Tag

psychological value Archives - SUE Behavioural Design

How to influence the perception of value?

By | Behavioural Science, HR & Organisation, SUE Amsterdam & Behavioural Design Academy originals

In this blogpost I want to explore the concept of value. I want to argue that Behavioural Design is as much about influencing how people perceive and experience things, as it is about changing actual behaviour. The design of psychological value is in my opinion a great concept to think about how to change perception and experience.

Value is a critical concept in economics. Peter Drucker famously said: “The purpose of a business to create a customer”. And the only way to create a customer, is to make him appreciate the value of what the company is offering for a reasonable price. But what is value really? And are we good at calculating the value or something?

We are price clueless

Well, it turns out we’re terrible at understanding value. In the book Priceless, William Poundstone explains the concept of “Price Cluelessness”. Because we have no idea of what something should cost, our System 1 – or automatic brain – is always relying on shortcuts to figure out the value of something. If we see a nice pair of sunglasses in a Chanel store, we expect them to cost € 200. But in an H&M store, these € 200 sunglasses would never sell. Even worse: people would be outraged. The context determines how to decode the value.

We even take price as a clue

Our incompetence for understanding value gets even worse: We tend to look for the price itself to find a clue whether something must be valuable. Something is priced high; therefore it must be excellent, otherwise, they would never price it this high. Also, when we really want the high-priced item, we tend to look for explanations, to trick ourselves into believing it’s actually a bargain. Stella Artois once campaigned around this idea. You could buy a coupon to pay even more for your Stella, thereby underscoring its brand promise “reassuringly expensive”. What most people in Britain don’t know is that in Belgium, Stella Artois’ home country, Stella is just an ordinary beer.

Popularity as a shortcut for value

The fact that something is popular is also a classic “System 1”-shortcut for determining the value of something: Many people want this item, therefore it must be good. Popularity helps you to decide without having to think about that decision. This is probably one of the most critical roles of branding: You know you can’t miss with buying a Jack Daniels, because you know everybody knows Jack Daniels.

Psychological value

The examples above are classic behavioural psychology tricks on how to influence the perception of value. But that’s the easy part. It gets much more interesting when you approach value from a human-centred point of view. Human-centred designers take irrational humans as their point of departure, for which they design answers and solutions. And when you depart from humans, you ask yourself questions like ‘How might we help people to…’:

  • Achieve their goals and realize their dreams?
  • Build positive long-term habits?
  • Resist their impulses and temptation?
  • Look at reality in new ways to trigger positive action?
  • Feel appreciated and respected?
  • Take away pain or frustration in their current experience?

Behavioural Design is fascinated with humans, their dreams, their fears, their bad habits, frustrations and their desire for happiness. And if we can understand them and design solutions form them, we will create psychological value.

Psychological Innovation

Once you start looking at reality through the lens of psychological value, you can see it everywhere:

  • Mom in Balance makes it much easier to stick to your workout habit because you meet up every time with the same group of mums like you.
  • The value of your restaurant experience goes through the roof if the chef decides to have a drink at your table
  • The € 10 you pay extra to sit in one of the front rows in an Easyjet-flight is the cheapest possible way to feel subjectively richer than the majority of people.
  • Airbnb is selling you the feeling that you are experiencing the city like someone who lives there. That’s priceless.
  • Uber makes a taxi experience 100x less frustrating because you know exactly when your car will show up, you know how much the ride will cost and you don’t need to have a transaction with the driver.
  • Would you prefer to work at the helpdesk or at the customer success team? Both jobs are exactly the same, but the second one feels so much better

Once you start thinking about creating psychological value for humans, you try to come up with ideas to help them to overcome stress, anxiety, insecurity, bad habits. Or to help them to achieve their goals, dreams and aspirations and to experience joy, fun and surprise. The number of things you can do to innovate are endless.

When it comes to innovation, we’re too often looking in the wrong direction. We think it’s about technology, but it’s really about creating psychological value.

PS: Our Behavioral Design Method is a method to spot opportunities for psychological value. It’s a fast-paced highly-structured process to turn hypothesis into ideas and to prototype and test what works and why it works. You can learn the method in our Behavioural Design Academy or apply the method to solve a business challenge in a Behavioural Design Sprint.

Want to learn more?

If you want to master the science of influence yourself, you could consider enrolling in our two-day course Behavioural Design at our SUE | Behavioural Design Academy. You can download the Academy brochure. Or maybe you currently have a challenge in which you want to influence choice or change behaviour. Please, take a look at our Behavioural Design Sprint. It might be the answer you’re looking for.

Or could be you just would like to get to know us a little better. We happily introduce ourselves here.

What’s Neymar worth? A lesson in price psychology.

By | All, Finance & Money, SUE Amsterdam & Behavioural Design Academy originals

Behavioural economics has always been fascinated by pricing. Classic economic thinking has taught us that a price is a fair representation of supply and demand. A rational or even objective evaluation of worth. But in practice, nothing holds further from the truth than this assumption. Almost nothing is more subjective or manipulative than the price of things. Our unconsciousness uses price as an irrational shortcut to evaluate the value of things. Driving up prices or value perception without any logical or objective explanation: Something is expensive so it must be good.

Some examples to illustrate this. For most wine buyers the price of a bottle of wine is the only cue on which they base their quality judgment of wine. A bottle of wine that is priced from 9,99 to 5,99 gives you the feeling that within your wanted price range of a table wine you suddenly get access to a high-quality wine. If the same bottle of wine were just priced 5,99, it just would feel like a table wine. Something happens in your value perception by the price indication. Another classic example of irrational value perception is the introduction of the black pearls in the twenties. When the first black pearls were discovered, nobody wanted to have them. People were used to white pearls and had no idea if black pearls were as valuable as white pearls. The distributor of the black pearls than made a genius move. He retracted all black pearls from the market and paid the world famous Tiffany’s New York to expose them in their window next to ridiculously expensive jewelry items. Suddenly everybody had to have the black pearls, and they were willing to pay a price that was a multitude of the original market price of the black pearls. The rest is history. Black pearls are still more expensive than their white sisters and brothers.

One of the key concepts of psychology is called price cluelessness. We don’t have any concept of what the price of something should be. Our brain solves this problem, by unconsciously looking for clues to help us answer a simple question: Is this product a bargain or is it overpriced? And that’s where things go wrong because most mental shortcuts we use aren’t only incorrect, they are also professionally abused by product suppliers.

A perfect example of this is the recent price escalation in soccer. This summer Neymar was sold by FC Barcelona to Paris Saint-Germain for a staggering 220 million Euros. The story behind this outrageous price is that Barcelona had put a leaver clause in Neymar’s contract of 200 million Euros to protect themselves from people buying this crucial player from them. They never expected that somebody would be that crazy to pay for such an excessive amount. But that was just peanuts for some wealthy oil sheiks that simply wanted Neymar to play for their Paris club.

The price that paid for Neymar just became the price that someone was prepared to pay for something he wants to own. But the effect was greater than this: What happened next is that the whole soccer transfer world went berserk. The price paid for Neymar became the new price anchor against which the value of all players is measured. In a few days time, the prices that used to be paid for players have been wiped off the table. Lionel Messi got a leaver clause of 300 million Euros in his contract, Ronaldo has to do with a clause of mere one milliard Euros. On the last day of the transfer period, Barcelona paid a 100 million Euros for 20-year-old Dembele, who ‘just’ had an estimated worth of 40 million Euros a few days before. Early summer, Manchester United bought the Belgian player Romelu Lukaku for 85 million from Everton. Jose Mourinho, the coach of Manchester United, actually called this a bargain. One month later, when the whole Neymar price spectacle took place, the transfer of Lukaku could easily have cost the club 115 million Euros.

Markets are irrational. The price paid for Neymar was nothing more than an excess of ultra-rich oil billionaires. But the price paid for Newmar ignited a chain reaction of reactions, tactics, and strategies that caused every player transfer to conform to this new price benchmark. In the end, the soccer market is not that much different from the housing market: It is an artificial bubble that will implode. Behind the game with a ball, there is a game with aggressive investors that will earn crazy amounts of money by blowing up this bubble. When the bubble pops, as it always does eventually, it will be only a few already filthy rich people that will profit while others will have to pay the painful and sometimes lifelong price of having bought something overpriced that has suddenly has lost its value. No billionaire will help you there; they are buying something outrageously new already.

 

SUE Amsterdam is helping clients to conquer the challenges of fast-changing markets by making their marketing and communication smarter using insights from behavioural psychology. We’ll help you get a grip on the needs, wants, and decisions of your customers by becoming radically human-centered. Exposing new opportunities and developing creative ideas that will influence the choices of your users and nudge them to the desired behaviour. We apply our Behavioural Design Method in which we train and coach our clients on the project. This way we can not only come up with winning ideas together, but client teams also master the method themselves. Do you want master behavioural psychology? Take part in the Behavioural Design Academy. You’ll learn the science of influence in just two days.

 

Cover image by Leonid Domnitser under Creative Commons license.

Want free training, tools, and tips in your inbox?

Join 2500+ others. Sign up right here, right now for free.