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Predictably Irrational April 29, 2011

Posted by reto wettach in ecoviz, gamification, theory.

As mentioned before I am currently involved in a research project where we try to understand how interfaces can support people to change their behavior, in our case, their ways of consuming energy.

For this project I just read the wonderful an inspiring book “predictably irrational” by Dan Ariely, who is a professor for Behavioural Economics at the MIT. In this book, Ariely is describing various “hidden forces”, which make us decide in ways, which are not rational.

In the chapter “The Truth about Relativity” Ariely shows that people always base their decisions on direct comparisons, be it the price of a certain product, their salary or even the partner they choose. He also shows that this behavioral pattern leads to irrational decisions: for example we compare locally to the available alternative regardless of the true impact of our decision: “it is so easy for a person to add 200$ to a 5.000$ catering bill for a soup entrée, when the same person will clip coupons to save 25 cents on a one-dollar can of condensed soup.”
Ariely also presents a popular pattern in marketing to make people decide in a certain way. He names this pattern the “decoy”: Offering three options – two are easily comparable with being one a those is not as good as the other one (A and –A), and the third option is not comparable (B). Most people will then go for A, because they can compare A to –A, while B is cannot be compared and therefore will not be considered. His examples range from ranking attractiveness of people to selling magazine subscriptions.

(image from the book)(Example for the decoy effect: Ariely took pictures of two similarly attractive people (A, B), added one, which was a digitally modified version of one of the faces to look less attractive (-A). Over 75% of the participants responded that they would prefer A. – for the left side)

Regarding my own research project “Experience the Energy” I think that Ariely’s thought in this chapter are quite interesting: How many of us are using energy saving light bulbs  and therefore feel like contributing our fair share to a better world. However, for every holiday trip we fly all over the world – causing a huge pollution in comparison with the savings from our bulbs – or should we rather think as my mother taught me: Kleinvieh macht auch Mist!?

In the chapter “The Fallacy of Supply and Demand” Ariely proves that the old concept of supply and demand is not true with us, non-rational humans. Instead the values of products are imprinted on us – similar to the attachment of ducks to the first moving object they encounter (similar to Konrad Lorenz and his ducks).

(image source)

Ariely calls this process anchoring: a new product or service is connected to a certain price/anchor. According to Ariely, these anchors can be arbitrary, but once they are set, we use them quite coherent. He calls this observation “arbitrary coherence” and proves it with an experiment, where the value of products (wine and cordless keyboards) was connected to an random number (in his experiment the last two digit of the participant’s social security number). Once these products were anchored to these random values, the participants reasoned very coherent within this system, e.g. a higher rated bottle of wine would cost more. He is even proving that humans stick to the initial anchoring – so once a price is set, it is very hard to get re-anchor it. I have sometimes the feeling that with most electronics innovations this price is set far too low – they are turned into gadgets. Apple is one of the few companies, who manages to keep prices high!
As an good example of how anchoring works Ariely explains the phenomena of Starbucks, who – when started – offered a new anchoring system: “Starbucks did everything in its power to make the experience feel different – so different that we would not use the prices at Dunkin’ Donuts as an anchor, but instead would be open to the new anchor that Starbucks was preparing for us.”. They did so by being like a “continental coffeehouse”, e.g. not offering small, medium and large coffees, but “Short, Tall, Grande and Venti, as well as drinks with high pedigree names like Caffè Americano, Caffè Misto, Macchiato, and Frappucino.
For designers the “different experience” is the key: that is what we can offer to a new product and where we have to be very careful of how to design this experience!

A third thought in this book was important for me: How expectations shape our perception and our behavior – be it through fandom/stereotypes/fanaticisms, through related rituals or through the price. Ariely is quoting a couple of studies with quite surprising results, amongst others on Placebos with different price tags (the more expensive the better), on tests with Asia-American women, who perceived themselves either as Asian-American (good in math test) or as women (bad in math test), or on beer with vinegar and how the right story made people even like this drink.
I guess this area is the one, where most of traditional design is happening – and as Ariely points out, it is important to understand that “two mechanisms shape the expectation that make placebos work. One is belief – our confidence or faith in the drug, the procedure, or the caregiver. […] The second mechanism is conditioning. Like Pavlov’s famous dogs […], the body builds up expectancy after repeated experiences and releases various chemicals to prepare us for the future.
How true for good marketing and design!



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