Predictably Irrational

I had the opportunity to attend to a presentation from Dan Ariely a few months back. He is the author of the famous “Predictably Irrational” book (and its sequel: “the upside of irrationality”)

The concepts he explores are fascinating. Well, at least for anyone interested in human behavior and why people often make choices that look, without the concepts he explains in ind, completely irrational.

From pricing to presentations and from work to home, I found these books not only very entertaining but also unsettling (i.e. the theory of the “efficient markets hypothesis” is pretty much debunked) and directly applicable in a field like marketing.

One example if this applicability is the concept of offering 3 products to your customers. Although one of his case in point is about choosing between 2 equally exciting trips to Paris or Rome, the concept he described mapped completely with physical products too.

What he explains is that, to skew a customer’s choice towards one particular direction, the easiest way is to offer them three choices. Two very similar and a third one fairly different but or equivalent value. The human brain being what it is, one will naturally compare the 2 similar (and you’ll manage to make the one you want the customer to pick the obviously most interesting one), then compare the “winner” to the 3rd one. However, when getting to this last comparison, the positive feeling build during the first choice will carry on to the second choice.

In “math” terms: if the choices are A1, A2 and B.

  • Customers will select between A1 and A2 first, instinctively. If A1 wins then
  • Customers will select between A1 (with a positive feeling about it) and the similarly appealing (but not similar) B
  • A1 will be selected much more often than B.

In his travel examples the choices were:

  • A1: Rome, all expenses included, nice hotels, tours, etc.
  • A2: same as A1 but without breakfast
  • B: Paris, all expense included, nice hotels, tours, etc.

A1 looks better than A2, so that’s an easy pick for the customer. Then, with this positive feeling about Rome with breakfast (A1), Paris consequently loses and A1 is chosen more often than not.

And it works with regular products too, I have witnessed this.

 

 

 

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