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Behavioral Economics for Marketers @ LTR by Appboy

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Learn from author and former ESPN Magazine editor Gary Belsky about how our various unconscious biases drive decision making, and what that means for marketers.

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Behavioral Economics for Marketers @ LTR by Appboy

  1. 1. OUR BEHAVIORS GARY BELSKY
 AUTHOR, WHY SMART PEOPLE MAKE BIG MONEY MISTAKES: LESSONS FROM THE LIFE-CHANGING SCIENCE OF BEHAVIOR ECONOMICS; 
 FORMER EDITOR IN CHIEF, ESPN THE MAGAZINE
  2. 2. Gary Belsky LTR Conference November 5, 2015 DIGITAL ENGAGEMENT:
 A Behavioral Economics Perspective

  3. 3. A BRIEF HISTORY OF BEHAVIORAL ECONOMICS DANIEL KAHNEMAN AMOS TVERSKY
  4. 4. SYSTEM 1 SYSTEM 2 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ? ? ? ? ? ? FAST PARALLEL AUTOMATIC EFFORTLESS ASSOCIATIVE SLOW-LEARNING SLOW SERIAL CONTROLLED EFFORT-FILLED RULE-GOVERNED FLEXIBLE HOW WE DECIDE
  5. 5. A BRIEF HISTORY OF BEHAVIORAL ECONOMICS BIASED TOWARD BIASES
  6. 6. An uncle left you money, which you must now invest. 
 You’ve narrowed your choices to four options: 1. Shares of XYZ Tech (18%) 2. Shares of ABC Widgets (32%) 3.Treasury bills (18%) 4. Municipal bonds (32%) Which option would you choose? STATUS QUO BIAS
  7. 7. An uncle has left you money invested in XYZ Tech, a volatile Internet company.You’ve narrowed your investment choices to these options: 1. Shares of XYZ Tech (+/-50%) 2. Shares of ABC Widgets 3.Treasury bills 4. Municipal bonds Which option would you choose? STATUS QUO BIAS
  8. 8. An uncle has left you money invested in ABC Widgets, a volatile Internet company.You’ve narrowed your investment choices to these options: 1. Shares of XYZ Tech 2. Shares of ABC Widgets (+/-50%) 3.Treasury bills 4. Municipal bonds Which option would you choose? STATUS QUO BIAS
  9. 9. An uncle has left you money invested in Treasury Bills, a volatile Internet company.You’ve narrowed your investment choices to these options: 1. Shares of XYZ Tech 2. Shares of ABC Widgets 3.Treasury bills (+/-50%) 4. Municipal bonds Which option would you choose? STATUS QUO BIAS
  10. 10. An uncle has left you money invested in Municipal bonds, a volatile Internet company.You’ve narrowed your investment choices to these options: 1. Shares of XYZ Tech 2. Shares of ABC Widgets (50%) 3.Treasury bills 4. Municipal bonds (+/-50%) Which option would you choose? STATUS QUO BIAS
  11. 11. Confirmation Bias Mental Accounting Availability Bias Representativeness Hindsight Bias Money Illusion Base Rate Ignorance Survivorship Bias Anchoring Sunk Cost Fallacy Choice Conflict Planning Fallacy Herding Overconfidence Effect Status Quo Bias Loss Aversion Hot Hand Fallacy Gambler’s Fallacy Focalism Endowment Effect Dunning-Kruger Effect Region-Beta Paradox Immune Neglect Regret Aversion Channel Factors Framing Preferential Bias Tradeoff Contrast Feature Fatigue Extremeness Aversion WHEN SYSTEMS COLLIDE
  12. 12. A BRIEF HISTORY OF BEHAVIORAL ECONOMICS
  13. 13. PROSPECTTHEORY: AN ANALYSIS OF DECISION UNDER RISK NOBEL PURSUITS
  14. 14. Imagine you’ve been given $1,000 and are asked to choose between two options. OPTION A: You win an additional $500. OPTION B: You flip a coin. Heads, you get another $1,000.Tails, you get nothing. Which option would you choose? LOSS AVERSION
  15. 15. Imagine you’ve been given $2,000 and are asked to choose between two options. OPTION A: You lose $500. OPTION B: You flip a coin. Heads, you lose $1,000.Tails, you lose nothing. Which option would you choose? LOSS AVERSION
  16. 16. Confirmation Bias Mental Accounting Availability Bias Representativeness Hindsight Bias Money Illusion Base Rate Ignorance Survivorship Bias Anchoring Sunk Cost Fallacy Choice Conflict Planning Fallacy Herding Overconfidence Effect Status Quo Bias Loss Aversion Hot Hand Fallacy Gambler’s Fallacy Focalism Endowment Effect Dunning-Kruger Effect Region-Beta Paradox Immune Neglect Regret Aversion Channel Factors Framing Effects Preferential Bias Tradeoff Contrast Feature Fatigue Extremeness Aversion WHEN SYSTEMS COLLIDE
  17. 17. • CHANNEL FACTORS SYSTEM 1 PROBLEMS
  18. 18. Man and Tetanus at Yale CHANNEL FACTORS
  19. 19. SYSTEM 1 PROBLEMS • CHANNEL FACTORS • CHOICE CONFLICT
  20. 20. Jam Session CHOICE CONFLICT
  21. 21. CHOICE CONFLICT Jam Session
  22. 22. vs. MAXIMIZERS AND SATICFICERS
  23. 23. SYSTEM 1 PROBLEMS • CHANNEL FACTORS • CHOICE CONFLICT • FEATURE FATIGUE
  24. 24. Enough Already . FEATURE FATIGUE
  25. 25. SYSTEM 1 PROBLEMS • CHANNEL FACTORS • CHOICE CONFLICT • FEATURE FATIGUE • TRADEOFF CONTRAST
  26. 26. Microwave Special 0.5-cubic foot Emerson Microwave, 35% off its $109.99 retail price (57%) *** 0.8-cubic foot Panasonic I Microwave, 35% off its $179.99 retail price (43%) WHICH MICROWAVE DO YOU PREFER? TRADEOFF CONTRAST…
  27. 27. Microwave Special 0.5-cubic foot Emerson Microwave, 35% off its $109.99 retail price (27%) *** 0.8-cubic foot Panasonic Microwave, 35% off its $179.99 retail price (60%) *** 1.1-cubic foot Panasonic II Microwave,10% off its $199.99 retail price (13%) TRADEOFF CONTRAST… WHICH MICROWAVE DO YOU PREFER?
  28. 28. SYSTEM 1 PROBLEMS • CHANNEL FACTORS • CHOICE CONFLICT • FEATURE FATIGUE • TRADEOFF CONTRAST • FRAMING EFFECTS
  29. 29. Imagine you are an army commander, threatened by a superior enemy.Your staff informs you that your troops will be caught in an ambush in which 600 will die—unless you lead them to safety by one of two routes. Route A: 200 soldiers will be saved. Route B: There’s a 1/3 chance all 600 will make it and a 2/3 chance none will. Which route is best? LOSS AVERSION
  30. 30. Now imagine that you are in the same exact situation, but this time your staff describes the following two options: Route A: 400 soldiers will die. Route B: There’s a 1/3 chance no soldiers will be killed and a 2/3 chance that all 600 will perish. Which route is best? LOSS AVERSION
  31. 31. Discount vs. Surcharge FRAMING
  32. 32. Save Now, Spend Later FRAMING
  33. 33. A Stitch in Time VS. FRAMING
  34. 34. SYSTEM 1 PROBLEMS • CHANNEL FACTORS • CHOICE CONFLICT • FEATURE FATIGUE • TRADEOFF CONTRAST • FRAMING EFFECTS • REGRET AVERSION
  35. 35. Pat goes to the movies.At the box office, she is told that as Customer 100,000 she has won $100. Chris is at a different theater, where she is told that as Customer 500,001 she has won $150. Who would you rather be, Pat or Chris? REGRETAVERSION
  36. 36. Pat goes to the movies.At the ticket window, she is told that as Customer 100,000 she’s won $100. Chris is at a different theater, where she is told that as Customer 500,001 she wins $150.The 500,000 the customer wins $1,000. Who would you rather be, Pat or Chris? REGRETAVERSION
  37. 37. SYSTEM 1 PROBLEMS • CHANNEL FACTORS • CHOICE CONFLICT • FEATURE FATIGUE • TRADEOFF CONTRAST • FRAMING EFFECTS • REGRETAVERSION • HERDING
  38. 38. HERDING Bedlam
  39. 39. SYSTEM 1 PROBLEMS • CHANNEL FACTORS • CHOICE CONFLICT • FEATURE FATIGUE • TRADEOFF CONTRAST • FRAMING EFFECTS • REGRET AVERSION • HERDING
  40. 40. Gary Belsky DIGITAL ENGAGEMENT:
 A Behavioral Economics Perspective


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