Why every business needs behavioural economics

What business are you in?

1 People Pa4erns Pty Ltd. All rights reserved.

Wrong.

You’re in the business of behaviour.


I mean, just think about it.

We spend all day geDng people to DO something.

Turn up. Listen. Agree. Buy.

Write, read, type, talk, come, go…. 3 People Pa4erns Pty Ltd. All rights reserved.

So isn’t it a good thing to understand what influences behaviour?

In fact, isn’t it an imperaOve?


Welcome to behavioural economics.

Think of it like a playbook on human behaviour;

what influences us to DO something what influences us to NOT DO

something


Like most things, it seems complicated when you start.


I mean there are so many concepts to get across!


Ambiguity effect

Anchoring

Bandwagon effect

Certainty bias

Choice brackeOng

Clustering illusion

Decoupling

Endowment effect

Diagnosis bias

Framing

Hedonic framing Hyperbolic discounOng

InformaOon avoidance

Actor-‐observer bias

Availability bias Impact bias

Mental accounOng

Loss aversion

RepresentaOveness

Resolving cogniOve dissonance

Status Quo(default) bias

AdaptaOon

CompleOon

Contra free loading Drop in the bucket effect

Herding

Ikea effect

Not invented here bias

Pa4ern recogniOon Procedural fairness

RelaOvity

Revenge

Short term bias

Self herding

Sunk cost

Vividness Fluency

Judgment heurisOc Halo effect

Systems 1 & 2

Scarcity percepOon

HeurisOcs

DepleOon effects

Free

Inter temporal choice

ConfirmaOon bias Choice paradox Rules of thumb


But really it comes down to four core rules…


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4. Ownership

Own position

3. Potency

Vividness of outcome

1. Congruence

Make sense of things

2. Simplification

Simplify decisions

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And an understanding that as consumers, there are behavioural influences that compel us to do

something and to not do something


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As consumers we are kind of like magnets.


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Some behavioural influences a4ract us to DO something.

That’s a be4er opOon than the

other one

I can get it today!

I don’t have to pay for ages

I’m almost done so I may as well

finish

They’re almost out of stock so I be4er get one

now

I chose it last Ome and it was ok, so I’ll choose

it again

I prefer the one I helped design


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Whereas others influence us to NOT DO something.

It’s too hard to choose. I’ll just do

nothing

I’ll sOck with what I did last Ome

I’ve put too much effort in to stop

now

That fact doesn’t make sense with what I know so it must be wrong

I have more to lose than gain

My contribuOon won’t make a difference

My idea was much be4er


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Once you know the reasons behind what influences behaviour, you’ll see your business in a whole new

way.


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Because you’re in the business of behaviour.


Email [email protected] Call 0408 392 173 Follow @peoplepa4erns Visit www.peoplepa4erns.com.au Read more on Behavioural Economics Bri’s blog www.peoplepa4erns.com.au Bri’s book 22 Minutes to a Be4er Business

Find out more about the business of behaviour
