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Behavioral Economics + Online Retail

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Behavioral Economics + Online Retail

  1. BehavioralEconomics +Online RetailPresented byPaul M. CohenFounder & CEO of Cognection CONFIDENTIAL | Do Not Distribute
  2. Heuristics
  3. People are irrational
  4. $8008 megapixels Camera A Huber, Payne, & Puto, 1982; Dhar & Simonson, 2003
  5. $800 $1,0008 megapixels 10 megapixels Camera A Camera B Huber, Payne, & Puto, 1982; Dhar & Simonson, 2003
  6. $800 PRICE $1,0008 megapixels QUALITY 10 megapixels Camera A Camera B Huber, Payne, & Puto, 1982; Dhar & Simonson, 2003
  7. Assume identical on all other dimensions (Or, that these two dimensions predict most of your choice) $800 PRICE $1,0008 megapixels QUALITY 10 megapixels Camera A Camera B Huber, Payne, & Puto, 1982; Dhar & Simonson, 2003
  8. Sensitive to qualitySensitive to price (megapixels) $800 PRICE $1,000 8 megapixels QUALITY 10 megapixels Camera A Camera B Huber, Payne, & Puto, 1982; Dhar & Simonson, 2003
  9. Sensitive to qualitySensitive to price (megapixels) 50% 50% $800 PRICE $1,000 8 megapixels QUALITY 10 megapixels Camera A Camera B Huber, Payne, & Puto, 1982; Dhar & Simonson, 2003
  10. $800 $1,000 $1,2008 megapixels 10 megapixels 9 megapixels Camera A Camera B Camera C Huber, Payne, & Puto, 1982; Dhar & Simonson, 2003
  11. “Camera B is “Wait, this is a way better than pretty bad camera C…” option…” $800 $1,000 $1,2008 megapixels 10 megapixels 9 megapixels Camera A Camera B Camera C Huber, Payne, & Puto, 1982; Dhar & Simonson, 2003
  12. “Camera B is “Wait, this is a way better than pretty bad camera C…” option…” 40% 58% 2% $800 $1,000 $1,2008 megapixels 10 megapixels 9 megapixels Camera A Camera B Camera C Huber, Payne, & Puto, 1982; Dhar & Simonson, 2003
  13. Target
  14. Target
  15. Target
  16. Context Effects
  17. Context Effects It depends on the context of the choice
  18. Context Effects It depends on the context of the choice
  19. Tall Grande Venti Simonson, 1989
  20. That’s notenough for me…Tall Grande Venti Simonson, 1989
  21. That’s not But I don’tenough for want that me… much…Tall Grande Venti Simonson, 1989
  22. Seems aboutThat’s not right But I don’tenough for want that me… much…Tall Grande Venti Simonson, 1989
  23. Seems aboutThat’s not right But I don’tenough for want that me… much…Tall Grande Venti preference Simonson, 1989
  24. Tall Grande Venti Trenta Quadragrane Simonson, 1989
  25. That’s notenough for me…Tall Grande Venti Trenta Quadragrane Simonson, 1989
  26. But I don’tThat’s not want thatenough for much… me…Tall Grande Venti Trenta Quadragrane Simonson, 1989
  27. Seems about But I don’tThat’s not right want thatenough for much… me…Tall Grande Venti Trenta Quadragrane Simonson, 1989
  28. Seems about But I don’tThat’s not right want thatenough for much… me…Tall Grande Venti Trenta Quadragrane preference Simonson, 1989
  29. Seems about But I don’tThat’s not right want thatenough for much… me… Gravitate towards the center “compromise” optionTall Grande Venti Trenta Quadragrane preference Simonson, 1989
  30. Is the Amazon riverlonger or shorter than 5,000 miles?
  31. Is the Amazon riverlonger or shorter than 5,000 miles? How long is the Amazon river?
  32. Is the Amazon riverlonger or shorter than 3,000 miles?
  33. Is the Amazon riverlonger or shorter than 3,000 miles? How long is the Amazon river?
  34. Is the Amazon river Is the Amazon river longer or shorter longer or shorter than 5,000 miles? than 3,000 miles? Tversky & Kahneman, 1974
  35. Is the Amazon river Is the Amazon river longer or shorter longer or shorter than 5,000 miles? than 3,000 miles? 4,500 3,500 Tversky & Kahneman, 1974
  36. Anchoring
  37. Anchoring Become anchoredto specific pieces of data
  38. 0909
  39. 86 09
  40. $36.00 $21.0086 09
  41. 6 types of Jam Iyengar & Lepper, 2000
  42. 6 types of Jam 40% looked Iyengar & Lepper, 2000
  43. 6 types of Jam 24 types of Jam 40% looked Iyengar & Lepper, 2000
  44. 6 types of Jam 24 types of Jam 40% looked 60% looked Iyengar & Lepper, 2000
  45. 6 types of Jam 24 types of Jam 40% looked 60% looked 30% bought 3% bought Iyengar & Lepper, 2000
  46. Choice Overload
  47. Choice Overload We want lots of options….
  48. Choice Overload We want lots of options….But we’re happierwith fewer options
  49. Context effects • Bar, cameras, and Economist.com – asymmetric dominance • Coffee & popcorn – compromise
  50. Context effects • Bar, cameras, and Economist.com – asymmetric dominance • Coffee & popcorn – compromiseAnchoring • Amazon river • Social security number and bidding
  51. Context effects • Bar, cameras, and Economist.com – asymmetric dominance • Coffee & popcorn – compromiseAnchoring • Amazon river • Social security number and biddingChoice Overload • Jam
  52. Cognitive Comparisons
  53. Algorithmic Behavioral Economics + Data Engine
  54. Casio EX-ZS5BK Black 14.1 MP Panasonic DMC-FH25K Black 2.7" LCD 26X Optical Zoom 14.1 MP 2.7" 230k LCD 30X 26mm Wide Angle Digital Camera Optical Zoom 28mm Wide Angle $260.00 $300.00In Stock Yes YesItem# N82E16830124205 N82E16830180374Model# EX-ZS5BK DMC-FH25KBrand Casio PanasonicSeries ExilimColor BlackDimensions 3.8”(W) x 2.2”(H) x 0.82”(D) 3.9" x 2.2" x 1.1"(WxHxD) (excluding projections; 0.76”)
  55. Auto Focus, Macro, Super Macro,Focus Modes Quick AF (Always On), AF Infinity mode, Manual focus TrackingFocus AF Area: Spot, Multi, TrackingArea/Point Approx. 5.9055” - Infinity (W)Manual Focus * Using optical zoom causes the aperture to changeMacro Focus Approx. 1.9685” - 19.685” (W) Wide 5 cm - infinity / Tele 100cmRange (Third step from widest setting) - infinity Auto, Auto/Red-eye Reduction, Auto, Flash off, Flash on, Red eyeFlash Mode Slow Sync./Red-eye Reduction, reduction Forced On, Forced Off Normal: 0.5ft (*2) - 9.4ft (W) Approx. 1.3ft - 4ft (T) 0.6 - 5.8m (Wide/I.ISO), 1.0 -Flash Range * Range is affected by optical 3.2m (Tele/I.ISO) zoom *2 Macro FocusExposure Program AE Program AEControlExposure -2EV to +2EV (in 1/3EV steps) 1/3 EV step, +/-2 EV
  56. Jam Man in Bar Coffee Sizes River Length
  57. Cognitive Comparisons
  58. Cognitive Comparisons
  59. Cognitive Comparisons Choice Justification
  60. Cognitive Comparisons
  61. Cognitive Comparisons
  62. Cognitive Comparisons
  63. Cognitive Comparisons
  64. Engagement
  65. Conversions+12.8%
  66. BehavioralEconomics +Online RetailPresented byPaul M. CohenFounder & CEO of Cognection CONFIDENTIAL | Do Not Distribute

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