Embed Size (px)
DESCRIPTION
USB Presentation by Rob Stokes
Citation preview
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.
