PSY-Q: Using Psychological Intelligence to Understand and Optimize Customer Behavior

Ben Ambridge:

Okay. Thank you very much. Yes. Thanks to everyone who’s joining us all around the world here. So I am based in Manchester in the United Kingdom, where I work for a conversion agency called Endless Gain. And the plan was gonna be to be coming to you from the Endless Gain office, but obviously, probably like most of you around the world right now, we’re on a kind of lockdown here in the UK. We’re only allowed out of our house once a day to do some exercise. I’ve already had my exercise for today, so I’m stuck indoors now for the rest of the day. And I guess many of you guys listening around the world are in a similar position.

So, hopefully, this will be a bit of entertainment for you, if you’re set at home and needing something to do and you’ve watched everything you can think of, on Netflix. So, obviously, eCommerce is, it’s always vitally important, but it’s taken on a, you know, particular importance at this time. So many of us now are relying on websites to get us everything we need, on delivery, and so on. So, hopefully, I can share some insights today that, are gonna help you, with your site. Using our psychological intelligence to understand and optimize our customer behavior, customer behavior, but it also has a kind of second talk, which is the top 10 non-myths of psychology.

So where this comes from is around the time I started working for Endless Gain, I did a TED Talk, and it was only, it was a TEDx Talk, like, one where you do it to a local school. But I was lucky enough for it to be picked up on the main Ted website and it really took off from there. So it got, I think it’s up to about 3,000,000 plays now all around the world, which was great, but it also took off in some not-so-great way. So I had a lot of emails when people asking me to solve their psychological problems. I’ve been in trouble with the International Rorschach Society for showing pictures of the Rorschach Ink Blot test, even though I got it from Wikipedia. Anyway, the reason I’m mentioning this is because the title of that talk was “Top 10 Myths of Psychology” and as you’d expect what I did in that talk, it’s tried to debunk a lot of psychology findings that people think are real, but they’re not. But, of course, myths aren’t gonna be much help to you guys. What you need are actual actionable psychology findings.

So findings will give us ideas for tests that you can run on your own website. So I thought what would be useful for this webinar is to switch this around and give you the top 10 non-myths of psychology. So the top 10 genuine psychology findings that you can actually use. So I’m sure you will need a bit of waking up and interactivity after most of you being start working from home. So what I’m gonna do is not just tell you about these studies. I’m going to actually run these studies on you. So, the chat I can see, the chat is live here. I’m not sure about the questions. But if I ask questions to you, then if if some of you can respond in the chat, then we should hopefully be able to get this, interactivity going a little bit.

Shubhankar:

Yep. Please feel free to drop in your questions. We have an assigned, segment for the Q&A towards the end of the webinar. But, any relevant questions, we’ll take them up during the webinar itself.

Ben:

Sure. Okay. So and also, you can respond when I ask you guys questions, and you can respond in the chat too. So the first finding that I want to tell you about is, delayed discounting. So it’s lunchtime here in the UK. Most of us have just had lunch, so maybe, we’re not also hungry, but you’ve probably heard of the the famous marshmallow test. So if I could somehow send you all like a virtual marshmallow. What I would do is give you the option of eating 1 marshmallow now or 2 marshmallows at the end of the webinar, in just under an hour’s time. So you’ve probably heard of the famous marshmallow test. Right? So the original study was done. I think it was at Stanford University, wasn’t it? Was done with the kids and kids were given the opportunity to eat one marshmallow now and it was placed on a a table in front of them. So it was really tempting. Or if they could wait, I think it was about 20 minutes or something. Then they’d get 2 marshmallows, at the end. Only about 1 third of the children were able to, successfully wait but then they followed up with those kids later, and they found that the kids who were able to resist the temptation in order to get the too many mellows later, went on to do better in school. They were less likely to get into crime to start drinking, taking drugs, and so on. But only about a third of the kids, as I said, could wait.

So you might like to think that as adults, we’re much more sensible than that but actually this same phenomenon, which is known as, delay discounting, applies to adults too. So let me show you, a load of, options here, a load of paired choices. Just think about it. You don’t need to answer in the chat here, but just think about what you’d prefer for each of the following pairs. So suppose I offered you £100 now or £1000 in 5 years time. So I’m sure pretty much all of you would take the £1000 in 5 years’ time. 

What about if I offer you 500 now or a 1000 in 5 years time? I think it’s pretty much safe to say that most of you are still gonna, to be good and wait for the thousands. What about if it’s £750 now or a 1000 in 5 years time? Starts to get kind of interesting, doesn’t it? 500 now or 1000 in 1 year. Probably most of you’d weigh. 750 now or 1000 in 1 year. Getting quite some things to take it now. How about this one? 900 now or a £1000 in 1 year. So when I put the same choice to real live audiences and get them to vote, I think normally more than half of the people, I know I would. More than half of the people would go for the £900 and now no one really knows what’s gonna be happening in a year’s time. You know, it’s better to have that money in the in the bank, even if it’s not gonna earn a £100 interest, then to, then take a chance on what’s going on later. So this delayed discounting is the fact that the psychological phenomenon or finding to put it kind of quite bluntly that we value having money now more than we value having money in the future. We discount the value of the money or the goods or whatever it is that we get in the future. So this is a problem that, and we encounter quite a lot with with a lot of our various different clients.

So for example, one big client that we still working with actually is a selling website, and the problem that we had with this site was that people who were selling on this site. I had to pay, and I think it was around $100, roughly up front. And of course, they were gonna get once they sold their goods, much more than that later, but the trouble is that they’re spending the money now and getting the money later So this is a kind of negative delay discounting. They’re taking the pain of paying out now and discounting the fact that they’re gonna get much more money back later. So one of the solutions that we’re still, we haven’t gone live with this yet, but we’re still exploring this solution.

Is, possible to take the credit card details now, but then say that you pay only when you’re hired themselves? So trying to, postpone that kind of, financial hit and bring sooner kind of mentally the the actual, getting the money. But it doesn’t just have to be with a rather specific example of a selling website. If your site is more standard eCommerce, just a a standard kind of selling site, it might be worth experimenting with, some kind of buy now pay later. The pain of paying out this money is gonna be reduced.

It’s gonna be discounted if this can be pushed back in time. Okay. So on to the second of our 10 findings. So this is known in psychology as the endowment effect. So this looks like a mockup, doesn’t it?

Now this is a real, genuine site that we have, and it’s It’s a high street store as well, actually, that we have in the UK. It’s called, the works, and it’s like a discount bookshop. They sell They sell books at very discounted prices, and I was, sad to see that my own latest book ‘Are You Smarter Than A Chimpanzee?’, is indeed on there at a a very discounted price. So I’m afraid, yeah, as I said, it was not a mockup. You can buy them for £3, which is why there’s a stack of them in my garage. So what I do when I do this talk with a real live audience is that I give someone a copy of this book free, and then I try to buy it back from them. So let’s try this now in the chat. So suppose I’ve given you, a copy of this book which has a value of £3. How much would you want me to buy it back from you? So I’m just gonna wait until we’ve got a couple of answers in the chat here. So I can see a couple coming in. So we’ve got £5. Anymore? £6. Okay. I don’t think we’re getting any more coming in.

Shubhankar:

By the way, we found somebody is even offering you $100.

Ben:

$100! Wow! That’s impressive. So, the Endowment Theory says that you won’t sell less, than for less than about £6. So already having it makes it worth, roughly double the value to you that it would have been if you didn’t have it in the first place. So I like to illustrate it with my own book but the the first study, I think, that, did was a study with, coffee mugs. So it was a psychology experiment and people came in and they were given a nice well, half of them were given a choice actually. They could either have, $3 or they could have the mug. And, you know, it was about 50:50. People liked the mug, but they didn’t go crazy for it. Someone chose the mug, someone chose the $3, and, you know, they’re all happy. But people who’d chosen the mug then wouldn’t sell it back to the experimenter for less than around $6 on average. So this is why I said about $6 or £6 was the expected value for mine. Once you’ve already got something, you seem to want roughly twice its value before you’re prepared to, part with it. So this raises the question of what exactly causes this, endowment effect and this was investigated in another study. So in this one, it was very similar except rather than a mug, people were given lottery tickets. And again, some people were given lottery tickets. Some people were just given cash, and then they looked to see if people would, sell lottery tickets back. And what they found is that people who were given the lottery tickets looked for reasons not to sell them. They’re looking for reasons to keep them. They thought, well, I better not sell them because if this number came up a winner, you know, then I’d really regret it. Whereas people who were just given, cash and the opportunity to buy lottery tickets, did not do so. They look for reasons not to have them. So this shows what caused the endowment effect. If you don’t have if you if you do have something, then you’re looking for reasons not to part with it rather than, reasons to part with it. So how could this work for your site?

It’s not always so straightforward because Normally, the customer who’s coming to your site doesn’t actually have the thing that you are selling yet. You need to somehow create that feeling in them that they, do have it, and that they don’t want to lose it. This, of course, is why free trials are so popular. So we’ve got, obviously, Amazon Prime here or Microsoft Office 365, So the idea here is that they, obviously, once they’ve given people the trial, they’ve already got the service or the product, they’re gonna find it difficult to give up later. Once they’ve already got it, then they’re gonna make it’s gonna make the service seem more valuable to them.

They’re more likely to want to hold on to it and less willing to give it up than they would be if they just had, to pay out for it in the birthplace. So how could this work for your site? It depends on exactly what your site is selling. You need a way to make the customers feel they already have the product, and they don’t want to lose it. So maybe you could try a free trial. You could, maybe if they’re buying something, you could bundle on something that they later would have to pay a fee or just the free trial can work very successfully. It was very successful for us with some work we did for virus software for a big, IT security company. It can also work the other way, of course. I’m at, you remember that I mentioned a few minutes ago that we did and work for, a company that did a selling website, and we had to try and come up with solutions for people. Looked for reasons. Endowment says that people are gonna look for reasons not to sell their goods that are sold on this particular site. So there, you have to try and find a way to overcome the endowment effect whether it’s a selling website or try to get a way to create the endowment effects.

If it’s a more conventional eCommerce buying website. Okay. So on to our third one now. So, so this is about flights. So this doesn’t work so well now because I don’t think anyone’s flying anywhere at the moment. I don’t think you could take either of these flies, but let’s suppose when this coronavirus is all over. You buy the following flight. So first, you buy a £300 flight for the holiday weekend in Italy. And then later, you buy a £150 flight for a holiday weekend in Spain. And the important thing to bear in mind is that you think you will enjoy the holiday in Spain more than the holiday in Italy. But then disaster strikes and, yes, inevitably, you’ve booked both flights for the same weekend. Both of these are non-refundable. So which of the 2 do you choose? Which of the holidays do you go on? So let’s have a few people answer now in the chat here, and we’ll see how this goes. I can’t see these coming in for some reason. Did we get any votes there?

Shubhankar:

Yep. So I think a lot of people, oh, actually, a lot of people are split between Italy and Spain. So I would say it’s probably 5050.

Ben:

50:50? Well, that’s interesting because the classic finding is about 54% versus 46%. So it’s pretty much 50:50. But, actually, when you think about it, the fact that kind of 50:50 is kind of amazing because this is, this is a classic, what’s called a ‘Sunk Cost’ effect. When the study is done, generally, we get this finding. So generally around half the people, in fact, even slightly more than half the people, but even with the audience we had today, around half the people are choosing to have the holiday in Italy rather than the holiday in Spain, even though they think they will enjoy the holiday in Spain more. And this is you know, in a sense, it’s kind of understandable.

You spent £300 on the flight to Italy, only £150 on the flight to Spain. You don’t want to waste that £300. That’s the sunk cost. That’s the phenomenon. But if you think about it kind of from a purely rational perspective, it makes no sense at all. You’ve paid out that £450 at some point in the past. That money’s gone forever. Whatever you do now, all you’re getting now is the choice between 2 holidays, and you’re deliberately choosing the one that you think some of you or perhaps slightly over half of you are choosing the holiday that you think you’ll enjoy less even though, you know, that’s not gonna get the money back. That cost has gone forever. So this is a classic sunk cost effect because once you’ve sunk money into that, Italy flight, you keep going more time and money after that, trying to recover this sand cost even though, of course, there’s no way that you can get back that cost. So how could this work for you?

Well, of course, you have to play this very carefully. And, of course, like, with all of these, psychological phenomena, it’s very important that you run your own tests because it can be very specific on a side-by-side basis, what’s gonna work and what’s not gonna work so well. You certainly don’t wanna, to alienate people. But if you have various, add-ons or upgrade options, you could try at least, not offering them until people have already paid out some money. So, it was quite hard to find an example of that. So this isn’t really what I’m talking about here on game 1. So this is the way that it tends to be is that people have got the basket and then it’s suggesting add What a sunk cost what the sunk cost, effect or what the sunk cost phenomenon suggests is that it might actually be better to get people to pay out the money, I’ll only then give them the options, of adding various add ons I guess it kind of depends on what the add on is, whether it’s something that’s if it’s something that’s kind of more essential, than people or you can create that feeling that it’s more essential for enjoying the product, then even after people have already paid out some money, they then might be willing to add on an extra that they feel they need to to get the most out of that cost they’ve already sunk.

And they might be more willing or at least the SunTrust theory says they will be more willing to do that add-on after they’d already paid out the money for the initial purchase rather than just, getting the choice to add it to the basket before they check out here. Another thing to mention is that not all sunk costs are financial, so effort can also be a sunk cost. So, excuse me, a lot of sites are gonna require a sign-in at some point, but the question is, when? So a lot of sites, like we’ve got here, compare the market. So this is an insurance site.

So A lot of these sites will get people to sign in. So here it’s this is car insurance. You have to put in your car details right at the start on this site. So a lot of sites do it this way, but again, some cost theory says that this isn’t always necessarily gonna be the best way to do it. It might be good to get people to do kind of a lot of work.

So imagine, I mean, I know supermarket websites all have been affected at the moment, but it could be good to get people to put in a lot of work, filling up the basket with loads of products, and then get them to sign in. So they don’t waste all the effort they’ve put together their big shop or their big customization or whatever they’re, doing rather than getting them the to do it at the start. Again, it depends on the particular side, but for some sites at least, it could be good to get people to sink a lot of effort in that they then, don’t want to waste. Okay. So the next, phenomenon is the so-called foot-in-the-door technique.

So in most city centers, I don’t know what it’s like where you are, but the most city centers in the UK, certainly in Manchester, we have these people that are kind of jokingly called chuggers or charity muggers. So their job is to try and get you to sign up for a direct debit to give money to charity. So how do they do it? They don’t come up to you, of course, and say, would you like to sign up to give £30 a month in a direct debit, they start with something very small. They say, you know, well, often they just they just say, could you spare a minute to answer a couple of questions?

Because, of course, you know, we can all spare a minute or most of us can. Only then do they, escalate it, and after they’ve built up a bit of a report and you’ve agreed to a lot of small requests, they then try to get you to sign up for the direct debit So this is the foot in the door technique. If you grant someone a small request at the start, then you’re much more likely to agree to a bigger request later. So this was, first documented as a phenomenon at the Stanford University Business School. So Research has phoned up houses in the local town, Palo Alto, and asked, if would it be okay for a team of 5 to 6 men to come to your house for 2 hours and go to all your cupboards and catalog the products that you’ve got in them for a market research survey. So, of course, when they did that, nearly everyone they phoned up, told them in no uncertain terms to get lost, there was no way they were gonna agree, to such an invasive survey. But then they thought, right. We’re gonna try to put in the door version. So first, after phoning people up, they ask them to complete a very simple 8-question market research survey over the phone. Nearly everyone agreed to that, and it only took a few minutes.

But then once they’ve done that, the researchers said, oh, well, thank you very much. That was very useful. What would be even better would be if you agreed for a team of fighters expense to come through your house to go through all your cupboards and so on. And in this foot-in-the-door version, over half of the people who were phoned up agreed to this pretty huge really, request as compared to under 20% of people who hadn’t had the foot-in-the-door technique. So this is kind of similar to, the sunk cost in a way, except some cost is about it works best if you get someone to sink in some big cost.

Foot in the Door is about getting people to agree to something small or to put up a small amount of money. And then once you’ve, got them in with that to So then it increased the, increase the price of of what’s being asked for. So here’s an example of how Microsoft does this. So this is with the Xbox, a game pass, Ultimate. So you can see they’ve done something very interesting.

So rather than the, we we saw, a little while ago with, well, it was Microsoft again, wasn’t it? With Office, but also with Amazon Prime, we saw that one popular option is to give a free trial, for, let’s say, 1 month or 3 months. But then what they’ve decided here with the Xbox, Game Pass is to get people on a subscription where they pay $1 a month for the 1st 3 months rather than nothing. So why have they done that? It’s not like Microsoft needs that $1 off everyone.

It’s not like that’s gonna make any difference financially, really. The reason they’ve done it, I assume they must have decided that this run than office. This is the type of thing where the foot-in-the-door technique is gonna work better. Once you’ve got into the habit of or you know, set up your direct debit in such a way that you’re quite happy to pay Microsoft, $1 a month for the Xbox past, then you’re gonna then agree when the request comes in after the 3 months to pay the, the $45 quarterly. On the other hand, the foot-in-the-door technique needs to be balanced with an opposite technique, called the door-in-the-face technique, So the idea here is that rather than giving people a tiny request and then upgrading it to a bigger request or a bigger purchase later, you start off with a huge and frankly, quite unreasonable request with the idea that people will agree to smaller request later kind of out of relief, as much as anything.

So in the original code Deanie study, what they originally did was, as participants, how would you feel about taking a group of juvenile delinquents on a day trip to the zoo? And unsurprisingly, everyone said, god, no. That’s not like an absolute nightmare. So then they said, okay. Well, if you can’t do that, how about just, acting as a guidance counselor to small groups of kids just for a couple of hours? And most people were so relieved to be given this easier and, they then agreed to do this. Whereas if you just ask people cold, would you like to sign up to be a guidance counselor for, 2 hours than most people, weren’t to weren’t too keen to do that. So how could this work for, you at your site?

So this is a donation website, and I’m not sure if it always defaults. So I think I think mostly it defaults to the lower amounts, but it’s just an example of how it could work. So, imagine you, one way it could work is to have the initial request to be, you know, a huge donation more than almost anyone is, realistically going to give. And then people the idea here is that if you default it to the $500 donation then people could be more likely to, well, to give any donation at all, but other than nothing or perhaps to give one of one of the medium-sized donations, rather than the the small one. So whether the foot-in-the-door or door-in-the-face technique is gonna work best for your site, it really depends on what you’re selling. And who you think your customers are. So there was a study that actually compared different personality types to see who responds best to fit in the door and door in the face. It showed that most people responded better to foot in the door, but there was a small subgroup of people who responded better to the door-in-the-face version. And these were people who were kind of outgoing thrill-seeker types.

So I think we’re not quite at the stage where you’re gonna be able to, you know, do a personality of your, personality profile of your customers off their clicks and so on. But if your site is the type where you think it’s mostly gonna get this kind of risks you can customers. So if you’re a gambling website, say, or a site that sells extreme sports experiences. If you have that type of customer, then it could well be the case that a door-in-the-face strategy is going to work better than a foot-in-the-door for you. If not, then, then a foot in the door is probably the way to go. Okay. So what I’d like you to do now, let’s say let’s do this. So it’s just people in the UK now. So if you’re listening to this in the UK, then please, post in the the chat or the questions. How many calories do you think are in this burger? Okay. So I can’t see these answers again. So can you tell me, what are we seeing here? What are we getting?

Shubhankar:

So, Ben, we’re getting options around the minimum I’m seeing is 400, and, I’m seeing up to 2000 calories in fact. And I would say the mean is about 1000 calories here.

Ben:

Okay. Right. Now for people who are not based in the UK, people watching this, in other places around the world, can you guess now how many calories you think are in this, I call it the world’s eldest happy meal. So it’s a burger, but instead of fries and a soda, you get celery and water. So how many calories do you think are in this? Okay. So what type of guests are we getting for this?

Shubhankar:

I would say, oh, somebody even said 300, 400, 500, 400. Yep.

Ben:

Okay. Yep. So it sounds like we’re getting slightly less, maybe. So people are gonna think I feel anything I put you up to this, you know, giving me fake answers, but, I can swear that that isn’t true. So what is supposed to happen, and I think we might be getting this here, obviously, we weren’t doing this under anything like test conditions, but, what happened when this was done under test conditions was that people guessed that the burger with the combined with the water and celery actually had fewer calories than the burger on its own. It is not if you’re thinking it’s not because eating celery burns calories. That’s a myth.

Salaries and water are both calorie-neutral. So, of course, the burger with or without the water and the celery has exactly the same amount of calories. But when this was done on the test conditions, people thought adding the water and the celery somehow made the overall package have around 100 fewer calories than just the burger on its own. So this is known as the less is more effects or the less is more a fallacy even because, you know, let’s that isn’t really more or less is less. So that was this was shown in a famous study again with mugs. Not sure whether it was used. Mugs, but it was done by a professor called Christopher C. At the University of Chicago Business School, and he found that participants were prepared to pay more for a box of 12 pristine coffee mugs than they were for a box of 20 mugs that had 5 broken ones and 5 pristine ones. So in other words, people were prepared to pay more for 12 mugs than for 15 mugs just because they didn’t like the extra 5 mugs, broken mugs being in the box. So why do we get these less is more effects or the less is more fallacy? If we go back to, the burger example, if you’re asked to judge how many calories we’re getting here, you kind of mentally average over the burger, the water, and the celery. This mental averaging brings somehow the overall perception of the number of calories down as compared to if you just show one high-calorie item.

It’s the same with the mugs. If you see, 12 mugs, 12 brand new mugs, you think, yeah, that’s great. If you see 15 brand new mugs and 5 broken mugs, then averaging across them, how good is this amongst as a whole, it doesn’t seem so great on average. So you think it’s less good than a box of, just twelve, press pristine mugs? So how could this work for, your site?

So The lesson for your site is that adding on free extras that don’t seem a particularly high value to the customer, you know, even if they are, good value. If they don’t seem good value to the customer, adding on, extras that aren’t so great could make the offering seem worse rather than better because when they average across, you know, the great product that they want and the the cheap freebie that they didn’t want, the overall quality of the package, seems worse. So here’s an example from, a a real site. Again, I’m not gonna say which, but the difference between the standard basic package on this site or the main difference, at least, is this, as you can see here, stands out and shows up to 8 photos in, search results. It turns out that this is actually a good benefit and is worth paying for that, but the customers see that value.

If they don’t, then they’re gonna think that the standard package seems worth more value than the basic package. It doesn’t seem, yeah, you’re getting less is more here. So the standard service plus this eight photos thing that they don’t think is very good. Averaging across that doesn’t seem so great. They kind of feel like they’d be better off with the basic package.

Okay. So now we go from less is more to, more is more. So the biggest football stadium in the Netherlands is the Amsterdam Arena. What I’d like you to do now in the chat is to, guess its capacity. Don’t Google it and don’t play if you know for sure.

I’ll just have a guess here. It’s capacity. Okay. So what sort of guesses are we getting here?

Shubhankar:

Okay. When the guesses we’re getting are all the way from 25,000 to 80 1000, I would again say, oh, we’re having some which are really less, like, 2003,000. So, yeah, or even a 100,000.

Ben:

A 100%. Okay. So, yeah, so here’s the real answer. Kind of surprisingly small actually, given how popular football is in the Netherlands. It has a capacity of just over, 53, 1000.

So here’s another one now. So The tallest mountain in the world is Mount Everest. Again, please don’t Google this, but please just, guess it’s height in feet.

Shubhankar:

Can I take a stab at this then?

Ben:

Yeah. Sure. What do you guess?

Shubhankar:

I’m guessing this is somewhere around 9000 meters.

Ben:

Okay. I don’t have it. I don’t I don’t have it in meters. How does that work out in feet? Anyone there?

Shubhankar:

Yeah. It’s like a multiple of 3, so I’m guessing about 27,000 feet.

Ben:

Oh, that’s a very good guess. So I don’t know what what did other people guess or did you get that first?

Shubhankar:

Okay. Oh, yeah. Somebody has 27,000 feet. Somebody has 50,000, somebody has 7000, somebody 28,000. Somebody has 25.

And, you know, things, it’s very tall. So

Ben:

Okay. Well, I think we’ve got, think we’ve got some very well-informed people here. So the actual correct answer is approximately 29,000 feet, but generally what people do is they seriously overestimate the maintenance height here like the person. I think you said one person said 50,000 feet. So the idea, of course, is that this is a classic anchoring effect.

So Once I’ve planted a big number like 53,000 in your head, then it’s supposed to drive up your estimate of the height of Mount Everest. And this is, generally what happens in the studies, that under, test conditions. So the anchoring effect is just that once you see a big number, it kind of shifts your frame of reference, your sense of what counts as a big number. So we’ve used Anchoring quite a bit in our tests with lots of different customers, and for most of them, it’s been very successful. And in fact, it’s one of the strongest and most reliable of all psychological findings.

So some of you might have heard not so long ago, that there was something called a replication project where they kind of revisited a lot of classic psychology findings, and did the studies again with different participants to see if the effects would hold. Lots of them didn’t, but they actually found this anchoring effect. They’ve been underestimating the power of this anchoring effect. So A very simple way to do this is just to have a a decoy item. So I don’t know what side this is.

I just just found it online. So you can see that this max plan, they’re not really expecting anyone to go for this max plan. They’re just trying to shift your frame of reference of what is a reasonable amount to pay for their service. So once you’ve kind of got in your head that around $200 is what some people are paying, then the idea is that this $49 package is supposed to seem kind of reasonable, and you’re supposed to go for this rather than the, the very basic package So this is kind of combining anchoring, with a decoy, but for a kind of pure anchoring, you it doesn’t have to work like this with the decoy. The idea is if you can just get a big number in front of people, it could make the price the price of the goods that you’re selling on your site seem smaller by comparison.

So this is the way it works with the the capacity of the football stadium and the height of Mount Everest obviously they’re completely, unrelated, but you still get the effect even though people know that they’re unrelated. So if you can get a big number in front of the customer, just before they see the price, then you could get an anchoring effect that works to your benefit here. So it could just be something like your street address if that’s a high number. It could be fun facts related to your product. So how many products did you sell last year say you just make one up, say you sell shirts, you could say the average shirt has so many thousand pieces of cotton in it or something.

The point is just that if you can get a big number in front of the customer, it can make other numbers like prices seem smaller, by comparison.

Shubhankar:

Okay. Then, we had a question. We had a question on that note. Would you say, Apple with the iPhone? Would you say that’s a sort of anchoring effect?

Ben:

I would have done it, but I guess a lot of people do go for the more expensive ones now, don’t they? You mean, like, with the gold ones and so on that are, like, yep. Yeah. I think that we Yeah. They do that with, with the, like, really expensive ones, don’t they?

The really fancy, limited edition gold ones that are like, you know, I can’t remember, but they’re like tens of 1000, aren’t they? Yeah. I think that’s well, I think Apple’s iPhones have kind of anchored the whole phone thing, haven’t they? Like, before Apple came along, you know, what would you pay for a phone? Like, you know, a $100 maybe less.

And then, you know, they kind of shifted everyone’s frame of reference so that like a phone is now something you pay like, you know, around a $1000 rather than than than around a $100. Yeah. Right. So the next one is framing. So we don’t need to, we don’t need to do this interactively.

You can just think about this yourself. Would you walk for an hour if someone offered to pay you $20? Maybe, maybe not. Would you pay $20 to someone else to do an hour-long errand for you? Okay.

So now think about it this way. Would you walk to the shops and back? This is now a long round trip to save $20 on a product that normally costs $50. So if you’re interested in the product, you could get it delivered to your door for $50 on Amazon. Would you take an hour-long round trip to the shops to save $20 and get it for just 30?

Now imagine the same thing, but the product that you’re gonna buy is like, a fancy new computer or something, and costs $5000 to deliver to your door, would you save $20 or more to the shops, if you can get it for 4 1980 So most people have very different answers to these, to these questions. So most people the first 2 are maybe kind of more a personal thing, but the last 2 certainly, most people say that they would, walk the shops and back to save $20 on the $50 product, but that they wouldn’t save $20 on the $5000 product. And in a way, we can kind of see the logic here a big percentage of the $50, but it’s, a very small percentage of the $5000. But then when you combine them with the other 2, you can see that we’re really asking the same thing here. We’re saying, we’re saying to what extent So we’re saying, is it worth $20 to you to do an hour-long errand to do an hour-long walk to the shops?

And in a sense, it shouldn’t matter whether how we’re framing it. These are 4 different ways of saving this of framing the same question. Would you do an hour’s walk is an hour’s walking worth $20 to you? It doesn’t really make sense that it is in some cases, but it isn’t in others. It’s all just about framing.

So how can this work for your site point for your site is that the same deal financially can be perceived very differently if it’s, losing a certain amount of money versus failing to gain a certain amount of money or compared to the base price of the the product. So for example, It might be better to have the basic price of $5 higher, but to offer so-called free delivery. Rather than to have it $5 cheaper, but then charge £5, for the shipping. So here’s an example, from eBay. This is a made-up example, but it just goes, to show you the point.

So you’ll see this yourself on eBay and various types of selling sites. So it takes only a a tiny bit of mental math too. Work out that the, the second one is cheaper here, but is it a good way to, if people pay less attention to the postage, it could be a good way to draw in the customers to have, a kind of, to frame it, to have a cheaper buy it now price and then add on the postage, than to have a more expensive, headline price here. Okay. So odd one out here, which of these photos is the odd one out?

So we’ve got a telly from the build of our workshop. We’ve got to pick your own strawberries. We’ve got a Betty Crocker cake mix and an armchair from Oak Furniture Land. So let’s say anyone in the questions here wanna have a guess, which is the other one out. Are you getting any guesses?

Shubhankar:

Yep. So a lot of people team seem to think it’s the armchair, which is a different one, but, my pick would be the strawberries.

Ben:

It is the armchair. And the reason it’s an armchair is that maybe people don’t probably people around the world don’t really know what Oak Furniture Land is, but this is an armchair that’s already made whereas the other ones, you have to do some work yourself. You have to build the bear. You have to pick your own strawberries. You have to make your own, cake here.

So that’s the wrong highlight to do. I don’t know where that one’s come up. It’s actually the armchair from Oak Furnitureland. So this is the labor love effect or the IPA effect, which is that you value something when you have to work more for it. So you don’t value the chair so much because you didn’t have to do any work to get it, you value something more when you’ve had to put, some work in.

I know the couple’s heads don’t look like they’re particularly having a great time. Doing that sub-assembly furniture, but the labor of effect of the IKEA effects says that nevertheless once they’ve assembled it, they’ll appreciate it more than if they’d, just got it ready-made. So a lot of substance these days are going the other way doing everything for, the customer. And this can be good if the stuff that they’re doing is the kind of boring work. So we saw the example of, for car insurance you put in your registration, and it gives you all the all the details about your car.

And that’s great because no one enjoys entering lots of boring details, into a form. But if you can find a way to get customers to do some work that’s actually kind of enjoyable or creative, then, then you could get the label of working, for you. So this obviously works for these websites where you can design your own cards here. So, you know, you could just upload the photos, and it could design it automatically for you. But our customers are going to appreciate it more if they get actually, design it themselves than if the design choices are taken for them.

So how can this work for you? It obviously depends a lot on on what you’re selling, but can you let customers, customize their package? Can they make some kind of minor design choices by having slight variance for the product, which gives them the impression that they’re actually doing some design even if it’s only kind of, you know, a few variants that that that you already have in stock? The important thing is just to create the perception that they’re putting some work in for themselves. And, the idea here is that this IKEA effect, the label of effect will work, and they’ll, therefore, value it more Okay.

I I’ll go through this a little bit more quickly because we kind of talked about decoy effects, in anchoring, but this is a particularly interesting example because it’s not about anchoring to a particular price, the the prices are all the same here. So the decoy works in quite a different way here. So if you want to subscribe to The Economist, you can get the print-only version for £12. You can get print and digital for £12, or you can get the digital-only for £12. So this is kind of unusual because you’ve only got one item that you’re supposed to go for The two other items at both there are decoys, and that’s supposed to make the option in the middle, appear better.

I mean, it is better, but then if you are without the decoys, you might think, well, 12 weeks or £12. Okay. It’s not as bad as an introductory offer. You know, is it really worth it when it’s gonna increase the price compared to only getting the digital one for the same amount of money? Then immediately this one starts to look much better value.

So we can also work as the one we saw before where we had to the decoy package that was $200, which is much more expensive than the 1, people were were kind of being steered towards, or it can work the other way as well. You could have, a kind of very cheap and very basic package that people aren’t really supposed to pick because it’s not really gonna meet most people’s needs, but it’s supposed to make the the kind of main package look better. So you get this a lot, in supermarkets, for example. So you might get supermarkets to sell their own brand, like, very cheap products and they try and make it look that they have under design packaging, they try and make it look not very desirable. They’re trying to make you think, well, Okay.

This one’s very cheap, but I can do it a bit better than that. They’re trying to make you buy the, you know, the 50p kind of baked beans or whatever rather than, the 10p kind of supermarket-owned brown beans. That’s just there as a decoder really to try and make the product that has more profit for them and seems better value. Okay. So our last one now is the 1 rest off effect.

So, we don’t need to have any interactive thing here. You can just do this on your own. So try and memorize this list of items. 9, 12, 316, a QX 14, 11, 2, and 7. Okay.

So if you’ve got a pen or if you’ve got somewhere to type it, just go ahead now and list all the numbers or list everything that you can remember. Okay. Gotta go at that. So let’s go back and see the answers. So I’ve never had anyone who can successfully remember everything here, but nearly everyone remembers QX.

So the obvious point here is quite simply that you just remember the one item that sticks out. So this is something that obviously can be put to very good use, in website design. So this is a version of some work we did for a fashion retailer, misguided, and we tried different colors. Actually, I think it was animated in the end which was the way that it stood out. But having just one product that is different from all the rest, whether it’s, visually or whatever, the one that’s different is the one that you that you remember.

So this is a great way to drive customers towards a particular, product on your site. Okay. So that’s the end of the of the bit where I’m just talking now. So, I think we’ve got about 10 minutes left if anyone’s got any questions. So that’s just a reminder of all the phenomena I’ve talked about if anyone wants to, ask me more about any of those things.

And just while you’re thinking up some I’ll just give you a little bit of information about, endless gain where, as I said, a conversion agency based in Manchester going since 2016. The 30 was based over 2 locations, Manchester, and Bangalore with various industry awards over the last few years. If you’re interested in in learning more about our approach and what we do, then, please go to our website. So follow these links here to download our pocketbooks, the ultimate pocket guide to the consumer, psychology, the ultimate guide to functionality testing, the world’s 1st dictionary of conversion optimization, and that attends that plan for a better customer, by experience. All of these books can be very helpful to you if you’re trying to optimize your conversions.

Okay. So if we have any questions coming in related to Well, related to any of these or to anything at all?

Shubhankar:

Okay. Yeah. But we do have some questions. Before I jump into the questions, I would like to thank you for this really engaging session. I feel like there is a lot here, and I’m pretty sure a lot of our audience would also agree with that fact. So somebody wanted to know about delayed gratification. So when you said about the 1 March now or 2 later, they want to know is, how can they really leverage it on a fashion site to get more sales.

Ben:

If you’re selling something, so I mentioned, it can depend on where the off-site is, like, an auction site or buying like, in terms of if it’s just selling, whether it’s fashion or whatever you’re selling, I think the way to do it is to get people to just to buy now or pay later so they don’t it could be that they don’t pay until the, until it arrives or, I guess, a fashion, a big thing would be like, you know, am I gonna like it? So maybe it’s like, you they they send it out, they try it at home, and then it it only debits that card if, they haven’t returned the product within a certain amount of time or whatever.

I mean, obviously, all these things need, need testing. You can’t just go and apply a finding from psychology straight to a site without a test, it can work different on different sites, but the general principle is you need to try and make the cost to the customer, come later and the benefits of them come sooner. So if they actually get the thing before they pay for it, then, you know, this could be a way to use this to advantage.

Shubhankar:

Okay, Ben. The other question is, what is the difference between the labor of love compared to this thinking and feeling? They sound the same. The user has to put in effort to interact.

Ben:

Yeah. I guess I guess they’re very similar. It’s just more to do with the fact that, labor law is specific to putting in, some kind of effort whereas the sunk cost effect generally to do with, is it can be interpreted to do with effort, but I would say it’s more normally what people are talking about. That affects more to do with, money. But, yeah, I’m sure, like, a lot of these biases, have a kind of the same ultimate source in in psychology. It’s that we kind of a lot of you will have heard of the book thinking fast and slow. So, you know, this is kind of all these things that are common to the way that we make decisions. We’re not rational. We’re emotional.

We want what we want and we and we want it now and all these types of things relate to these or always these kinds of similar underlying, constructs. But, yeah, Suncast would be getting a customer to pay out some financial amount normally, which they then don’t want to waste if they’re not getting, you know, by failing to purchase something that will extra that will improve their experience where the labor love is really getting them to kind of do some, design work or some kind of enjoyable work that will make them feel kind of invested in the effort that they’ve sunk in rather than just pure money.

Shubhankar:

Yep. That’s very interesting, man. Somebody also wants to know about any advice you would have would be scenarios and business-to-business transactions.

Ben:

Yeah. It’s terrible. I mean, I’m not sure really that I would say that any of these are gonna be kind of,

Shubhankar:

Do you mind if I tackle this?

Ben:

Yeah. Sure. Yeah. Go ahead. I’ll think about it while you’re answering.

Shubhankar:

Yeah. So I think, we could really leverage the sunk cost or the labor love, whichever you might fit, seeing fit here, but, a lot of platforms, much like VWO offer free trials. And, if somebody can give you a free trial of their platform, and, you know, people would set some time aside from the schedules, worked on it for about a month or so. And by the end of the month, once they’ve you know, put in some effort, got the tracking place, are running a few experiments, they’re more likely to make a purchase for the platform rather than, you know, not having put in that effort.

So I think that really works. And, as with pricing, pricing pages, like you said, you know, the anchoring principle, it is really prevalent in a lot of, these B2B sites where they have multiple pricing options for similar products. So, yeah, I think, a lot of what you can read here is also applicable to B2B. Would you like to add anything?

Ben:

Yeah. And I think delay discounting as well. It can be, you know, there’s very various different models that you could have charging, isn’t it? Are people gonna pay upfront, or are they gonna pay, you know, at some point, a long time in the future? Are they gonna pay a fixed amount? Are they gonna pay, like, a percentage if you’ve increased revenues? You know, there’s lots of there’s lots of different models, and there’s no reason to think that people are gonna be It might be business to business, but they’re still being run by humans at the end of the day who are still gonna have these, these same biases.

We don’t most of us yet have algorithms making all these decisions for us. So the psychology of the people making the purchase decisions is is gonna be similar, I think, whether they’re kind of consumers buying something on a website or, or, you know, businesses working with other businesses.

Shubhankar:

Yep. I agree completely, Ben. I’ll post my question for you. You cited, CLDB earlier. Our viewers want to know if you have any other favorite authors or books.

Ben:

So I’m reading, well, if there’s any tangentially related to this, but an author that I really get a lot from who’s kind of related to psychology is Daniel Dennett. So he’s kind of the combination of psychology and philosophy. And I’m midway through his latest one at the moment where he’s, he’s he’s talking about how we managed to evolve a philosophy of, how we manage to evolve consciousness, even though that might seem the kind of thing that we can’t evolve.

So I’m not sure if that’s gonna be this relevant for this, but it’s, it’s certainly, great for, you know, thinking about psychology more broadly. If I could mention one more that’s kind of maybe slightly more related, A lot of people in the UK and probably the US will have heard of Tim Hartford too, who is he well, he does a lot of different things, but he writes for the financial times. And he’s great on, this kind of behavioral, psychology stuff for behavioral economics, and has some really interesting things to say.

And, one other guy, Nick Chater, who has done some work in, one of my other areas of interest, which is child language, but he’s also very interested in behavioral psychology, and he’s got an interesting piece actually about the kind of behavioral psychology of, of the UK government’s response to coronavirus and whether or not it’s really based in behavioral science, which is what the government here claiming. So those are some, yeah, those are awesome authors who are interested in this type of stuff.

Shubhankar:

Yeah. Ben, I’m pretty sure all of us are going to give them a read Another question to you is, in your experience, do you think there are specific words better to words to say value price? Do you think there’s a golden word out there that can get more people to that word?

Ben:

Yes. The golden word is free. So this is a, I should have included this one of the effects actually there. It’s a well-known phenomenon called the power of, free. So there was, I can’t remember the exact details of the study now, but it was something like this. So that you could buy, they set up a stall and you could only buy, like, 5 chocolates per customer from their store or something, and you could buy, the fancy chocolate was $1 each. And then, and there was, like, a disgusting chocolate that was, like, one cent each or something. And everyone bought the nice chocolates and no one bought the 1 cent chocolates.

They made it again on a different day, and it was like 99¢ for the fancy chocolates or free for the horrible chocolates. But again, like a limit of both per customer so you couldn’t go crazy, but then everyone did the free ones. So, again, it’s kind of a framing effect. Is it worth paying a dollar more to get them, to get better chocolate? In Germany, people thought it was definitely worth paying a dollar more to get the better chocolate. Except when the worst chocolate was free. So the difference between it being, you know, 1¢ and it being free doesn’t mean anything for the customer.

They’re not gonna miss that 1¢, but free just to access the kind of you know, a like a lamp to a moth. It just kind of gets people swarming in. I’m gonna get something free. So if there’s a that’s that’s my Yeah. That’s my magical word. If there’s a site, if there’s a word you can get on your site somewhere, and it relates to this thing about do we do you pay extra for posters? Do you include it? If you can get free on your site in big red letters, then this is the word that’s gonna, like, draw people in. Yeah.

Shubhankar:

Yeah. That’s quite interesting. There’s one more question here, which I think is more my speed. I’ll take that. Somebody wants to know, how can we find out the customer profile. In order to leverage the mentioned effects better. I think now that Ben has graciously, you know, demonstrated these effects to us. What we can do is set up a few tests on our website, which leverage, you know, multiple or, you know, like a single effect. And once we have that setup, we can have the data come in, and the data can dictate what the consumer profile of, the customers is. So, that’s I think that’s in, that’s just my method of doing things. What would be your take on this?

Ben:

Yeah. I mean, it’s not something that you can really do very easily, you know, in a live side, but what we do is we have people come into the labs and we have a biometric setup where we can, you know, we use all the things like eye gaze and the galvanic skin response and EEG and all these types of things that are gonna measure the, you know, the emotional responses that that people are giving to the site. So, I guess, yeah, it’s this isn’t quite down to personalization, which is kind of, I think, you know, I think it’s gonna be the next big thing that’s coming personalization. We’re not kind of there yet, but before we can do this and a kind of live way, I think that the trick is really, biometrics is a big focus for us as at the moment of testing these things in a more controlled way in the lab where you really can get these, biometrics measures to measure these types of things.

Shubhankar:

Yeah. I agree with you, Ben, on that. Again, man, I think you’re done with all the questions. In conclusion, I would, really thank you for taking the time out for this session. I had a great time. I’m pretty sure our audience would agree. And last but not least, I would like to thank the audience for joining us today. Hope you guys

Ben:

Yeah. So, listen and, and join in as well with the interactive bit. That worked quite well. So thanks to everyone who who provided your answers and your questions.

Shubhankar:

Yep. And, we know these are very trying times. Personally, we can see the effect of the coronavirus all around the globe. So I would request all of you to stay safe and stay indoors. And, yeah, good luck, I guess. Thank you, Ben. Thank you.

Ben:

It does. Stay away from everyone, and stay safe. Good luck wherever you are in the world. Yeah.

Shubhankar:

Thank you, guys. Bye bye.

Ben:

Thank you. Bye, everyone.