Tag

behaviour design

Workers are massively firing their employers.

By All, Behavioural Science Insights
Currently, 67% of all salaried employees in The Netherlands are considering changing employers. Combine that with abundant job vacancies, and you realise that organisations face a huge behavioural challenge. After all, how do you retain your talented employees? Offering more money or a bonus is no longer enough. The key is behavioural expertise. If you understand how choices are made and behaviour is created, you can manage them. We can teach you how to achieve this during our in-company training. You will learn how to do this with a simple method and practical tools. In this article, I shed some light on why employees decide to leave and give three tips to help managers retain their talented employees.

The situation: we’re in the middle of The Big Quit

We recently conducted a behavioural survey of salaried employees. It showed that as many as 67% were considering them to step down to another employer. If we add to that the recent CBS data[1], which continues to show that for every 133 jobs, there are only 100 applicants, the challenge facing managers and executives becomes very clear. Because how do you keep talent in anymore? Indeed, many employees actually take action, also known as the ‘Big Quit‘ or the ‘Great Resignation‘. Well explained from behavioural psychology, because where normally change comes with a lot of uncertainty, confidence that a new job will be found in no time has also risen.

The problem: money is no longer enough to motivate employees

Managers and executives are tasked with understanding what motivates their talent. This sounds logical, but in practice it is not so easy. Because every employee is different and everyone needs something different. Combine that with the high workload of most managers. And the fact that hybrid working is the rule rather than the exception, literally making 1-to-1 contact with their team members more difficult, and you get the idea that managers have a very challenging task. Often, the ‘tool’ that managers get from the organisation to motivate their teams is to award a salary increase or bonus. But at present, that really no longer seems to be enough to motivate employees sufficiently. But what does work?

 

The opportunity: understanding your employees’ choice psychology  

The key to retaining your talent is understanding how they make choices and how their behaviour comes about. Really understanding what drives them and why they take (or don’t take) certain actions. Behavioural science offers many useful insights for this purpose. Only, these insights are often very theoretical. What can you do with them in practice? The work crisis is now and demands action from managers now. That is why this is the perfect opportunity for you to follow an in-company training with your team. You will receive all the essential insights from behavioural science translated into a simple method you can use to influence choices and behaviour in practice. You can use it right away to successfully retain your talent. And money and bonuses do not turn out to be the most effective at all.

Would you like to power up your team with Behavioural Design?

If you wish to add behavioural intelligence to your team, be sure to check out our in-company training. Bringing your talent up-to-speed with the latest in behavioural science and teaching them hands-on methods and tools to apply this in practice right away. Tailormade to your organisation.

Check out in-company training

PS. We've trained many teams already! From leadership to project teams.

The solution: the real crisis is a crisis in appreciation and personal growth

A fundamental insight from behavioural psychology is that people do not work purely for the work itself, but what work brings them. What it helps them realise. This is the so-called job-to-be-done. The name is slightly confusing in this case, because here the ‘job’ has nothing to do with a function or set of tasks, but with the deeper motivation why people work. Often, employers try to retain their talented employees by offering higher salaries, bonuses or extra monetary fringe benefits. This is important because it allows employees to achieve their functional jobs-to-be-done, such as paying their mortgage, being able to afford holidays and buying goods. But employees’ emotional and social jobs-to-be-done are often forgotten and even more often underestimated.

There is, in fact, something interesting going on. If you ask employees about reasons for changing employers, higher salary is indeed cited as the number one reason. But this is closely followed by a better work-life balance, more challenge and more meaningful work. Asked about behaviour, “What would you actually leave your employer for?” very different factors emerged. A whopping 1/4 of ‘overachievers’ said they missed recognition. Followed by: ‘I am not happy in my current team’ (social), ‘I have no opportunities to grow’ (emotional) and ‘I want to learn something new’ (emotional). The major work crisis appears to be mainly a crisis in appreciation and personal growth. Yes, salary is absolutely important, but rather a prerequisite. It is an improvement in achieving the emotional and social jobs-to-be-done by which you, as a manager, are most likely to retain your talent. But how do you do that? Here are 3 tips.

Tip 1: Provide context and make personal impact clear

Zooming in on meaningful work, it becomes increasingly important for an employer to create a work context where employees can see their roles and contribution. Share what the company stands for, what contribution your employee and his team make to it, and make clear what success means. And above all, make time for your employee to experience the positive impact of his work. Something as simple as installing an ‘impact habit’, the behavioural routine of giving an employee time two weeks after completing a project to ask/see what his work has delivered, can boost motivation enormously.
 

Tip 2: Be mindful of commitment and express appreciation

Ultimately, as humans, we are all looking for recognition and appreciation. This does not mean that as a manager, you have to give compliments all day long, even though compliments are often forgotten, and successes are not celebrated enough. Recognition is also in trust. It is about allowing people to schedule their own time and not micro-manage. This can also fulfil the great need for a better work-life balance. This does require clear goals and behavioural routines that keep the employee’s visibility sufficient (also for the manager). But it is also about explicitly acknowledging work performance. Have goals been met or even exceeded? Has someone helped a colleague or customer exceptionally well? Has someone grown enormously in their role? Or, on the contrary, are there blockages that you need to help them remove so they can continue their personal development? This actively helps to overcome difficulties that come with work (both job-related and mental) and helps meet your employees’ need to grow, learn something new and retain job happiness. An employee wants to be seen, helped and appreciated. Again, simple behavioural routines can make a big difference.

BONUS: Read the entire research paper

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Tip 3: Recognise that you, as a manager, make the difference

Our research reveals, among other things, the critical role a manager or supervisor plays in employee retention. Humans are social creatures; we copy and follow the behaviour of others. How you appear in the workplace as a manager makes an impression and significantly impacts employee motivation. But the fact that you yourself are genuinely enthusiastic about the organisation or believe that you and your team can make a difference also makes you better able to motivate others. So also reflect on your own contribution. What makes you proud to work for the organisation? What successes have you already achieved with your team? How did you ensure that talent could grow? As a manager, you just as much need all the aspects we highlighted in our employee survey to be and stay motivated yourself. Realise that as a manager, you do make a difference. Motivation and enthusiasm are contagious.

Conclusion

If you want to influence choices and behaviour successfully, it is crucial that you understand the person behind the employee. The ability to think outside-in is indispensable. Understanding the psychology of the employee (but also of your customers, your decision-makers, your colleagues or budget holders) is the competence of the future for every manager. In my book ‘The Art of Designing Behaviour‘, I help you develop that competence and put the power of behavioural science to work for you in practice. Want to start right away? Book an in-company training.

The book is now available at Managementboek
Dutch: De Kunst van Gedrag Ontwerpen
English: The Art of Designing Behaviour

Published by Boom Publishers. 

 


Astrid Groenewegen
Co-founder SUE | Behavioural Design

23/09/2022

How obstacles are key for innovation

By All, Behavioural Science Insights, Personal Behaviour

I am continually fascinated to discover the importance of behavioural economics in solving the significant challenges of our time: eradicating disease and tackling climate change. After reading an interview with Susan Athey, I realised how robust and starting from choice psychology can be in solving these complex challenges.

How to save the climate and lives with behavioural psychology

Susan Athey is economics professor at Stanford Business School and the woman who managed to:

  • 700,000 lives by having pharmaceutical companies invest in the development and production of a malaria vaccine.
  • The development and worldwide distribution of the Covid vaccine will not take the normal R&D time of 10 years, but will be realised in 7 months (and millions of lives will be saved as a result).
  • Get the commitment (and a billion dollars) from big corporates to accelerate the development of technology for carbon removal from the atmosphere.

Shortlisted for the Nobel Prize, Athey is an econometrician and a specialist in market design. The challenge she tackles is how to get players in a market to invest more rapidly in solutions that save lives. She is not someone who explicitly starts from psychology, but what I find fascinating is that if you listen to her story through Behavioural Design glasses, you see that understanding choice psychology was an essential key in arriving at the solutions to all three challenges.

The Problem of the Mexican Standoff

Back to the 700,000 lives (it was the malaria vaccine) and the Covid vaccine. Athey describes that in both cases there was a deadlock. From her economic perspective, she describes this as a typical market problem. Developing vaccines requires billions in investment. For pharmaceutical companies, the decision to develop and produce vaccines is a very uncertain one. They have to take a gamble in the hope that 1) there will be a customer soon who 2) is willing to pay enough money to recoup that investment and turn it into a profitable business model. Pharmaceutical companies are often dismissed as ‘evil’. But the investments they have to make to develop a vaccine and the uncertainty as to whether there will be enough customers willing to pay a fair price make it extremely risky for them. Apart from the fact that ‘evil pharma’ marginalises the complexity of the healthcare issue, it is in any case not very constructive. It only creates a Mexican standoff situation, in which no party wins and certainly no one moves.

Outside-in thinking 1: Creating movement is about removing barriers.

If you look at it from a psychological perspective, a different picture opens up and opportunities open up. From our SUE | Influence Framework, the uncertainties about market demand are clear ‘anxieties’, or stumbling blocks that stand in the way of desired behaviour (producing vaccines). At the time, for example, there was a lot of uncertainty about Covid. How long would the pandemic last? Wouldn’t the virus die out quickly on its own due to mass immunity? It would take more than a year before a vaccine would be ready and that required huge investments in R&D and production capacity. Would governments be willing to pay a market price at all or would they simply demand the vaccines through legislation? In the US, for example, there is the Defense Production Act, which allows the American president to appropriate product capacity. In short, there were enough roadblocks to prevent the pharmaceutical industry from making decisions and behaving accordingly.

Athey describes what contributed to the solution as counterfactuals. In other words, what would be true under different circumstances? As Behavioural Designers, we always ask ourselves a similar question: what would be true if we were to remove barriers?

Outside-in thinking 2: Fulfilling the Job-To-Be-Done of the market players

From the SUE | Influence Framework, try to present the desired behaviour (producing vaccines) as a better way to meet the goals and drivers (the Jobs-To-Be-Done) of the pharmaceutical industry, than the undesired behaviour of doing nothing. Their Job-To-Be-Done is to realise a healthy, profitable business model (which in turn allows investment in R&D for finding medication for other diseases).

How did this happen in both the production of malaria vaccine (which saved 700,000 lives) and the Covid vaccine? In both cases, the solution of Athey and her team was to realise so-called advanced market (or purchase) commitments.  By calculating from an economic perspective what the economic and social benefits would be -gains in the Influence Framework – if the world were up and running again quickly ($1,000 per person at relatively low cost of the vaccine), they managed to get governments to commit to purchase orders in advance. In short, it appealed to the Job-To-Be-Done of governments: the rapid stabilisation of society and the economy. And yes, the wealthy countries got the Covid vaccine first, but as Athey puts it, Covid was primarily a capacity problem. The wealthy countries invested in widening the production pipeline. They got the vaccines first, but without that investment there would have remained a narrow production pipeline and other countries would have been much slower to get the vaccine. From a Behavioural Design perspective, it is unfortunate framing that these investments were seen as the fight for the vaccines rather than the fight for capacity.

Breaking the Mexican standoff to accelerate carbon capture

Athey is now working on solving the problem of removing carbon from the air. This is another complex challenge, as it requires large investments and there is no real market demand. Who is the buyer? Governments move slowly and there is a freeloader problem that increases inertia. If the US decides to invest, Russia will benefit and vice versa. There is not yet (enough) legislation that obliges organisations to invest in carbon capture. No demand means no bank is willing to finance this technology.

But again, the same approach seems to work. By looking again at who it is desirable to remove carbon from the air (a Behavioural Designer would say: for whom is this a relevant Job-To-Be-Done?), she now works for Frontier. An organisation that grew out of the large financial corporate Stripe where employees and customers are committed to the climate issue. The Job-To-Be-Done Done of a corporate is twofold: 1) scoring well on environmental social and corporate governance (this is the extent to which an organisation contributes to social goals that go beyond the initial goal of maximising shareholder value) and 2) thereby attracting and retaining talent and customers. These Jobs-To-Be-Done Done are so relevant to corporates that organisations such as Meta, Shopify, Alphabet have together invested a billion dollars in Frontier (again advanced market commitments), making banks willing to co-invest (removing anxieties).

Recap

In short, a story that teaches us a number of things. First: any complex problem becomes simpler if we look at it from the Behavioural Design lens. By interpreting what is happening in other domains from the SUE | Influence Framework, it becomes much more understandable. And we can learn from their innovative solutions so that we can apply them to other challenges. Ultimately, everything can be traced back to a behavioural problem. If we understand Jobs-To-Be-Done and remove the obstacles that get in the way of that Jobs-To-Be-Done, innovation becomes not only much more interesting, but also much simpler.

Astrid Groenewegen

Kom naar Behavioural Design Fest!

Op 30 september in Amsterdam. Een fantastische line-up van sprekers die je laten zien welke verandering je met gedragskennis kunt bereiken, zakelijk en persoonlijk.

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sue behavioural design
16/08/2022

Case Study: The Behavioural Design Sprint applied to SUE.

By All, Behavioural Science Insights

It’s my conviction that one has to practice what one preaches. That’s why, twice a year, we run a Behavioural Design Sprint on ourselves, to learn what our customers need and how we can get better at helping them to achieve success. 

 

Turn customer insights into improvements

I love to share the lessons we learned. The Behavioural Design Sprint we did on ourselves is an excellent illustration of how outside-in thinking helped us turn our understanding of our customers into a dramatic improvement of our offering.

In the brief case study below, I will walk you through the key psychological insights, and how these insights inspired us to re-designed our processes to serve our customer’s needs better.

I will use the SUE | Influence Framework terminology to describe the most significant insights into how our customers think, feel, and behave. You can learn everything about the framework in the article “The SUE Influence Framework Explained“.

The Behavioural Insights

The most important Job-to-be-Done for our clients is to understand their customers or stakeholders and turn that understanding into better Customer Journeys, products, services, or policies. They only hire a consultancy if it reassures them that it will increase their chances of achieving this Job-to-be-Done successfully.
Secondly, people want to hire peace of mind when hiring a third party. To get peace of mind and be relieved are critical emotional Jobs-to-be-Done for hiring a consultancy. They want the partner to deliver the right piece of the puzzle without unnecessary work or investment in time and energy.

Pains

The most significant Pains that drive their search for help is that our clients:
1. Often lack actionable insights into what their audience really needs and how they think and feel.
2. Often lack time and confidence to do qualitative in-depth interviews with their customers or prospects.
3. Often feel frustrated that part of the strategy gets lost in the implementation phase.
4. Often get stuck in execution, because they miss support, coaching and expert reviewing

Comforts 

The third component of our Influence Framework are ‘Comforts’.  These are the psychological forces that prevent our clients from seeking outside help. The most significant comfort is that teams have their own processes, deadlines and methods. It’s often difficult to overrule these processes. Yet, external partners like ourselves, often impose our own way of working.

Anxiety

The most significant Anxiety that prevent them from working with SUE more often is that a team doesn’t have the capacity or time for a full Behavioural Design Sprint. Sometimes they just need Behavioural Intelligence on board at the right time. In those instances, their own process and timing needs to be leading. 

Want to do a Sprint with us?.

Download our Behavioural Design Sprint brochure telling you all about the ins and outs of the sprint in detail. Please feel free to contact us suppose you would like some more information. We gladly tell you all about the possibilities.

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Go ahead, it’s completely free of charge!

The opportunity

Based on the insights I described above, we realized we had to update our offering for the first time in 10 years. The new offering needs to provide a better answer the following behavioural opportunities:

  • Piggy-bag on Comforts: How can we provide behavioural design value without interfering with our clients processes?
  • Take away Anxieties: How can we lower the barrier to hire Behavioural Design Expertise? How can we provide value without deep effort or time investment from our client and their team?
  • Solve Pains: How can we help our clients with understanding their customers, prototyping, testing their ideas, and add the magic layer of behavioural science onto their communication and marketing?
  • Experience Gains: How can we get our clients to experience breakthroughs and success as quick as possible?
  • Achieve Jobs-to-be-Done: How can we assist our clients into translating a deep understanding of their target audience into fast and clear improvements of their products, services, marketing, or policies?

The Key Behavioural Insight is that we learned that we needed to find ways to provide behavioural intelligence and value inside our customer’s projects and their way of working.

The perfect time to learn about influence

With the economy sliding into a recession, understanding your customers will be essential to navigate through the turbulence. Join our Fundamentals Course to learn a practical method to achieve this!

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The solution

We came up with four simple new products. All of them aim to leverage Behavioural Design at the right time, at the right place inside the processes of our customers:

  1. Behavioural Insights: Get a SUE Behavioural Design Expert to conduct in-depth interviews with your customers, prospects, or employees. Get the best interviewers to find the killer psychological insights into how your market things, feels and behaves. Get help when needed, or get monthly Behavioural insights updates on threats, opportunities, and low hanging fruit on what your customer needs and how you can help them
  2. Behavioural Design Scan: Get a SUE Behavioural Design expert do a scan of your customer journey, communication, and competitors and get a hands-on-advice on how to make your communication much more compelling and persuasive
  3. Prototype and test and refine your strategy: Get a SUE Behavioural Design expert to prototype, test and validate your strategy, campaigns, and innovations, and learn fast what works and how to get people excited.
  4. Successful Implementation: Get a SUE Behavioural Design Expert to optimize and supercharge your marketing communication, using behavioural science as their tool.

Conclusion: Design for the problem

If we hadn’t done our interviews with our customers, we would never have understood that the biggest opportunity for SUE was to find a way to lower the barrier for getting Behavioural Design expertise. Understanding that the biggest barrier is that our customers have internal processes that can’t be overruled easily, was the key to rethinking how we can provide value without interfering with these processes.

We’re constantly learning, improving, and adapting, and we still have a long journey ahead of us. But I’m convinced it’s going to be a fun journey.

Tom De Bruyne

How do you do. Our name is SUE.

Do you want to learn more?

Suppose you want to learn more about how influence works. In that case, you might want to consider joining our Behavioural Design Academy, our officially accredited educational institution that already trained 2500+ people from 45+ countries in applied Behavioural Design. Or book an in-company training or one-day workshop for your team. In our top-notch training, we teach the Behavioural Design Method© and the Influence Framework©. Two powerful tools to make behavioural change happen in practice.

You can also hire SUE to help you to bring an innovative perspective on your product, service, policy or marketing. In a Behavioural Design Sprint, we help you shape choice and desired behaviours using a mix of behavioural psychology and creativity.

You can download the Behavioural Design Fundamentals Course brochure, contact us here or subscribe to our Behavioural Design Digest. This is our weekly newsletter in which we deconstruct how influence works in work, life and society.

Or maybe, you’re just curious about SUE | Behavioural Design. Here’s where you can read our backstory.

sue behavioural design
21/04/2022

Perspective is everything

By Citizen Behaviour, Personal Behaviour

My Belgian mother called. She was a bit worried about her son who lives in the Netherlands. Dickpics, hard lockdowns, COVID-riots, armed hostage situation, far-right creeps in parliament,… What the hell is wrong with the Netherlands?

The perspective of someone living in The Netherlands

I replied that nothing could be further from the truth.

I myself have experienced several miracles in the past weekends alone. I flew from Amsterdam to Berlin for less than € 200 in less than an hour on a plane that weighs 150 tons. I told her that to get to the airport, all I needed to do was to open an app on my phone, and less than 3 minutes later, a private driver in a new Tesla was in front of our apartment who took us to Schiphol Airport.

I said that we live in a time where science had discovered a vaccine for a pandemic in less than a year. And after two years, we had vaccinated almost the entire country 2 or 3 times. We have now actually reached a point where we don’t even have to force vaccine-hesitant people into vaccination anymore. How cool is that?


Disobedient protest or voicing concerns?

I added that here in Amsterdam, the nightclubs have decided to engage in public disobedience. They opened up the clubs again and called it a protest. I live in a country where they can just do that without the army or police closing their clubs. You should have seen those happy faces from all those young people in town.

I live in a country that was hyper-polarized five years ago on the issue of Black Pete, but where the vast majority now shrugs their shoulders, thinking, “Yeah sure, charcoal sweeps, chimneys, logical, right?”. And that we will probably experience exactly the same with dickpic-gate and “The Voice”-gate. Within a couple of years, we will all have a much better understanding of what is acceptable and unacceptable. Think of this era as the learning track for society to learn and internalize social norms around how men interact with women
When society revolts here in the Netherlands on moral issues, the debate won’t stop, and peace will only return until something has really changed.

 

Want to look at the world from a different perspective?

Join our two-day Fundamentals Course to change the way you look at behaviour and decision making. You will learn the latest insights from behavioural science and get easy-to-use tools and templates to apply these in practice right away!

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It is all about perspective

I hastened to add that I live in a country where the supermarket around the corner has everything, really everything fresh and affordable on the shelves, so I get an amazing dinner from my love every night. And that if we don’t feel like cooking, we can get a warm meal delivered by a nice person on an electric bike, from every cuisine we can imagine in less than half an hour after ordering it.

We live in an extraordinary time, surrounded by magic and miracles.
You only need to allow yourself to see them.
The story above reminds me of this brilliant rant by Louis CK: Everything’s amazing and nobody’s happy.

How do you do. Our name is SUE.

Do you want to learn more?

Suppose you want to learn more about how influence works. In that case, you might want to consider joining our Behavioural Design Academy, our officially accredited educational institution that already trained 2500+ people from 45+ countries in applied Behavioural Design. Or book an in-company training or one-day workshop for your team. In our top-notch training, we teach the Behavioural Design Method© and the Influence Framework©. Two powerful tools to make behavioural change happen in practice.

You can also hire SUE to help you to bring an innovative perspective on your product, service, policy or marketing. In a Behavioural Design Sprint, we help you shape choice and desired behaviours using a mix of behavioural psychology and creativity.

You can download the Behavioural Design Fundamentals Course brochure, contact us here or subscribe to our Behavioural Design Digest. This is our weekly newsletter in which we deconstruct how influence works in work, life and society.

Or maybe, you’re just curious about SUE | Behavioural Design. Here’s where you can read our backstory.

sue behavioural design
18/02/2022

Eight wicked opportunities for Behavioural Designers

By All, Behavioural Science Insights

There are many fascinating areas that could greatly benefit from Behavioural Design Thinking. Because in every field, understanding human behaviour provides opportunities for behaviour change. Here are 8 domains where behavioural designers can make a profound mark in 2022.

Behavioural Design Domains

The other day someone asked me for a proper definition of Behavioural Design. This is the best one I could come up with:

Behavioural Design is a structured method for turning deep human understanding into experiments for behavioural change. 

You can apply this method to basically every domain involving humans: customer behaviour, citizen behaviour, company behaviour, employee behaviour, market behaviour, family behaviour, etc…

If there’s one thing that 2021 taught us, it would be the total underappreciated importance of  understanding behavioural change. Governments around the globe have been struggling to find the right interventions to motivate their citizens into collective action to beat the virus. So many well-intended measures to ban COVID are being met with deep hostility or sheer indifference.

The behavioural design challenge of triggering collective action to beat the virus is the biggest behavioural design challenge of the year. But there are many more fascinating areas that could benefit greatly from Behavioural Design Thinking. Here is our list of 8 domains where behavioural designers can make a profound mark in 2022. In random order:

Challenge 1: Redesign Policy-Making and policy implementation.

The goal of policy-making is to influence the behaviour of stakeholders in society, from companies to citizens. However, the problem with many policies is that they are based on a poor understanding of how people actually behave. Quite often, bad policies are born out of moral judgements (e.g. ‘unemployed people are lazy’, or ‘deregulate companies and leave everything to the job creators’, or ‘you are guilty unless you can prove otherwise’ ).

Behavioural Design could both help in the design process of policies, as well as in the implementation phase. In the design phase, behavioural designers could advise policy-makers which interventions they should choose. More importantly, they can reveal both the intended and unintended consequences of each intervention and the perverse incentives that are often invisible to the policy-maker. In the implementation phase, behavioural designers could set up multiple pilots to determine which combination of interventions yields the highest results.

Challenge 2: Redesign Housing

We’re in the midst of a housing crisis. Abundant access to cheap capital, combined with high demand and tight rules for building, sparked a perfect storm on the housing market. Add to this the growing need for migrant workers and the resistance in many communities to build houses for them.

One of the biggest solutions is to think outside of the box: How can we re-think the way we build communities? How can we design flexible housing concepts that offer not only a roof and a bed, but also a sense of belonging and community? We urgently need to re-think the idea of home and inspire people to embrace these new ideas.

Want to shape behaviour and decisions?

Then our two-day Fundamentals Course is the perfect training for you. You will learn the latest insights from behavioural science and get easy-to-use tools and templates to apply these in practice right away!

Download the brochure

Go ahead, it’s completely free of charge!

Challenge 3: Redesign Marketing and Sales

I think there are two major opportunities for behavioural designers in marketing and sales. The first one is to challenge the “customer-centric” mantra and replace it with “human-centred” thinking. Companies that aim to innovate in a customer-centric way could greatly benefit from Behavioural Design Thinking for having a far more granular understanding of the goals, barriers and problems of the user.

The second opportunity is to improve digital marketing. Digital marketing is obsessed with tactics and not with psychology. A better understanding of how the psychology of influence works could dramatically improve the quality of digital marketing.

Challenge 4: Productivity and Creativity

The Behavioural Design Method is a highly structured creative process to facilitate the seamless transition from insight to strategy to execution. By integrating research, strategizing, prototyping and testing in a step-by-step process, we are able to make meaningful processes at speeds that most teams are unfamiliar with. The Behavioural Design Sprint yields a 10x faster and 10x better result than a regular innovation process, where research, strategy, concepting and execution are seperate processes. Furthermore, the Behavioural Design Sprint contains rules and tactics that are deliberately designed to yield the highest levels of creative output from of a group.

BONUS: free ebook 'How to convince someone who believes the opposite'

Especially for you we've created a free eBook 'How to convince someone who believes the opposite'. For you to keep at hand, so you can start using the insights from this blog post whenever you want—it is a little gift from us to you.

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Challenge 5: Redesign Finance

Regulators put more and more pressure on financial companies to use behavioural science for helping their clients make better financial decisions. Behavioural Science applied to finance is hot. Both our saving and our investing behaviours are deeply flawed and biased. And, by simply looking at the crypto ads at sports events, exploiting our irrational desires for easy money is a great business model. The business model of banks are also under attack by new digital disruptors. This fuels a lot their appetite for behavioural intelligence on how to attract and retain customer. 

Challenge 6: Redesign Healthcare:

Healthcare is booming. Parallel with radical innovation in biotech; we are also witnessing a boom in preventive healthcare. Helping people build exercise habits, healthy eating habits, losing weight habits, mindfulness habits, and the list of smart apps and services that promise salvation are endless. The holy grail of design and innovation in healthcare is to figure out how to help people overcome bad habits. And the number one behavioural challenge is to help them stick to the new routine. 

Challenge 7: Redesign Sustainability & Climate Action

We have been writing a lot about this topic lately. We all want to live on a healthy, sustainable, green planet. We all feel we need to do something, but we collectively don’t change our behaviour for the simple reason that we look around and don’t see other people changing theirs. This is what behavioural scientists call a coordination problem. There are many opportunities for behavioural designers to develop ways to nudge people into positive green choices. And to frame the sustainable option is the most attractive one. Our favorite example is the Beyond Burger. It doesn’t say: “We are a vegetarian hamburger”. It says: “We have created the juiciest burger ever. It’s beyond meat. Oh and by the way: It’s plant-based”.  

Challenge 8. Redesign Personal Wellbeing and Happiness 

We suck at doing the things that actually make us happy. We think we will get happiness from buying stuff, fulfilling our dreams and desires, and achieving success. But the science of happiness reveals something different. We increase our overall happiness levels from things like learning and experimenting, from having deep and meaningful relationships, from being surrounded by people who challenge us to become better, and from getting genuinely good at something. Happiness is mainly the effect of behaviour and context. We get happier by pursuing our curiosity. We get happier from surrounding ourselves with the right people. The science of happiness holds many promises for Behavioural Designers to set up experiments to explore and re-ignite their curiosity.

Summary

As you can see there are many opportunities to apply Behavioural Design. In this blog we have only covered 8 wicked opportunities. But there are many more! Which opportunity are you going to use in 2022?

Tom De Bruyne

How do you do. Our name is SUE.

Do you want to learn more?

Suppose you want to learn more about how influence works. In that case, you might want to consider joining our Behavioural Design Academy, our officially accredited educational institution that already trained 2500+ people from 45+ countries in applied Behavioural Design. Or book an in-company training or one-day workshop for your team. In our top-notch training, we teach the Behavioural Design Method© and the Influence Framework©. Two powerful tools to make behavioural change happen in practice.

You can also hire SUE to help you to bring an innovative perspective on your product, service, policy or marketing. In a Behavioural Design Sprint, we help you shape choice and desired behaviours using a mix of behavioural psychology and creativity.

You can download the Behavioural Design Fundamentals Course brochure, contact us here or subscribe to our Behavioural Design Digest. This is our weekly newsletter in which we deconstruct how influence works in work, life and society.

Or maybe, you’re just curious about SUE | Behavioural Design. Here’s where you can read our backstory.

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12/01/2022

Behavioural Finance: how to get wealthy in 2022?

By All, Behavioural Science Insights

First and foremost, I wish you and your family a prosperous 2022, free of worries. We tend to wish each other happiness and luck in the new year. However, the effect of the absence of stress and anxiety – the other side of the happiness medal – will have a much more profound impact on your overall wellbeing. 

 

One of the best ways to achieve a worry-free state of mind is not having to worry about whether you’d be able to take care of yourself and your loved ones. There’s strong scientific evidence that poor people tend to make things worse for themselves. They consistently make irrational and impulsive decisions because of the stress levels they experience. 

 

So in this blog, I want to explore some of the key lessons from the world of behavioural finance on how to make better financial decisions, build up wealth and achieve financial peace of mind. I want to explore which simple behaviours and habits could profoundly impact your economic wellbeing.

Wealth and status signaling

It’s always interesting to start our search for insights by looking at the behaviour of “extreme users“. Extreme users are people on both ends of the spectrum: One exciting category is people with modest incomes who became financially independent at age 32. An opposite group of extreme users are the investment bankers, with huge salaries who personally went bankrupt only two months after losing their jobs.

There’s only a slight correlation between how much you earn and how wealthy you can become.

So what differentiates the wealthy people from the poor ones, even though many poor people look rich at first sight? A law in behavioural science called Parkinson’s Law describes the phenomenon that ‘expenses always tend to match income‘. No matter how much more revenue we get, we will start spending more and end up with precisely the same amount of money to set aside. Which, in the end, turns out to be way too little to support the lifestyle.

A big chunk of these increased expenses has to do with status signaling. We love to signal to others and ourselves that we’re climbing the social ladder. So we invest heavily in brands, hobbies, and the stuff that allow us to signal that status to others. Investment bankers during the financial crisis of 2008 – the self-proclaimed masters of the universe – went bankrupt in a matter of months because after losing their jobs, they realised that the private schools, the big house, and the two Maserati’s drained the little financial reserves they had.

Get more detailed information.

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Being rich is not the same as being wealthy.

One of Morgan Housel’s pearls of wisdom in the book “The Psychology of Money” is that the difference between being rich and being wealthy is that you don’t see wealth. Rich people drive expensive cars. Wealthy people have put that money in investment funds, so the money starts working for themselves.

One of the fascinating communities on the internet is the FIRE movement. FIRE stands for Financially Independent / Retire Early. They apply a geek and hacker mindset to create financial independence for themselves. One of the fascinating people in this community is Mr Moneymoustache, a Canadian guy who retired at 30. He lives off the interests of his financial decisions and lives a pretty wealthy lifestyle. Check out the video below to listen to his story.

 

Five behaviours that differentiate wealthy people from others. 

1. Spend less on stuff.

“Spend less on stuff” might sound trivial, but the number one behaviour that leads to financial independence is to take the money you spend on stuff you don’t need – and that doesn’t make you happy – on stuff that makes money for you, like stocks, bonds, a business or a house you can rent out. Once you understand the dynamics of status signalling and how much of your income you waste on stuff that has no other purpose than to signal your prosperity, you’d be surprised how much more you will end up saving at the end of the month.

It reminds me of the brilliant quote that is attributed to many different people:

“We buy things you don’t need, with money we don’t have, to impress people we don’t like.”

Owning stuff doesn’t make you happy. The direct route to serotonin, the gateway hormone for wellbeing and happiness, is the feeling of achievement and self-importance you gain from learning, creating and mastering things. We wrote about this in a previous blog.

2. Don’t try to beat the market. Instead, follow the market. Invest in index funds

Morgan Housel refers to a fascinating study in his book. About 85% of all professional stockbrokers didn’t beat the market over a decade ending in 2019. Let this sink in for a moment. We trust our money to people we pay hefty fees that have no better qualities in predicting the market than dart-throwing monkeys.

Warren Buffett, the most successful investor on the planet, recently said that he would put all his money in Index Funds if he did it again. These funds spread their money in the 500 best-performing companies on the stock exchange. If you do this, you will always win.

The enormous psychological trick is to resist selling in a panic when the stock exchange is performing poorly or when a bubble bursts and a crisis occurs. If you zoom in on today versus yesterday, your money will sometimes take a blow. However, if you zoom out over decades, the stock exchange follows a spectacular growth curve.

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3. They understand compound interest. 

Albert Einstein once called compound interest the Eighth Wonder of the World. It’s pretty hard for people to understand the magic of compound interest. Still, the simple idea is that if you wait long enough, the accumulated interest on your interest grows exponentially. If you put 100 dollars per month on your investment account at an average of 5% interest and do this for five years, you will have invested 6000 dollars, but the compound interest would be 7573 dollars on top of that 6000 dollars.

That’s why having money in your savings account is such a terrible idea. Inflation decreases the value of that money over time, while low-interest rates don’t get the compounding effects to kick in. The most intelligent strategy is to maintain a savings account for unnecessary expenses and put everything you don’t need today in a long term investment fund.

4. They understand the power of default options.

Most people – like me – hate to think about money or get to deal with cash. Smart people set rules that would directly transfer the money they have left at the end of the month into their investment fund. This way, they don’t need to spend the mental energy to do the right thing. If the money’s there, it will be invested. If you had spent more money on other things, your investment contribution would be lower for a month.

5. They are hyper-rational in times of stress.

Being hyper-rational means, you will have to learn to get comfortable with loss. Morgan Housel from ‘The Psychology of Money” wrote:

The S&P 500 increased 119-fold in the 50 years ending 2018. All you had to do was sit back and let your money compound. But of course, successful investing looks easy when you’re not the one doing it.

“Hold stocks for the long run,” you’ll hear. It’s good advice. But do you know how hard it is to maintain a long-term outlook when stocks are collapsing? Like everything else worthwhile, successful investing demands a price. But its currency is not dollars and cents. It’s volatility, doubt, uncertainty, and regret – all of which are easy to overlook until you’re dealing with them in real-time.

The market is performing lower than a previous all-time high peak most of the time. In that period, you are losing money. But if you wait long enough, you will have outlived enough market peaks to make a great return. All you need to do is to keep your nerves and stay patient.

One of the worst ideas is to look at the performance daily through all these new apps. They will make you nervous, and you’ll be inclined to act and make terrible financial decisions.

Tom De Bruyne

Cover visual by Executium on Unsplash

How do you do. Our name is SUE.

Do you want to learn more?

Suppose you want to learn more about how influence works. In that case, you might want to consider joining our Behavioural Design Academy, our officially accredited educational institution that already trained 2500+ people from 45+ countries in applied Behavioural Design. Or book an in-company training or one-day workshop for your team. In our top-notch training, we teach the Behavioural Design Method© and the Influence Framework©. Two powerful tools to make behavioural change happen in practice.

You can also hire SUE to help you to bring an innovative perspective on your product, service, policy or marketing. In a Behavioural Design Sprint, we help you shape choice and desired behaviours using a mix of behavioural psychology and creativity.

You can download the Behavioural Design Fundamentals Course brochure, contact us here or subscribe to our Behavioural Design Digest. This is our weekly newsletter in which we deconstruct how influence works in work, life and society.

Or maybe, you’re just curious about SUE | Behavioural Design. Here’s where you can read our backstory.

sue behavioural design
05/01/2022
The Forces That Shape Behaviour Change

The forces that shape behaviour change

By All, Behavioural Science Insights

In this blog, I want to explore the different forces that shape behaviour change. Whenever you want to design a strategy that aims at changing behaviour, you have to ask yourself three questions: 

  • Macro-forces: What are the trends I can tap into?
  • Meso-forces: What are the needs I can tap into?
  • Micro-forces: What are the biases I can tap into?

1. The macro forces: What are the trends I can tap into?

The world is changing at an accelerating speed. It took only 66 years between the first flight of the Wright brothers and Neil Armstrong, setting the first step on the moon in 1969. It only took 30 years for China to transform from a developing country into the biggest economy in the world. The iPhone is only 14 years old, kickstarting an era of ubiquitous access to knowledge, services, social capital and radical new ideas for commerce, creating companies like Uber, Netflix and Amazon.com. Over the past few decades, China alone has lifted hundreds of millions of citizens to become part of the middle class. And middle-class people want stability and want to consume, travel and be entertained. 

These macro forces have an enormous impact on behaviour change.

If you want to introduce an innovative offering into the market, it matters a lot if you’re able to tap into these trends.

If you are Carsharing company Sharenow, it matters a lot if you can tap into a big inner-city market of people who don’t own a car and feel perfectly comfortable hiring and unlocking one with their smartphone. What seemed unfamiliar five years makes perfect sense today. We’ve seen an interesting trend in the Netherlands during COVID of families leaving the metropolitan cities and moving into the countryside or smaller communities. This trend is an exciting opportunity to tap into e-bikes and electric cars. Another emerging trend that COVID accelerates is that every entrepreneur is thinking hard about designing the optimal environment for combining physical presence with distributed working. 

When you think about introducing a new product or service into the market, it’s vital to understand the trends. Successful innovators understand that demographic, technological, cultural and economic trends generate new opportunities.  

2. Meso-Forces: What are the needs I can tap into?

The second category of forces that shape behaviour are needs and motivations. They drive behaviour in unconscious yet essential ways. All of us have deeply rooted desires: The desire for love, recognition, competence, social status, belonging, adventure, purpose, protection and excitement. Every brand in the world taps into these deeper needs: 

  • BMW taps into the desire to project masculinity and social status
  • Volvo taps into the desire for security and protection
  • Beer brands all tap into the desire for friendship and connection
  • Business schools tap into the desire for competence and social status.

There’s a saying in Silicon valley that every successful tech company taps into one of the seven deadly sins. Understanding these drivers, motivations or Jobs-to-be-Done is essential for designing interventions for behavioural change. If you can’t tap into an existing desire, your intervention will probably fail. The Behavioural Design Canvas is a great tool to uncover these forces. 

Want to shape behaviour and decisions?

Then our two-day Fundamentals Course is the perfect training for you. You will learn the latest insights from behavioural science and get easy-to-use tools and templates to apply these in practice right away!

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3. Micro-Forces: What are the biases I can tap into? 

The third category of behavioural forces is micro-forces. Let’s suppose you uncovered a behavioural trend (say: middle classes flock to cities in hordes and can’t afford a car). You also crafted a proposition that taps into a deep desire (e.g. you offer luxury electric vans to go on weekend trips in the countryside to fulfil the desire for adventure and social status).

The big question from a behavioural change perspective is now: How do I trigger people to buy what I’m offering?

To become successful, you will need to find ways to get people to see the message, boost the motivation to try it, reduce doubts and uncertainties and make it as easy and frictionless as possible to order it. In the case of our electric van, you will boost motivation through social proof, reduce anxiety by demonstrating the comfort of sleeping in the vehicle in a demo video or guaranteeing 24/7 support, including insurance. You might want to look for hot trigger moments and advertise on billboards near busy roads, where traffic jams increase people’s motivation for escapism.

For this layer, a great tool to think about designing interventions is our SWAC-tool. In the SWAC-model you will find many principles from the science of influence to spark behaviour (S), to boost the desire to want (W) something, to help people to be able, so they can do it (C), and make them do it again and again (A).

Summary

Designing a strategy for behavioural change requires you to think in three layers. True innovators tap into emerging trends. They see where the puck is going. They also understand the psychological needs that drive behavioural change. And they take great detail in figuring out the details to get people actually to change their behaviour. 

Tom De Bruyne

Cover visual by Kelly Sikkema on Unsplash.

BONUS: free ebook 'How to convince someone who believes the opposite'

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How do you do. Our name is SUE.

Do you want to learn more?

Suppose you want to learn more about how influence works. In that case, you might want to consider joining our Behavioural Design Academy, our officially accredited educational institution that already trained 2500+ people from 45+ countries in applied Behavioural Design. Or book an in-company training or one-day workshop for your team. In our top-notch training, we teach the Behavioural Design Method© and the Influence Framework©. Two powerful tools to make behavioural change happen in practice.

You can also hire SUE to help you to bring an innovative perspective on your product, service, policy or marketing. In a Behavioural Design Sprint, we help you shape choice and desired behaviours using a mix of behavioural psychology and creativity.

You can download the Behavioural Design Fundamentals Course brochure, contact us here or subscribe to our Behavioural Design Digest. This is our weekly newsletter in which we deconstruct how influence works in work, life and society.

Or maybe, you’re just curious about SUE | Behavioural Design. Here’s where you can read our backstory.

sue behavioural design
07/10/2021
Behavioural Economics 101: We’re Only Human.

Behavioural economics 101: We’re only human.

By All, Behavioural Science Insights

Behavioural economics, maybe you have asked yourself once or twice, what’s all the fuss about? Why is everybody talking about us not being rational and capable of making good decisions all of a sudden? Is Behavioural Design something you should add to your competence gamma, and if yes, why so? This is a short introduction to behavioural economics. Meant to bring you up-to-speed with what everybody seems to be talking about right now in a simple way. In fact, I could summarise what’s in it for you in one sentence: 

If you want more control over successful outcomes, you have to understand you are dealing with humans, not econs. 

 

behavioural Design

The difference between economics and behavioural economics

Okay, I admit this sounds vague without any background. Basically, it comes down to a difference in paradigm on decision-making between economists and psychologists that gave birth to a beautiful cross-over between the two: behavioural economics (also known as behavioural psychology). What is it all about?

Let’s start with a problem we have probably all faced. Many new products, ventures, policies or innovations of any kind fail because they don’t take a deep understanding of human decision-making into account. They are inside-out, not inside-in driven. Therefore, innovations are often technological high-end, make things more cost-effective or offer different unique selling points, but they don’t start at the end. How do people choose for your offering? What psychological effects does pricing have? What’s, is the impact of social influence? Does the way we display products or frame policies affect decision-making? Which unconscious psychological forces influence our decision-making? Do those forces make objective sense?

According to an economist, the answer is:

  • Decision-making is rational.
  • People make a cost-benefit analysis.
  • The utility is a critical driver of any choice we make.

However, if you have ever had any regret after purchase or not making a purchase, you know that economist rule out one crucial factor: emotion. Emotions from within and emotions attached to what we think others think or expect from us. We are not 100% rational (or econs); we are filled with emotions and sometimes make decisions that are a far cry from most optimal for ourselves or our future.

Behavioural economics put emotions into the economic equation.

Bounded rationality: critical concept of behavioural economics

Furthermore, economists propose people always have all information at hand to make informed decisions. But is that true? First of all, we are bombarded with information all day long via multiple channels and media. No sane person can process all this rationally. Secondly, do we truly have all information to make informed decisions, for example, about our future? This is where we really have to make crucial decisions, after all. Buying an ice cream is not so hard but deciding upon your mortgage or pension plan is a whole different ballgame. Do you have all the information at hand to make a 100% rational decision here?

For example, do you know exactly your income level in 5, 10 or 15 years? Do you know what the inflation ratio will be in the same periods? Do you know what your health level will be like? Will you be able to work full-time, part-time or be out of work?

Rationality requires completeness of information, computational abilities, consistency in decision-making and cognitive skills (ability to think through a problem unemotionally). No human scores 100% on all these factors. So, what do we do when faced with a decision? We rely on short-cuts and social cues in our context and past experiences. We are only human, after all.

Taking the human, so-called bounded-rational part of us into the decision equation is what behavioural economics is all about.

Behavioural economists have researched and unlocked these human tendencies for years. Behavioural Designers take this behavioural science to design environments that help shape positive behaviours and choices of people. In fact, by using the exact science and combining it with design and creativity, we can create tangible products, services, policies, or organisations that help people make better decisions for their health, wealth and happiness.

Behavioral Design is applied behavioural economics.

Want to shape behaviour and decisions?

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Behavioural economics: a game of choice architecture

One final note: How can we design environments that shape positive behaviours and better choices? Often, we think we need disclosure. Make sure you provide people with all the required information to help them make their informed decision. Unfortunately, that again is an econ approach to matters. Even if you help people with the information they need for a particular decision, we as humans often don’t use it. Most of the times, we know what is good for us but don’t act upon it.

For example, we all know exercising is good for us, and I guess we have all made a plan to do some form of exercise one day or the other, but most of us either started and stopped or are still procrastinating. This is known as the planning-action gap or intention-action gap. This is not new, of course, as we see in general three tools being applied to get humans into action:

  1. Restrictions (you cannot buy alcohol under the age of 18)
  2. Incentives (if your child attends school five days a week, you will get more child support)
  3. Selling (convincing people by telling them about benefits or USPs)

Behavioural Designers use another tool: choice architecture. We take humans and a deep understanding of their decision-making processes as a starting point to design a context that triggers better choices and behaviours. We do it using our SUE | Behavioural Design Method©, a highly structured, practical approach to turn human insights into strategies and ideas that influence better choices and shape positive behaviours. Basically, turning the breakthrough science of human behaviour into practical applications. What this results in, you can check out on our success stories page.

Summary: What’s behavioural economics all about

For now, I just want to wrap it up with the three things to remember when designing better choices and behaviours:

  1. You are dealing with humans, not econs
  2. Humans use cues in their context to make decisions
  3. You need to be aware of the intention-action gap

Taking these three principles as starting point already jumpstarts you in thinking as a behavioural designer. And understanding what all the fuss about behavioural economics is about (and how important it is to get a grip on success).

 

Astrid Groenewegen

 

Cover visual by Red with the Red Hat on Unsplash.

BONUS: free ebook 'Behavioural Economics: the Basics'

Especially for you we've created a free eBook 'Behavioural Economics: the basics'. For you to keep at hand, so you can start using the insights from this blog post whenever you want—it is a little gift from us to you.

Download ebook

Go ahead, it’s completely free of charge!

How do you do. Our name is SUE.

Do you want to learn more?

Suppose you want to learn more about how influence works. In that case, you might want to consider joining our Behavioural Design Academy, our officially accredited educational institution that already trained 2500+ people from 45+ countries in applied Behavioural Design. Or book an in-company training or one-day workshop for your team. In our top-notch training, we teach the Behavioural Design Method© and the Influence Framework©. Two powerful tools to make behavioural change happen in practice.

You can also hire SUE to help you to bring an innovative perspective on your product, service, policy or marketing. In a Behavioural Design Sprint, we help you shape choice and desired behaviours using a mix of behavioural psychology and creativity.

You can download the Behavioural Design Fundamentals Course brochure, contact us here or subscribe to our Behavioural Design Digest. This is our weekly newsletter in which we deconstruct how influence works in work, life and society.

Or maybe, you’re just curious about SUE | Behavioural Design. Here’s where you can read our backstory.

sue behavioural design
15/05/2021

How to make better financial decisions: mental accounting

By All, Behavioural Science Insights

Did you know we treat money differently depending on where it comes from, where it is kept, or how we label it? In this blog post, I want to introduce you to the concept of mental accounting. A fascinating psychological phenomenon affecting many of our financial behaviours, such as the way we spent and save money or value things for which we’ve paid money. Understanding more about mental accounting could help us design better financial decisions and behaviours. And understand why some people seem to make financial decisions that don’t always seem to make sense or be in their best interest.

Mental accounting: How humans violate the economic theory

Why mental accounting is so fascinating is that it simply explains why 1 euro isn’t always 1 euro. From an economic theory perspective, this might sound foolish. The value of 1 euro and another euro on the same day is equal. We have a whole international money rate system in place that can tell you the exact worth of your euro at any precise point in time. In four digits. Also, economists believe that it shouldn’t matter if you have a 100-euro banknote or five 20-euro banknotes. It is the same amount of money, and you will spend it the same way; after all, they are exchangeable. However, psychological research has shown that humans often violate this rational approach to money. 

This works may be easiest explained by an example described in the landmark paper of Richard Thaler (1), the author of the influential book ‘Nudge‘ and a Nobel prize laureate. Let’s say you have bought a ticket to a concert and it cost you 50 euros. You made your way to the concert venue, you have dressed up nicely, you have arranged a babysitter, and if you say so yourself: you look good. You are more than ready for the evening out that you have anticipated for weeks. You get to the entrance, reach into your pocket to find out that you have seemed to have lost your ticket. After going through all the stages of grief: denial, pain, anger, depression, acceptance, finally, hope kicks in as you see the ticket booth is still open. You quickly head over to the ticket booth to find out you don’t get your ticket reimbursed but have to pay another 50-euro for a new ticket, which is luckily still available.

Okay, same scenario, but just a bit different. You want to see that same concert, again you dress up nicely, sprayed on a bit of cologne because it is a special night out, after all, the same babysitter is there to attend to your kids, and you head over to the concert venue. When you go over to the ticket booth to buy yourself a ticket, you realise the 50-euro banknote you had put in your pocket to pay for the ticket fell out. After almost panicky going through all your pockets, reality sinks in. The 50 euros are gone. Luckily, the time tickets are still available; you have to get out another 50 euros to buy the ticket. 

The interesting question is would you do so in both situations? From an economist perspective, the exact same situation: You have lost 50 euros, and you have to pay another 50 euros to attend the concert. So, there shouldn’t be a difference in the decision you make. However, Thaler’s research found that people in the first scenario are far more likely not to buy a second ticket, whereas people in the second scenario do. 

If you lose cash, it turns out you’re willing to buy a ticket. If you lose a ticket, you do not want to buy a second ticket.

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Mental accounting: What is it, and how do people do it?

Mental accounting explains this story. What is mental accounting? It is the idea that people tend to label money. And the moment you label money differently, it gets spent differently. 

People tend to label money. And the moment you label money differently, it gets spent differently.

 So, how do people mentally account? Well, there are several different ways in which people put money into different psychological categories: 

  1. You could mentally account by purpose. You can allocate money to a specific product or service, or objective. This is what happened with the concert ticket. It was assigned to the concert, losing the ticket felt we had lost out on the concert in our mental account. You think you are already in the ‘red’. You are not going to make it worse by spending even more money on the same product. But allocating money to savings is another way to mentally account by purpose.
  2. You could mentally account by time. You could say I will spend X amount per week or budget that many euros each month.
  3. You could mentally account as a function of how you have earned money. If you have put in many hours of hard work to make your money, you will spend it differently if you have earned it by winning a lottery. 

Mental accounting: The sunk cost effect

Let’s take a look at another way mental accounting influences our behaviour. Let’s get back to the concert. Let’s say you have the ticket, only this time there is a difference in how you acquired that ticket. In the first scenario, you have prepaid for it; in the second scenario, the ticket was a gift. Imagine this situation, on the evening of the concert, there is this raging blizzard storm, and the concert is a two-hour drive away from your home. Would you go to the concert in both scenarios? If you would rationally think about it, you wouldn’t go in both situations. It is much safer to snuggle up comfortably on your couch. However, most people who have prepaid the ticket will make an effort to drive a few hours through a blizzard storm to attend a concert that they (only) paid $20 for. This is caused by a phenomenon known as sunk cost fallacy. 

If people have spent effort, time or money on something, they will commit to the behaviour related to it; otherwise, they feel they lose out.

The moment you spend money to consume something in the future, our sunk cost effect of mental accounting kicks in. The moment you prepay, you have a deficit in your account. If you cannot consume, then you have to close your account in red. It’s like making a loss. People don’t like making losses, so they rather get what they paid for than perhaps make a better decision not to consume something. For example, if people spent 60 euros on a four-course dinner, but they are already full at the third course, most of them will eat dessert anyway. I paid for it! It feels like a loss not to go or not finish all your plates.

Another example made famous by Richard Thaler is about a man who joined a tennis club and paid a $300 membership fee for the year. After just two weeks of playing, he develops a case of tennis elbow. Despite being in pain, the man continues to play, saying: ‘I don’t want to waste the $300.’ (2)

The sunk cost effect becomes a huge motivator of consumer behaviour.

However, the intensity of the sunk cost effect isn’t always the same; it depends on how closely the cost and benefit are connected. Let me give you an example of how this works. Let’s say you love skiing and you have booked yourself a trip to the French Alps. You got yourself a four-day ski pass giving you access to all the ski lifts for the four days at the costs of € 160. You enjoyed the first three days, and then all of a sudden, the weather conditions change dramatically: Big snows, fog, heavy winds. No skiing conditions that will bring joy. The same scenario, but now you have bought four separate tickets of € 40 with which you can hit the slopes for four days. In which situation would you go out skiing on the fourth day?

This was researched (3), and it showed that people who bought the one ticket would be more prone to stay in. However, the people who had four separate tickets were far more inclined to go out and ski anyway. They felt the €40 burn in their pocket (cost) and want to experience the benefit (skiing). The all-inclusive ticket is, in fact, a form of price bundling. This leads to a ‘decoupling’ of costs and benefits. The effect being it reduces someone’s attention to sunk costs and decreasing a consumer’s likelihood of consuming a paid-for service. In other words,

Price bundling affects the decision to consume.

Now, it becomes interesting how we can use these insights to design for better choice and positive behaviour.

BONUS: free ebook 'Mental Accounting: How Money Works in our Mind''

Especially for you we've created a free eBook 'Mental Accounting: How Money Works in our Mind'. For you to keep at hand, so you can start using the insights from this blog post whenever you want—it is a little gift from us to you.

Download ebook

Go ahead, it’s completely free of charge!

Mental accounting: Using it for better decision-making

Being aware of the human tendency to engage in mental accounting and being affected by the related sunk costs effect can help us develop behavioural interventions that can help people make better decisions. I want to end this blog post with an example of how this might work. 

A lot of people find it challenging to spend less money than intended. You can make this easier for them by partitioning. How does it work? Let me illustrate this with a real-life example that took place in India. In India, there are quite some low-income households with very little spare cash. Salaries are often paid in cash, making it very easy for family providers to spend it, for instance, in the bar, after a hard days’ work. Still, people also needed money for the children’s upbringing, for example. 

Those households typically earned 670 rupees per week (£6,60 or $11,20), and most families only managed to put aside 5 rupees per week (0,75%) (4). The intervention they did is divide the money into envelopes before handing it over to the beneficiary and partitioning it beforehand. It increased the savings rates to 4% (27 rupees per week)(5). What made it even more successful is putting a visual reminder on the envelopes. So, for example, a picture of their children on the envelope contained money for their upbringing.

You could also use this for yourself. We are also more reluctant to spend money we have already mentally allocated for savings. You can distribute very physically, like the envelopes, but think about labelled jars in which you divide your household money. Viviana Zelizer, a sociologist at Princeton, calls this ‘Tin Can Accounting’ (6). The more digitally savvy translation of this is the digital saving buckets many banks offer nowadays, in which you can allocate your savings to specific goals. It will be harder to withdraw money from an ‘ultimate wedding dress’ or ‘summer family holiday’ bucket than from a general savings account.

Summary

We, as humans, often make very emotional decisions when it comes to money. It largely depends on how we have earned, labelled or how our money is kept, how we will treat money and how we value what we bought with the money. This largely influences our behaviour. A euro isn’t always a euro, and a dollar not always a dollar. It may sound illogical, but it will make perfect sense once you understand the concepts of mental accounting and the sunk cost effect. We need to take these psychological phenomena into account if we want to help people make better decisions.

Astrid Groenewegen

 

Cover visual by Kelly Sikkema on Unsplash.

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sue behavioural design
15/05/2021

How to design a choice: The art of choosing

By All, Behavioural Science Insights

Can we design a choice? In most societies, if there is one value we hold dear, it is our freedom of choice. Having autonomy is a concept that directly speaks to our core as human being. Suppliers of goods and services understand this and have submerged us in an economy of choice that can match everyone’s individual needs. It fits our need for autonomy like a glove. It allows us to be in the driver seat of our own lives. But is it? Is it true? Does abundance help us make better decisions? Does more choice equal more satisfaction? The answer is no. So, the question is: How we can master the subtle art of choosing to shape better decisions and positive behaviours?

How to design a choice: The paradox of choice

Something interesting is going on which choice. It is a paradox, a concept cornered by Barry Schwartz. He describes the paradox of choice as follows:

So, what does this implicate? Is less indeed more? Well, yes and no. In most cases, too many options to choose from isn’t in our best interest. This has to do with our bounded rationality. We, as human beings, cannot make every decision in our daily lives wholly rational or, better put, with focused attention. There are too many decisions for us to deal with to do so.

Just think about your morning. From the moment you heard your alarm go off, you had to decide to turn it off or snooze. You had to decide to stretch or do another roll-over on your side right into that comfy spot that has the perfect temperature; You had to decide to get up or sleep in for just a little bit longer. You had to decide to get dressed right away or get your first coffee in PJ’s first. You had to decide to have coffee indeed, or did you decide to have something else? Or did you decide to go pee first? I have not even begun to talk about the decision to check your phone, turn on the radio, heating or toaster yet. Or the decision to combine all of these with checking your to-dos of the day. And your day has only just started.

These examples all may seem trivial, but they’re not. It is estimated that your brain has to compute about 35.000 decisions a day, from minor ones to bigger ones. Your brain cannot process all of them consciously or with extensive thought; It would simply crash. Therefore, a lot of our decisions are made automatically and unconscious. As Nobel laureates Kahneman and Tversky have discovered, we have two operating systems in our brain: A deliberate and an automatic one. And the automatic one has the upper hand, which is a good thing. It simply shows our brain is wired to help us navigate as with as little effort as possible through life.

How to design a choice: The phenomenon of choice overload

Now back to too many options to choose from. Why does it work against us?

First of all, having too many options causes apathy simply as it requires too much cognitive activity. This can lead to decision fatigue or even not making any decision at all. This phenomenon is called choice paralysis (also referred to as choice deferral).

There is a cognitive bias related to this phenomenon called regret aversion. When people anticipate regret from a choice, they tend to not act at all. This can have severe consequences. A meta-analysis has shown that people’s behaviour to accept medical treatments is influenced more to avoid regretting making the wrong choice than it is influenced by other kinds of anticipated negative emotions. Therefore, when designing a choice, you have to be aware that the number of options you present to someone also enhances the probability of choice regret. Which in return enhances inertia. In the mentioned example, this has shown to seriously impact behaviour concerning health.

Secondly, when we have more options to choose from, we tend to make worse decisions as we tend to rely even more on our system 1 cues, which can be biased. Examples are our tendency to stick to defaults, recommendations, or reliance on peer choices. Have you ever said in a restaurant: I am having what he/she is having’? Well, probably this was caused by option overload on the menu. Research showed what happens if there are either six or thirty food options on a menu. In the first case, people tend to choose for themselves. In the second case, they choose what their partner chooses.

Thirdly, we tend to make more conservative choices to minimise the potential for regret.

And finally, the more options to choose from we have, the less satisfied we are with the choice we did make. The more options, the more we feel we ‘missed out on.’ In his book, Schwartz described two experiments. One in which people had to choose between 20 varieties of jams and another could choose between six models of jeans. The experiment showed that the more choices people had, the less satisfied they were with their final choice. This matches Sheena Iyengar’s research, professor at the Columbia Business School and author of ‘The Art of Choosing’, which taught us that:

‘The existence of multiple alternatives makes it easy for us to imagine alternatives that don’t exist. And to the extent that we engage our imaginations in this way, we will be even less satisfied with the alternative we end up choosing. So, once again, a greater variety of choices actually makes us feel worse.‘

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What works to design a choice: Bounded choice

So, what works then to design choice in a way it shapes positive behaviours? Next to the concept of bounded rationality, there is the concept of bounded choice (which I prefer to call bounded options as you may have guessed). Let’s look back at the paradox of choice again. It shows that having too many choices has been associated with feelings of unhappiness.

 

A greater variety of choices actually makes us feel worse.’

But on the other hand, it works the other way around too, and on the more positive side of things:

Limiting the number of options can lead to more satisfying choices.

Researchers did a meta-analysis comparing 99 scientific studies on choice overload. They found that choice reduction is most effective when:

  1. When people want to make a quick and easy choice
  2. When the product is complex
  3. When it’s difficult to compare alternatives
  4. When consumers don’t have clear preferences

Before we design a choice: Ethical considerations

From an ethical point of view, it is good to make a distinction between options and choice. We feel it can be a very effective Behavioural Design to help someone make better decisions by limiting an option, but you shouldn’t forbid a choice. So, in fact, you design choice by working with options. This is the essence of nudging. Let me illustrate the difference with an example.

Limiting the number of options or take out some options altogether has, for example, proven to be very beneficial in helping people who are struggling with being overweight. One very effective way to fight this is to change eating habits. A lot of interventions have been developed and tested to help people change their eating patterns. From adapting food labels to more affective nudges, for example, by promoting the taste instead of a particular food’s healthiness. From a meta-analysis, aggregating data from almost 96 behavioural experiments on successfully promoting healthy eating, the most effective intervention turned out to change the plate and cup size Taking an option (in this case, large 16 oz. cups) helped people eat less and still feel satisfied. Although you take away options with this intervention, you don’t take away the freedom of choice. People always have the choice to go for a refill or buy a second portion. Only, it turned out not many people do. By simply reducing options, you make it easier for people to change their behaviour.

Just one more argument against limiting freedom of choice (instead of options). We, as humans, are wired to want a sense of control and closely tied to this sense of control is our need for freedom and autonomy. If you do forbid a choice, you may, therefore, very well encounter adverse effects. People might start avoiding, ignoring or counterarguing. This is also why warnings backfire. We don’t like to be told what to do. It crosses our innate need for freedom. And if people are pushed into doing something, they push back. How many times did you change your mind or behaviour in your adult life because someone demanded you to do so? My parents and teachers still had that influence on me, but in daily life when we want to influence people, we need to allow for agency.

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Designing a choice: Behavioural change interventions

Time to turn human understanding into practice. What can we do to help people make better decisions and be more satisfied? I want to show you five behavioural intervention strategies to design for better choices:

Limit or remove options
Terminate products or services that are not doing well.

Organise options
Make categories or ease people into choosing from more options.

Frame options
Present information to someone in a way choosing becomes easy.

Help people to understand their personal preferences
Helping them limit options to the ones that fit them.

Offer expert advice
This way, people can ask a specialist to help them choose, outsourcing the decision.


Limit or remove options
How far you should limit options depends on the behaviour you are designing. If you want someone to click on a button on your website, it is better to have one clear option. If you want someone to pick a health regimen, it works to have three options, with your preferred option positioned in the centre, as people tend to gravitate to the middle. If you want someone to buy a specific product, it works to show two options of which the left product (in Western countries) is a decoy that is priced much higher than your target product. This higher-priced product will act as a mental anchor that makes people feel your product is a perfect deal. These are best practices from behavioural science, but it is always a matter of experimenting with what works best in your situation. One thing remains the same for every situation: Less is always more when shaping decisions and behaviour. 

Organise options
However, you can make people more capable of choosing from more options. You just have to do it gradually. A research team at a German car manufacturer ran an experiment with the manufacturer’s online car configurator. Potential clients using the configurator had to choose from 60 different options to configure their entire car. Every option again consisted of sub-options. For instance, to pick your car colour, you had 56 colours to choose from, picking your engine also four options and so on. It seemed logical to have people select an ‘easy option first. For example, colour is something that most people have a set preference for. And then move to the ‘harder’ options like the engine. The experiment made half of the customers go through the configurator from many options (e.g., colour) to fewer options (e.g., engine type). The other half from fewer options to many options. The researchers found that they ‘lost’ the second group: They kept hitting the default button or aborted the process. The first group hung in there. They had the same information and the same number of options, only the order in which the information was presented varied. 

If you start someone off easy, you can teach them how to choose.

Frame Options
Sometimes option reduction is a matter of framing. In other words, thinking about how to present information to someone. Maybe you have kids, and well, most kids aren’t big on eating veggies. Mine isn’t, anyway. We, as parents, often tell our kids: ‘Eat your peas’. You’ll probably have more success if you give your kids a sense of control, designing the options a different way. ‘Do you want to eat your peas or carrots first?’ It can also work in our professional life. Let’s say you are in negotiation with a talent you like to attract your team or organisation. Make sure you frame your negations in a way options are limited but still allow for autonomy. To make it more real: Often, negotiations come down to challenging the salary offer. Suppose you give someone the option to get awarded a higher salary, but you tie a condition to it. For example, sure, you can have a higher salary X, but it implies X fewer days off. Your candidate still has freedom of choice, but at the same time, you framed your offer as bounded options. Thus, prevented setting the stage for a limitless salary/bonus battle, nitpicking over secondary employment conditions. ‘It’s either this or that kind of framing.

Identify personal preferences
We have seen that when we experience option overload, we tend to rely on system 1 cues such as following the choices of others. If you can help someone identify their personal preferences, you can rule out a lot of options. This is why shopping bots or online filters really help us navigate through options. Once you have set your preference, you only get to see a selection of all available options.

Offer expert advice
A different way to reduce options is to outsource the decision process to an expert. In this case, we can learn from the healthcare domain. If you have a condition that can be solved with treatment A, B or C, most people follow their doctor’s advice for a specific treatment. He rules out some options for you. What if we could also provide trusted experts in other domains? If you know, you can rely on an exercise, nutrition, finance, education expert? That would save you a lot of option researching and go down a rabbit hole of endless possibilities. You could simply follow the lead of a trusted specialist.  

To conclude, there is, in fact, an art to choosing. If you start to understand a bit more about the workings of the human mind this will give you far more control over successful outcomes. You can choose to be more successful, in fact. How’s that for a change? Doesn’t it spark your sense of freedom?

Astrid Groenewegen

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How do you do. Our name is SUE.

Do you want to learn more?

Suppose you want to learn more about how influence works. In that case, you might want to consider joining our Behavioural Design Academy, our officially accredited educational institution that already trained 2500+ people from 45+ countries in applied Behavioural Design. Or book an in-company training or one-day workshop for your team. In our top-notch training, we teach the Behavioural Design Method© and the Influence Framework©. Two powerful tools to make behavioural change happen in practice.

You can also hire SUE to help you to bring an innovative perspective on your product, service, policy or marketing. In a Behavioural Design Sprint, we help you shape choice and desired behaviours using a mix of behavioural psychology and creativity.

You can download the Behavioural Design Fundamentals Course brochure, contact us here or subscribe to our Behavioural Design Digest. This is our weekly newsletter in which we deconstruct how influence works in work, life and society.

Or maybe, you’re just curious about SUE | Behavioural Design. Here’s where you can read our backstory.

sue behavioural design
09/04/2021