Wrfy Predictably Irrational

Predictably Irrational by Dan ArielyAs read by Rob Stokes – 29 November 2010

Economists expect us to be rational

Trouble is we are often not

The Truth about Relativity

You choose:

a) A weekend in Rome with a free breakfastb) A weekend in Paris with a free breakfast

You choose:

a) A weekend in Rome with a free breakfastb) A weekend in Paris with a free breakfastc) A weekend in Paris without a free breakfast

Use relativity to differentiate your offerings

As a consumer, benchmark your decisions against a constant factor – such as your time

The Fallacy of Supply and Demand

Anchoring has a major long term effect on our willingness to pay

Understand anchoring. Question your repeated behaviour.

The Cost of Zero Cost

Free doesn’t obey market theory

After your name, free is the most powerful word. Use it wisely.

Use free to trigger behaviour

Make sure you don’t pay with your time

The Cost of Social Norms

We are happy to do things, but not when we are paid to do them

The fine changed social norms to market norms

When a social norm collides with a market norm, the social norm goes away for a long time...

The High Price of Ownership

3 Quirks of human nature:

1. We fall in love with what we already have.2. We focus on what we might lose, rather than what we might gain.3. We assume that other people will see the transaction from the same perspective as we do.

Try and distance yourself from the transaction

The Effect of Expectations

Beware the stereotype

The assumptions people make about your business will influence the way they perceive your product or service

The Power of Price

If it costs a lot, it must be worth something...

The Context of Our Character

Given the opportunity, most people are tempted to cheat

Particularly when we are not dealing with cash

We care about honesty and want to be honest.

The problem is that our internal honesty monitor is active only when we contemplate a big transgression.

Beer and Free Lunches(or what is behavioural economics)

People are sometimes willing to sacrifice the pleasure they get from an experience in order to project a certain image to others

We are all far less rational in our decision making than standard economic theory assumes

Furthermore, our irrational behaviours are neither random nor senseless - they are systematic and predictable

Behavioural economics is based on how people actually behave, not how they would behave if they were rational

What did I take out of this?

I run a digital marketing agency

Biggest lesson: motivating people and the distinction between and market and a social contract

Pink: autonomy, mastery and purpose

Economics tells you to focus on the money

I think the sweet spot is somewhere in between

My 2nd gain was as a marketer, both for my clients and my business

Understanding what influences consumers to purchase one item over another is a never ending pursuit

Behavioural economics teaches us that whilst consumers are often not rational, at least their irrational behaviour can be predicted and therefore better understood.

This is the beginning of a journey for me.

Thank you

Presentation: www.quirk.biz/USB-EdQuirk textbook: USBtextbook@quirk.biz