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What is behavioral economics? Why does it matter to you?

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Podcast Episodes

What is behavioral economics? Why does it matter to you?

362. Anticipating Errors: The Secret to Guiding Behavior and Influencing Decisions

In this episode of The Brainy Business podcast, you’ll join host Melina Palmer as she dives into the fascinating world of behavioral economics and decision-making. With her expertise in the field, Melina explores the concept of Expect Error and how it plays a crucial role in understanding human behavior and designing effective nudges. By sharing personal experiences and real-life examples, she highlights the common errors we make in judgment and decision-making. 

From post-completion errors to forgetfulness, Melina demonstrates how anticipating these errors can lead to improved decision-making and behavior. Throughout the episode, she provides valuable insights and practical strategies for businesses and individuals to leverage the power of nudges and choice architecture. So, if you’re interested in enhancing your decision-making skills and understanding the psychology behind our choices, this episode of The Brainy Business is a must-listen. Get ready to gain valuable knowledge and unlock the secrets to better decision-making!

In this episode, you will:

  • Understand the impact of errors in decision-making to improve your choices.
  • Harness the power of choice architecture to shape your decisions and outcomes.
  • Discover effective nudges that can influence behavior and guide decision-making.
  • Enhance the effectiveness of nudges by incorporating sensory cues.
  • Create consistency in your routines and habits to optimize your decision-making process.
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HERE'S A 2 MINUTE TIP.

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SHOW NOTES:

00:00:00 – Introduction,
Melina introduces the episode, which focuses on the E in Nudges – Expect Error. She explains that humans make errors in judgment and decision-making all the time, and emphasizes the importance of designing interventions to support behavior.

00:03:32 – Importance of Expecting Error
Melina discusses the importance of expecting errors in decision-making and how it is the reason why nudges and choice architecture exist. She highlights that humans are not perfect, unlike the fictitious species of econs in traditional economic models, and provides examples of errors we can expect in everyday life.

00:07:53 – Post-completion Error
Melina explains the concept of post-completion error, where we mentally check off a task as done even if it is only partially completed. She shares her personal example of forgetting to move the laundry from the washer to the dryer. Melina also mentions the importance of incorporating all the senses when designing nudges to prevent errors.

00:10:22 – Consistency and Medication Errors
Melina discusses the importance of consistency in preventing errors, using the example of medication adherence. She explains how taking medication daily and at a consistent time can help reduce the likelihood of forgetting. Melina also mentions the use of placebo weeks in birth control pills and the recommendation to take weekly medication on Sundays.

00:15:22 – The Power of Strategic Foresight
Strategic foresight allows businesses to anticipate and solve errors before they happen, creating a strong reputation for problem-solving and customer service.

00:16:44 – Empowering Employees to Make It Right
Giving employees the authority to rectify mistakes on the spot, such as offering compensation or going above and beyond, creates a culture of exceptional customer service.

00:18:07 – Going Above and Beyond
The Ritz Carlton is a prime example of a company that empowers its staff to do whatever it takes to make things right for customers, creating a sense of trust and loyalty.

00:20:36 – Anticipating Errors
By understanding the busy and overwhelmed state of customers and staff, businesses can implement nudges to help prevent errors and alleviate stress.

00:23:34 – Adding Value to Processes
By considering the needs and potential errors of customers and staff, businesses can enhance processes by adding helpful features, such as including batteries or recommended add-ons with products.

00:31:42 – Gmail’s Nudge Feature
Gmail’s nudge feature helps users stay on top of their emails by putting important emails back at the top of the inbox after a few days of inactivity. This nudge includes a message in a different color text, like orange, that prompts the user to follow up on the email.

00:32:41 – Hot State and Cold State
Understanding the concept of a hot state and a cold state is essential in behavioral economics. In a hot state, people are more likely to make impulsive decisions and struggle to stick to commitments they made in a cold state. Strategies like self-exclusion lists for gamblers and using Dysulfram for alcoholics can help individuals stay on track even when in a hot state.

00:34:14 – Precommitment and Save More Tomorrow
Precommitment strategies, like the Save More Tomorrow program, can help individuals increase their commitment to certain behaviors. For example, asking individuals to commit a percentage of their future raises to go directly into their retirement savings has led to significant increases in contributions over time.

00:35:45 – Consistency and Staying Top of Mind
Consistency is crucial in business to stay top of mind with customers. Drip campaigns and regular content updates, such as blogs, podcasts, and newsletters, help remind customers of their initial interest and keep the brand in their routine.

00:37:38 – Conclusion,
Melina’s top insights from the conversation. What stuck with you while listening to the episode? What are you going to try? Come share it with Melina on social media — you’ll find her as @thebrainybiz everywhere and as Melina Palmer on LinkedIn.

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