Dan Ariely and Behavioral Economics (Part II)

So as promised, here is the rest of my notes from the speech of Dan Ariely.

The Power of “Default”

On the previous post there was a case showing the effect of the default option on the organ donations. This was a very strong example but still there can be a question about the culture or the educational status of the subjects, who are ordinary people that apply for a driving license. To make the minds clear, Dan Ariely gave another case study about doctors, who are expected to be the most aware and responsible professionals in the community. I can not remember either the name of the disease or the medicines but in general the result of this case surprised me to be honest.

There is a common  knee problem that has two options to be fixed. First one is medication for some period and if the pills don’t fix your knee, the doctors delegate the case and give you an appointment with the operator doctors because the knee should be operated. The doctors who can not fix the knee with medicine are the subject of this study. One group of the doctors who stop the medication because they do not see any other option rather than operation are called the next day they send their patient to the operator doctor and told there is a totally new medicine called “Oxiprofis” (i am not sure about the name) that is much more effective than the existing medicines on this problem on the market and there is a certain chance for the patients that need to have an operation on the knee to get fixed without the need of an operation. The majority of the doctors who get this information immediately cancel the appointment of the patients and the operator doctor, call back the patient and start a new medication process with this medicine. That was obvious right?  Here is the surprising part: The other half of the subject doctors are called and told that there are two new medicines on the market called “Oxiprofis” and “Piroxicam” which are much more effective than the existing medicines on the market and if the patients are treated with one of these two options there is a big chance of getting fixed and avoiding the operation. So what do you think the doctors did? 75% of them did nothing and leave the patients get operated. This study perfectly shows the power of “by default.” The first group of doctors accepted the new medicine as a default and the second group did not want to make a decision between one of two options and they kept the process flow by default, which is the operation…

The Jam Study

A jam (some kind of marmalade) brand sets up two different commercial stands in two different supermarkets. At the first stand 6 kinds of different jams are presented and at the other one there are 24 different kinds of jams. Let’s take a look at the process beginning from the interest to the desired end, which is buying:

It is obvious that the 6 jams stand did not take as much interest as the 24 jams stand did. The reason could be the fact that 24 jams stand is bigger, looks richer etc.. Let’s see how many jams the shoppers tried in average. 6 jams stand: 1.4 jams. 24 jams stand: 1.5 jams. So we can say the number of the jams on the stand does not make any difference in the intention of trying the product. What about the buying figures? 30% of the shoppers that visited the 6 jam stand bought at least one jam but only 3% of the other group bought a jam from the 24 jam stand. If we consider there were 100 shoppers saw the two stands in two supermarkets, 12 of them bought a jam from the 6 jams stand and only 2 bought from the 24 jams stand. So what is causing this crazy difference? Dan Ariely says, buying a jam is one of the most simple decision taking and if you make it complex with too many options you can stop the people decide.

How often do you floss?

There is another study of Dan Ariely about setting a new dictation on customers’ minds in seconds and changing their behaviour. Two different groups of people are asked how often they floss with two different scale for each group, one of them asking: “How many times do you floss a day?” and the other one “How many times do you floss a month?” The both scales start from 0 (zero) to “9 and more” and on the bottom of each scale there is another question: “Should you call your dentist and make an appointment?” The majority of each group obviously give the similar answers. The group that are asked how many times they floss a day answer mostly 0,1 or 2. And the ones that are asked how many times a month they floss answer mostly 8,9 or “9 and more”. This result seem to be normal but the interesting output of this study is in the second question. The majority of the first group wants to call their dentist and make an appointment and very few in the second group think it is necessary. The reason is that the people in the first group think if this scale goes to “9 and more”, there must be people out there who floss way more often than they do in the day and since they are just in the start of the scale, they might be in a risk and they feel they need to see their dentist. The second group think they do not need to see their dentist since they are in the end of the scale, which gives them a confidence…

The Economist Magazine Subscription Experiment:

The last case comes from The Economist magazine. The Economist applied a subscription form on the web site. They defined 3 options for subscription:

Web Page Subscription for $59.

Print subscription for $125

Print and web subscription for $125

Obviously no one wanted to pay the same amount for less, in other words no one applied for print only subscription but since they can get both print and web subscription for the same amount, 84% of the new subscribers came from “print and web option” for $125 and only 16% choose web page subscription. Since no one applied for print only subscription The Economist removed this option and left the two options that are web page subscription and print subscription. This time things changed dramatically. 68% of the new subscribers came from web page subscription and 32% choose print and web option. The reason is obviously that web page subscription is cheaper. The interesting learning from this case is that the customer focus on the offer which seem to be most advantageous for them. In the first case, web page subscription was still there and still cheaper than the other two options but “paying the same for more” advantage was much more attractive than “paying less for almost the same.” When the offer for “print and web” is removed, paying same for more perception is gone and this time people focused on the advantage of paying less for almost the same.

All these cases and many more can be found in the two best seller books of Dan Ariely, which are “The Upside of Irrationality” and “Predictably Irrational”. I’ll read them both with a great joy!..

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