How Behavioural Economics can help you tackle everyday business issues

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Slides from a presentation on how behavioural economics can be used by businesses of any size to improve outcomes. Covers five key principles; loss aversion, choice paradox, anchoring, short-term bias and social influence. Seminar is companion piece to book called "22 Minutes to a Better Business" by Bri WIlliams.

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  • How Behavioural Economics can help you tackle everyday business issues

    1. 1. 22 minutes to abetterbusinessHow Behavioural Economicscan help you tackle everydaybusiness issuesBri WilliamsBuying Behaviour Specialist
    2. 2. Irrationality
    3. 3. $285Image credit: Supplied
    4. 4. Ian McaulyImage credit: Courier Mail
    5. 5. Image credit: Supplied
    6. 6. Image credit: Supplied
    7. 7. Image credit: rgbstock.com
    8. 8. 3% fat ✔ 97% fat freeImage credit: iStockphoto
    9. 9. Sorry, economists✗ ✔Image credit: rgbstock.com
    10. 10. Irrationality ispredictable
    11. 11. Representativeness Information avoidance Systems 1 & 2 Self herdingCertainty bias Ambiguity Herding Status Diagnosis bias Quo(default) bias effect Depletion effects Anchoring Resolving cognitive Halo effect dissonance Heuristics Judgment heuristic Completion Bandwagon effect Clustering illusion Revenge Confirmation bias Rules of thumb Choice paradoxProcedural fairness Relativity Choice bracketing Framing Pattern recognition Decoupling Hyperbolic discounting Mental accounting Hedonic framing Sunk cost Loss aversion Inter temporal choice Availability bias Not invented here biasImpact bias Adaptation Free Drop in the bucket effect Contra free loadingShort term bias Endowment effect Fluency Vividness Actor-observer bias Scarcity perception Ikea effect Image credit: rgbstock.com
    12. 12. Behavioural EconomicsThe study of emotional, cognitive and socialinfluences on economics decision-makingbehaviour.Why we do stuff!
    13. 13. With Behavioural Economics you can Make yours a better businessBy influencing the behaviour of customers, staff and suppliers
    14. 14. Your top 3 business issues…Image credit: rgbstock.com
    15. 15. Five key principlesImage credit: rgbstock.com
    16. 16. 1. Loss aversionWe are more motivated toavoid loss than seek gainImage credit: rgbstock.com
    17. 17. Heads, win $100 Tails, lose $100Heads, win $250 Image credit: rgbstock.com
    18. 18. Everything we do involvesan assessment of what we have to lose Time money, status, effort…
    19. 19. 1.5 – 2.5 xImage credit: rgbstock.com
    20. 20. Image credit: Flyingg from Flickr
    21. 21. Image credit: Supplied
    22. 22. If there’s toomuch to lose… Image credit rgbstock.com
    23. 23. Using loss aversion in your business• Nothing to lose – guarantees, solutions• Something to lose – waste, taking something away
    24. 24. Nothing to lose Image credit: supplied
    25. 25. Nothing to lose ✔ Image credit: supplied
    26. 26. Nothing to lose ✔ Image credit: supplied
    27. 27. Using loss aversion in your business• Nothing to lose – guarantees, solutions• Something to lose – waste, taking something away
    28. 28. Something to lose ✔ Image credit: https://twitter.com/#!/ebkcd2/status/176057198361841664/photo/1
    29. 29. Something to lose ✔ Image credit: supplied
    30. 30. Something to lose My fault Your stupid policy ✗ ✔ Image credit: supplied
    31. 31. Something to lose ✔ Image credit: supplied
    32. 32. Something to lose ✔ Image credit: supplied
    33. 33. Something to lose ✔
    34. 34. Something to lose ✔ Image credit: supplied
    35. 35. Something to lose ✔ ✔ Image credit: supplied
    36. 36. Something to lose ✔ Image credit: supplied
    37. 37. Something to lose ✔ Image credit: supplied
    38. 38. Something to lose ✔ Image credit: supplied
    39. 39. Something to loseSpam Image credit: supplied
    40. 40. gainSomething to lose…and to gain ✗ ✔ Image credit: supplied
    41. 41. 2. Choice paradox We desire choice but can be easily overwhelmedImage credit: rgbstock.com
    42. 42. Image credit: The Age
    43. 43. Image credit: rgbstock.com
    44. 44. The jam experiment 24 jams 6/10 3% 6 jams 4/10 30% Iyengar & Lapper 2000
    45. 45. If there’s too much choice… Image credit: supplied
    46. 46. Using choice paradox in your business• Structure choices – hierarchy and clusters• Use defaults – make the default choice
    47. 47. Structure choices ✗ ✔ Image credit: supplied
    48. 48. Structure choices ✔ Image credit: supplied
    49. 49. Structure choices ✗ Image credit: supplied
    50. 50. Using choice paradox in your business• Structure choices – hierarchy and clusters• Use defaults – make the default choice
    51. 51. Use defaults ☐ Opt in  Opt out Image credit: rgbstock.com
    52. 52. Use defaults ✔ Image credit: supplied
    53. 53. Use defaults ✔ ✗
    54. 54. 3. Anchoring We are influenced by previously introduced information, even if irrelevantImage credit: rgbstock.com
    55. 55. $ 6, 7, 8, 9 1, 2, 3, 4Image credit: rgbstock.com
    56. 56. Online only $59 68%Print & Online $125 32%Ariely
    57. 57. Online only $59 68% 16%Print only $125 0%Print & Online $125 32% 84%Ariely
    58. 58. If you don’tprovide the anchor… Image credit: supplied
    59. 59. Using anchoring in your business• Establish context – frame of comparison• Sequence deliberately – high to low
    60. 60. Establish context Establish context ✔ Image credit: supplied
    61. 61. Establish context
    62. 62. Establish context
    63. 63. Establish context Photo credit: Kym Smith www.news.com.au
    64. 64. Establish context 80% chance of survival X2 20% chance of mortality Lehrer
    65. 65. Using anchoring in your business• Establish context – frame of comparison• Sequence deliberately – high to low
    66. 66. Use Sequence Examples from market ✗ Image credit: supplied ✔
    67. 67. Use Sequence Example - Relativity ✔ Image credit: supplied
    68. 68. Use Sequence Examples from market ✔ Image credit: supplied
    69. 69. Use Sequence ? Image credit: supplied
    70. 70. 4. Short-term bias We focus on the immediate term result rather than the longer- term impactImage credit: rgbstock.com
    71. 71. Photo credit: rgbstock.com
    72. 72. Image credit: rgbstock.com
    73. 73. Image credit: rgbstock.com
    74. 74. If you don’t deal with short-term bias Image credit: rgbstock.com
    75. 75. Using short-term bias in your business• Understand self-control - impulsivity• Use vividness – make long-term short-term
    76. 76. Self-control ✔ Image credit: supplied
    77. 77. Self-control ✔ ImpulseSave App Image credit: supplied
    78. 78. Self-control Urge App ✔ Image credit: supplied
    79. 79. Self-control ✔ Image credit: supplied
    80. 80. Self-control ✔ Image credit: supplied
    81. 81. Using short-term bias in your business• Understand self-control - impulsivity• Use vividness – make long-term short-term
    82. 82. Vividness ✔ Image credit: supplied
    83. 83. Vividness Image credit: supplied ✔
    84. 84. 5. Social influence We are persuaded by what we think others are doing or believingImage credit: rgbstock.com
    85. 85. Goldstein, Griskevicius, Cialdini 2008
    86. 86. If you don’tutilise social influence Image credit: rgbstock.com
    87. 87. Using social influence in your business• Normalise behaviour – we’re a pack animal, “most popular”• Celebrate uniqueness – we like to feel special
    88. 88. Normalise behaviour ✔ Image credit: Supplied
    89. 89. Normalise behaviour (missed) ✗ Image credit: Supplied
    90. 90. Normalise behaviour ✔ Image credit: Supplied
    91. 91. Normalise behaviour ✔ Image credit: supplied
    92. 92. Normalise behaviour “Operators are waiting, please call now” “If operators are busy, please call again” ✔ Colleen Szot cited in Goldstein, Martin, Cialdini’s “Yes!” Image credit: rgbstock.com
    93. 93. Normalise behaviour ✔ Image credit: supplied
    94. 94. Normalise behaviour ? Image credit: https://twitter.com/annagaal/status/213212665496088576/photo/1
    95. 95. Using social influence in your business• Normalise behaviour – we’re a pack animal, “most popular”• Celebrate uniqueness – we like to feel special
    96. 96. Uniqueness ✔
    97. 97. Uniqueness ✔ ImpulseSave App Image credit: supplied
    98. 98. Uniqueness ✔
    99. 99. Uniqueness (gone wrong) ✗
    100. 100. Five key principlesImage credit: rgbstock.com
    101. 101. Top 5 principles 1. Loss aversion 2. Choice paradox 3. Anchoring 4. Short-term bias 5. Social influenceImage credit: rgbstock.com
    102. 102. Your top 3businessissues…
    103. 103. Top 5 principles 1. Loss aversion 2. Choice paradox 3. Anchoring 4. Short-term bias 5. Social influenceImage credit: rgbstock.com
    104. 104. ABC of things to do nextA. APPLY Top 5 PrinciplesB. BEHAVIOURAL Resources Presentation & materials are the property of People Patterns Pty Ltd and cannot be reproduced without permission. All Rights Reserved.
    105. 105. Tools & ResourcesNewsletter www.peoplepatterns.com.auBooks @danariely @R_Thaler @peoplepatternsArticles @MarketingMag @Smartcompany @peoplepatterns Presentation & materials are the property of People Patterns Pty Ltd and cannot be reproduced without permission. All Rights Reserved.
    106. 106. ABC of things to do nextA. APPLY Top 5 PrinciplesB. BEHAVIOURAL ResourcesC. CONSULT Bri Presentation & materials are the property of People Patterns Pty Ltd and cannot be reproduced without permission. All Rights Reserved.
    107. 107. Get in touch bri@peoplepatterns.com.au 0408 392 173 @peoplepatterns www.peoplepatterns.com.au

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