Irrational behaviour is hard to manage because it's hard to spot
Behavioural economics is all about understanding how people behave in their everyday lives and starts by assuming that what we do is not always in our own best interest.
In other words, our behaviour is 'irrational'. For example, we know superannuation is important but we spend more time choosing our lunch than which fund to use.
In business, if we can understand why people make irrational decisions then we can design to influence the outcome. That makes behavioural science our golden ticket to improving the effectiveness of relationships with customers, staff, suppliers and stakeholders.
Why then does it seem so elusive – if behaviour is happening to us and around us every day, shouldn't it be easy to spot?
Spotting irrational behaviour
Spotting irrational behaviour in your everyday life is tough. I know because I have to think long and hard in order to find examples. Here's why.
Irrational behaviour is not abnormal behaviour.
Irrational behaviour is normal. It's how we all behave.
Because it is normal, it is harder to spot and therefore harder to identify. It's what we take for granted. You'll never see a behavioural economics equivalent of "Funniest Home Videos" because we are not talking about crazy, wacky, outlandish behaviour.
Quite the opposite, we are talking about micro, quiet, unassuming, unremarkable behaviour.
Behaviour like me happily paying $5.80 for a cup of tea and muffin and then, only five minutes later baulking at $2.50 for an avocado at the market. Or:
- thinking 99 cents for an App is outrageously expensive so opting for the free and crappy 'lite' version.
- rejecting free access to an online news site because I now have to sign-up giving a website I'd never heard of before all my credit card information without hesitation because I was so carried away by the experience they provided (Foldable.Me if you are interested).
That's the challenge
So that's the challenge. When you are looking to improve your business, it is the small, incremental behaviours that you need to influence rather than anything on a grand scale.
- offering discounts for on-time payment rather than late fees;
- placing an office paper recycling bin at every desk so it's easy to access;
- asking your client to reply 'yes' to their appointment reminder SMS;
- changing the colour of a Call to Action button to stand out rather than match your website;
- adding a few well-placed testimonials on your website to alleviate anxiety; or
- contextualising your pricing amongst more expensive offers so it looks reasonable.
Next week, I'll provide tips on how to hone your behavioural spotting skills so that you can start translating observations about your customers into better business results.
Bri Williams runs People Patterns Pty Ltd, a consultancy specialising in the application of behavioural economics to everyday business issues.