with the wrinkles with a Reason to Believe such as because it contains the Coenzyme Q10, the consumer should know or search what the Coenzyme Q10 is and does – what are its effects.

Just as a note, I tried reading about the Coenzyme Q10 here, but I couldn’t understand a thing and I guess that the huge majority of people in the target audience do not understand too much… though I might be an exception since I was a very bad student in organic chemistry.

But more often than not, the people in the target audience will behave like the guy asking for a date when faced with I’ll be with my boyfriend. It is plausible enough to not doubt the claim.

On the surface, the fact that we should not give Reasons to Believe, but give Reasons to Not Doubt might seem like a nuance. However, there are profound differences and huge implications for marketing communication.

I hope I gave enough reasons to not doubt my claim ;)  

You should visit my website www.naumof.com because you liked what you read ;)

Re-Design Banking & Insurance

At the end of November in 2014, I gave a session of Re-Design Banking & Insurance seminar to a group of intellectually curious bankers.

It was a very pleasurable experience and I was happy that the participants were open to my (a bit wacky, for banking standards) approach.

One participant said after the seminar:

Nicolae made us think about things we always take for granted.

Another participant said something that made me feel very happy and very proud.  

Nice how he got to the point without bullshitting around it. With every point.

The organizer of the event said about the Re-Design Banking & Insurance seminar I gave:

Nicolae delivered more than promised: content to reflect on, presentation to learn from and takeaways that the group took home to work on right away.

Jeroen Nas

You can take a look at the presentation of Re-Design Banking & Insurance seminar enjoyed by more than 20 intellectually curious bankers here: Re-Design Banking & Insurance seminar.