This is an excerpt from Melina's new book, "What Your Customer Wants and Can’t Tell You".
Imagine you conducted a global survey of people who have not yet done business with you and asked, “What one thing would you like to know more of before signing up?” and 46 percent of them all said the same thing. It is something you can do easily, and your staff and production team have been advocating to add this same thing for years because they too see it as a barrier to entry.
What would you do?
Do you say, “Great! Let’s build it.” Or do you stop and run a test (or ten)?
In many businesses, the mindset is likely that the survey was the test. You did some due diligence, asked the question, and nearly half of people identified this thing, so there must be at least some truth in it. You might be inclined to push forward and implement it as quickly as possible.
Fortunately for Netflix, they did not take this seemingly logical approach.[i] The top barrier to entry was the inability to see the content catalog before signing up for the free trial. Totally logical—but they still ran some tests.
The team set up a series of A/B tests to determine which new version would be best. They fully expected all the new versions would outperform the existing version—after all, nearly half of people said it was the one thing that was preventing them from signing up. The test was expected to determine which new design increased conversions the most.
Round one is Control (no content visible) versus Test Version One.
Control moves on to compete against Test Version Two. Control wins again. And again. And again.
The version without content converted better every single time.
What in the world has happened here? According to Navin Iyengar at
a presentation at UX London, they could tell that people were getting overwhelmed by choices and options. They began searching for specific titles and couldn’t experience the magic of using Netflix.
Users’ conscious brains thought they would prefer something, but too many choices overwhelmed them and resulted in a decrease in free trial signups. And while it wasn’t explicitly stated in any of the case study material, I would venture to say that the dopamine release from the anticipation of finding out what was available would also motivate people to get over the “sign up for a trial period” hump. When there is no anticipation or curiosity, why click the button?
For Netflix, which signs up millions of new subscribers every quarter, going straight to market with their survey findings could have had a catastrophic effect on their earnings. Thankfully, they have a stellar behavioral team and a culture built on testing.
Why a behavioral team?
Even when someone asks you explicitly for something, or you are sure you know the root of a problem, it can usually benefit from a little more thoughtfulness. This is because of the way the brain works.
You have heard the terms “conscious” and “subconscious” before, and probably about the “lizard brain”. While you know that you have a subconscious, it is something we don’t really like to think about too much. (It turns out, even though we all have brains, we don’t really understand how they work.)
Studies have shown that 99 percent of decisions your brain (and the brains of your customers) make every day is done on a subconscious level.[ii] The subconscious’ decisions are made using simple rules of thumb based on what has worked well in the past. And unfortunately, the conscious and subconscious don’t really speak the same language. That means, the subconscious is pretty much running the show and the conscious knows very little about what guides all those decisions.
The problem for businesses is this: when you sit down with your team to work on brand strategy or build out a promotion or research project or new product…what part of your brain do you think you and your team use? Conscious.
And what part of the brain do the customers use to make their decisions? The often-illogical subconscious brain.
If you don’t understand the rules of the brain, you are hoping to capture the tiny sliver of conscious processing and effectively throwing noodles at the wall hoping they stick. Thankfully, behavioral economics is here now, which understands these rules of the brain and has found them to be a very accurate predictor of behavior.
Essentially, behavioral economics gives us insight into what people will actually do instead of what they say they will do or what everyone logically knows they should do. As an applied behavioral economist, I help businesses to understand what these rules are and how to use them to increase conversions and have more effective brands, messaging, pricing, and more.
Where should a business start with behavioral economics?
The biggest mistake most businesses make when trying to apply behavioral economics is at step one: understanding the problem. It is too easy to find the right answer to the wrong question. Invest more time in knowing what is truly needing to be solved so you are creating the right interventions to nudge behavior properly.
All our brains are biased to believe we are right. We also believe that, if someone asks for something explicitly, they did the due diligence to determine it really is the thing they want before asking for it. (Not necessarily true.)
Clients often ask me, “What is the best way to structure our offers?” and more often than not I say, “That depends. What do you want people to do?”
Behavioral economics has found that choices are relative and heavily context dependent. Putting desserts at the front of a cafeteria line makes kids 25% more likely to choose them, while they are 25% less likely to choose them when they are at the back or in a separate line.[iii]
There is no one best layout. There is no single, perfect concept of behavioral economics that will work in every situation. There is a great deal of art in this science—that’s my favorite part—and it is also the root of the most common mistake I see people make when trying to apply behavioral concepts to their business.
When you consider the problem in a vacuum or assume the problem you see is the only true problem, you will often end up finding the right answer to the wrong question.
The best brochure in the world won’t solve a deeper, unrelated issue.
Working with the brain will make it easier to understand and solve problems in your business. I have used it with my own clients to increase conversions, raise prices, nudge product choices, and so much more. But if you don’t take the time up front to understand what you are trying to accomplish, you will still be throwing noodles at the wall.
And this is exactly why I wrote my new book, What Your Customer Wants and Can’t Tell You. It is a reference book of sorts in a fun, conversational tone that gives people in business everything they need to understand and start applying behavioral economics in their business. The book is separated into four parts:
- Part 1 tells you about the brain, how it works, and why this matters for brands
- Part 2 digs in on my top 16 behavioral economics concepts for business to understand, with prompts and tips to start applying them right away (there is also a free Companion Workbook of over 100 pages on my website with many more worksheets to help you along the way)
- Part 3 gives you a recipe to follow so you can start combining concepts and testing this out in your business
- Part 4 is called “Don’t Get Stuck” and shares some simple brain biases that keep us all in status quo (because the subconscious likes predictability). I want you to be successful, so this section is short, but so important
Properly applied behavioral economics lets you start throwing darts, while your competition continues to throw noodles. Are you ready for a brainier approach to your business?
Melina Palmer is founder and CEO of The Brainy Business, which provides behavioral economics consulting to businesses of all sizes from around the world. Her podcast, The Brainy Business: Understanding the Psychology of Why People Buy, has downloads in over 160 countries and is used as a resource for teaching applied behavioral economics for many universities and businesses. Melina teaches applied behavioral economics through the Texas A&M Human Behavior Lab.
[i] Zhang, Y. (2015, November 2). The registration test results Netflix never expected. Apptimize.
[ii] Pradeep, A.K. (2010). The buying brain: Secrets for selling to the subconscious mind. John Wiley & Sons.
[iii] Thaler, R.H. & Sunstein, C.R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Penguin Books.