Behavioral Economics and Social Games

Behavioral Economics and Social Games

Playdom Business Intelligence Team

Dave Botkin Elena Rykhlevskaia

Agenda• How does brain make $$ decisions• Behavioral economics principles to:• Help customers understand their preferences• Price virtual goods• Influence purchase decisions

Your money and your brain

We all look the same in an MRI machine

Your brain knows your decision before you know it

Nucleus accumbens Prefrontal cortex

Anterior insula

• Gain prediction

• Loss prediction • Strategic reasoning + execution

Brain activation predicts your decision to purchase

How do we decide?

Reason guides soul to truth Intelligent intuition

Reason vs. emotions

Reason + emotions

Rational + Emotional = Decision

Ames room: heuristics cause a mistake

• Emotions are a decision making resource • Fast• Help with complex choices

• Emotions can misguide us• Heuristics / biases

Helping game players make a decision

• How do you help them discover their preferences?

• How do you price virtual goods?

• How do you influence users to buy?

Know what they want

Know what they are willing to pay

Inspire immediate actionGain

prediction

Reasoning & execution

Loss prediction

Help customers find what they want

• Efficiency• Aesthetics

Different customers value different things. E.g.:

• Financial gain/loss optimization

• Time• Revenge & competition

Revenge and competition

Saving time

Efficiency seekers choose best alternatives

Which one would you choose?

Efficiency seeker’s city

Decorator’s city

Aesthetes / Decorators chose things they “like”

• Don’t know own preferences that well

• Context matters

• Rely on reference points to understand own preferences

We do not know our preferences well

Which sweetheart would you buy?

$32,000 $30,000

STEVE THE COMEDIAN

$32,000

MOST FUN

Context matters• Online only - $59.00• Online + print - $125.00• Print only - $125.00

0%10%20%30%40%50%60%70%80%90%

Online Online + Print Print Only

Perc

enta

ge

Online Online+Print Print Only

Perc

ent s

ales

3 options2 options

Financial gain/loss optimizationDeals, discounts and bundles

Increasing perceived value• Good things cost more $$$

• Brain pleasure centers light up to pricier goods

• Expensive drugs work better

• Lower priced items assumed to be of lower value

• Good things are wanted by everyone else

Pricing

• Coherent arbitrariness - there is no “right” price in a consumer’s mind

How much are customers willing to pay?

• Anchoring and reference – people use nearby comparison and adjustment

How do we infer value?

$279 $429

Anchoring

Would attend if paidWould pay to attend

59%

3%Willi

ng to

atte

nd a

po

etry

read

ing

35%

8%

Would attend for free

Default option provides an anchor

Conversion• Avoid choice overload

• Minimize perceived loss with respect to gain

• Use weapons of influence

Avoid choice overload

0%

5%

10%

15%

20%

25%

30%

35%

6 Jams 24 Jams

Percentage Purchasing Jams% customers who purchased jam

jam variety offered for tasting

What would you change in this store front to help customer decide?

Minimize perceived loss with respect to gain• Loss aversion:

Losses are 3X more painful than gains are pleasurable

• Paid contract spoilage recovery vs. instant completion: 3x more users opt in

Loss aversion

KEEP

Influence ammo: Social referencing

Validation Scarcity Conformity

Influence ammo:Reciprocity

Recap

Know what your customers want

Know what they are willing to pay

Inspire immediate action

Resources

• Treat virtual goods as retail and consumer products• Reference successful retail practices outside of the social gaming space• Research psychology of consumption

• Framing and presentation• Optimize number of choices• Experiment with context• Make some options “pop”

• Techniques for suggesting a price• Anchoring, reference points• Try charging 2X more

Things to try today

Thanks!