Introduction to Applying Behavioral Economics
Melina Palmer: Welcome to episode 588 of the Brainy Business Understanding the Psychology of why People Buy Today’s episode is for everyone who says where do I start when it comes to applying behavioral economics? Ready? Let’s get started.
Announcer: You are listening to the Brainy Business Podcast where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now, here’s your host, Melina Palmer.
Melina Palmer: Hello. Hello everyone. My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. Since you’re here listening to this episode, I would have to assume that you have some interest in human decision making, behavioral economics, neuroscience or psychology and how they apply, both personally and especially in business. If not, please do let me know what did bring you here because I’d be fascinated to learn about it anyway. One of the common conversations I have with listeners and clients is about knowing where to start with all this stuff or where to focus your attention. There are hundreds of concepts guiding the decisions human brains are making at any given time. Do you need to understand and master them all before you can start using this in your work? How do you know which ones are for you and when should you start testing stuff? What if you miss something? I totally get that feeling and after years of helping people with this, I have found an optimal number of concepts to work with so you can dig in and start seeing results without getting overwhelmed. This episode is all about how many concepts are optimal and how you can pick the best ones for you so you can get started already, or if you’ve been sort of starting and feeling like you’re spinning out a bit. It’s a way to help you focus and make more progress really quickly. Before we get into the episode, I want to be sure you know that there are links in the show notes for my top related past episodes and books, ways to get in touch, and more. It’s all waiting for you in the app you’re listening to and at thebrainybusiness.com/588.
The “Find Your Five” Framework
Melina Palmer: Now let’s jump right in and talk about how to get started applying behavioral economics to your work. Okay, so as I alluded to in the opener here, one of the most common things I hear from people is something along the lines of I love it. Where do I start? I also get people trying to learn everything and feeling stressed as they’re trying to figure out when they’re ready to move from learning mode to doing mode whenever you’re doing something new. It’s common to want to be really sure before you start so you don’t mess up. It makes sense. And that’s its own set of behavioral biases your brain uses to try to keep you safe. In my opinion, you learn so much by actually trying things. So my advice is to start testing pretty early. Just don’t learn one concept or listen to one episode and put all your eggs in that single basket with your full budget. Like scale matters here. So what’s the right number of concepts to focus on? My recommendation and what I give all my clients is five based on your stated goals. And we call it find your five. Much more than five and it gets murky. It’s easy to hide in the options and spin out much less. And you have blind spots. Not enough diversity of thought. Five is enough to remember without a list and enough ground to get you past whatever you just jump in with. If you only had a couple of things. So once you know your five, you can start testing little things right away. A subject line, how you send an email, how you open a meeting. You don’t need budget for those things. You’re going to do something anyway, so just do it with a little more intention. One caveat though, pay attention to the results. Don’t try something once and forget why. Give it a real shot. Look for something more concrete than, yeah, that felt better. Or I bet people will call. You want to have that testing mentality, some sort of a control, go in so that you can have that intention and see what’s working and continue to build on that. And so the first step, knowing that you can’t test everything all the time, everywhere, that’s its own stressor. That’s unnecessary. You need to know then what you actually want. What’s your goal? What are you trying to achieve? To help with that, here are the five areas we focus on here at the Brainy Business. I guess I really love fives. That was unintentional, but these are color coded. So once you know your focus area, that umbrella category, you can find matching content anywhere. You’re gonna see stuff from me or the Brainy Business on the podcast pages when you go to our website, just at thebrainybusiness.com/podcast. We also sort books into these categories. And when I post on social media, you will start to notice the backgrounds on emails we send. Things like that, are going to fall into one of these five categories as a leading space. The first one is foundations and that’s purple. It’s for anyone that’s just getting started. Who isn’t sure what you want to use this for? Just like general foundational knowledge about behavioral economics. Now next is habits, mindset and productivity stuff. This is red. It can be for your own personal habits. You can also be using this when you think about the habits of your teams or of your customers, when you want to make and break habits, things like that. Then we have leadership and internal communication, which is our orange category that matches my book What Your Employees Need and Can’t Tell You. It’s about advancing your career, getting buy in, being a better leader, teammate, how you’re going to be more strategic at work. Anything that’s happening really in the office is going to be in that orange category. Next we have customer experience, Brand Strategy, Marketing, Consumer insights. This is our blue content matching with my book What Your Customer Wants and Can’t Tell You. And really this is anything that’s going to be in that customer facing space as you think about how people interact with your brand from the outside and if you’re going to really narrow down to our next and final category, that has to do with pricing things, sales, pitching, product design in that specific way, those are going to be green aspects of content which matches my book, The Truth About Pricing.
Setting Goals and Choosing Your Focus
Melina Palmer: So once you pick a category, kind of a theme that you want to get better at as you’re going to apply this stuff. Yes, you can apply some of the concepts across various categories. But let’s say you’re gonna focus just to get started, right? We’re trying to get you moving here. Then you want to know what is it that you’re trying to do within that category. So if leadership is where you’re focused, are you trying to get your team to show up on time? You want them to miss fewer deadlines, you want to get real buy in on an idea or maybe you want to get a new project or you’re trying to have some other advancement in your own career. If you were looking at pricing and sales, do you want more people to open your emails? Do you want more people to reply? Do you want them to book a call to actually show up and not ghost if that’s something you’re having issues with. There’s a lot more territory than that under each category and that’s just a taste. But hopefully you get the idea of the things you might start to look as opportunities to test and implement the specific concepts that you pick from the five that you use within the category that lives in. So once you know your goal, which category it’s in, it becomes a lot easier to know where to focus and to pare down to get your five concepts that you’re going to focus on for now. And it doesn’t have to be forever, really. This would be something that you’re thinking. It’s like, you know, for a year, if you’re really going to get better at customer experience and that strategy, you know, then what do you need to be doing? What are a couple things that would be good mile markers that you would have done between the year? Also, you know, sometimes the category you land in isn’t the end goal, but it’s where you need to start. So maybe your real goal is more sales, but you know that your customer experience is kind of rough. And so that tells you to work on experience first, even though pricing is where you’ll eventually end up. And you may adapt or change your concepts as you go, but you can pick the five. They’re going to help you with that first goal, knowing where it is that you’re looking to end up that you can, like, build upon as you go. Now, I also know that you probably want a few of these things to happen. A lot of those things I kind of rattled off there and because, you know, they tend to go together. I get it. But I really strongly suggest that you pick one, maybe two or three max. That can be things that you’re going to, you know, work on kind of in succession. But like I said, set an overarching goal for the year and then something to test for the next three to six months that’s going to move you toward it, and then you can reevaluate. Imagine it’s six months from now, and you’re looking back on what you’ve done, and you’re celebrating because you have achieved what you were looking to do. You know what’s different? Do you have five new clients? Do you have a 20% lift in your open rate? Do you have a new team to lead? What’s that thing that would make you feel like this was so worth it and it was awesome? And if that’s the case, you know, then what are the concepts that will be most likely to help you to get there as you really start to use them in your everyday work? So hopefully you get it. And you can probably guess why a lot of clients prefer to work with me directly here, so we can talk it through. They can know what’s in scope and what’s not, and being able to say something like not yet, that’s in Q3 and actually mean it and stick to it. Know that the concepts they end up with—their five—are going to be helping them with those goals and that they’re applying them in the right way. And that’s amazing. I love working with people on this and if that’s something you’re interested in, definitely send me an email melina@thebrainybusiness.com and we can talk about it. But I do want to give everyone tips so that you can make an attempt at doing this yourself. So that’s what the bulk of what we’re going to talk about for the rest of the episode is.
How to Select Your Concepts
Melina Palmer: Now that you know your category and you know that I recommend five concepts. The obvious follow up would be how do you pick the right five without knowing every concept out there? The good news is you can start before you know them all. Don’t jump at the very first thing that you hear, but don’t wait until you’ve learned everything either. First option, a way that you could go about this would be to scroll through a comprehensive list of concepts and kind of self sort as you go. I really like BehavioralEconomics.com’s mini encyclopedia of BE. They have an alphabetized list of all the concepts that would exist in the field that include short descriptions, one to three paragraphs. They have some academic sources for top articles and things if you want to learn more. And so you could perhaps set a goal here to say you’re going to read about 10 or maybe 20 of them in a day and you can then make a note of which ones feel relevant to your goal. So you end up with a list of however many that you thought were useful from the couple hundred that you’re going to go through. And then you can narrow down and pick your five from there. That’s a good option. I also have a series that I did here on the podcast that was called All the Biases. It ran across episodes 45 through 54. You’ll note there are 10 numbers for eight episodes because I broke that up with the behavioral economics analysis of Costco and a full episode dedicated to the concept of time discounting. So you could go through those and you could hear those concepts, hear me give you a little bit about each of them and make notes kind of in that similar way. As a quick tip, especially if you’re new here, so you know that episode numbers do work as direct links. So you could go to thebrainybusiness.com/45 and it will take you right to the episode about all the personal biases that are going to come up. So that’s always an option. That’s a way that you can go through this process. Love it, if that’s what you want to do. And if you want a cheat code version, what the rest of this episode is: I’m going to go through each of my top five categories and give you my top nine concepts for each of those categories. These are the ones that I most commonly give to my clients who are doing this work when we’re working together. So what we’re going to do, we’re going to go through each of those five categories. I will pretty quickly give you each of those nine concepts with just a little taste of what it’s about so you can learn more. You’re going to notice that some concepts show up more than once. Framing is one of my favorites, so longtime listeners won’t be surprised that you hear that often. But there are others that are a little bit more diversified, so you get a real range of concepts and ideas as we go. These are the fast, more like headline versions, giving you a little taste of each one. And for everyone who is a subscriber of the newsletter, you’re going to get a little bit more detail with links out to the full episodes. If you’re not already subscribed, I would recommend doing that. Go to thebrainybusiness.com/join to get on that list. I’m going to be sending out emails over the coming weeks with that information to help give links, all that good stuff.
Top Foundations Concepts (Purple Content)
Melina Palmer: So with that, our rapid fire starts now. Enjoy. Okay. I’m starting with foundations because it’s the foundation. If you’re just getting started, you’re not sure what to focus on. My top recommendation is to go where your heart takes you. If you have a specific concept that got you introduced to the field and that you’re just genuinely excited about, definitely have that on your list. Right. Maybe you’re going to come into this with one or two that you really love. And so you’re just looking to add three to the list that you already have of concepts. That’s amazing. Do that, learn about it and know that you can be adding as we go.
Melina Palmer: So with that being said, here’s my most common list that I recommend when people are just looking at the foundations. So first is habits and status quo bias. I know I’m combining two here to stick to my limit of nine right off the bat. But trust me, these really go hand in hand. So knowing how much habits impact our decisions every day and how rooted people get in their status quo and how much the brain loves predictability is just foundational to the whole field. You need to see it, you have to question it, start noticing it everywhere. You must be thinking about and including this in your work. So second, we have system one and system two thinking, which you may know I refer to as the subconscious and conscious processing that the brain does. So this is the framework that is introduced by Daniel Kahneman and Amos Tversky. And it’s really underneath everything else you’re going to find on this list. So knowing that humans make 35,000 decisions a day on average, the bulk of that is done in that subconscious processing using habits and predictability and the status quo. And so we want to know what’s in that system one subconscious. When are we getting into the slower, more conscious and deliberate thinking in system two and how that all is going to work for you or against you as you build into your concept. So very foundational item to be aware of and know about and be thoughtful to as you’re looking to apply concepts. So herding is next, and it includes things like social proof and social norms. We’re a herding species. We look to others like us to decide what’s safe, what’s smart, what’s our best choice, what’s expected. No one’s going to tell you in a focus group that they bought a toothpaste because their cool older sister used it in high school. But that pull to fit in drives a huge amount of what we actually do. So understanding those instincts really matters. Choice architecture is next. Absolutely foundational. Got to have this one. This original work came from Richard Thaler and Cass Sunstein. And really it’s knowing that how you present options changes the choices that people make. Whether you think about it or not, you are already a choice architect. And the question is whether you’re doing it on purpose and with that intentionality, which I always recommend that you do. So knowing what it means to be a choice architect and how you can better present decisions is really key and important. And that’s very closely related to Nudges, which also came from Thaler and Sunstein. And as a quick caveat, NUDGES is an acronym for six categories. So it’s a big one on its own. So maybe you want to focus on just one letter, like you’re going to look at incentives or defaults, and that’s going to be your concept. Or maybe you’re going to dedicate two of your five concepts to this. So one is going to be just the overarching idea of nudges, and then you want to have another that’s about expecting error and giving feedback. That’s your other concept here out of your five. So there’s a lot of opportunity and options within that based on what your goals are. So I would recommend learning at least a little bit about the whole set of what nudges are. I do have a full series on it, and then you can decide how much of your five it deserves based on your goals.
Melina Palmer: Framing is next, and it’s one of my favorite concepts, as I said, and it is where I tell a lot of people to start. This concept says that how you say something matters more than what you say. And you can loop a lot of other concepts under this umbrella. You can frame with social proof, you can frame for your audience’s values, you can frame with numbers. You can be framing for so many different things. And there’s a lot of options to safely test here, like I said, the subject lines of an email that you might want to write out 10 versions instead of just going with your first instinct. Or you can frame about your mindset of working on a project or understanding what the real problem is before you just jump into trying to solve something. Lots of options here, really great one to just test and practice and try to frame things in different ways. Next, and I’m counting this as one because they’re really two sides of the same coin, we have optimism bias and negativity bias. So on the optimistic side, we tend to think we’re better, faster, smarter, stronger and more disciplined than everybody else, including the us of five minutes ago. But we’re also really drawn toward the negative. Looking at what might go wrong, we might catastrophize. We really pay more attention to negative information. We remember it longer and it can guide our decisions. That’s the negativity bias. So you could take some time to figure out which one is really showing up for your teams. Where are they too optimistic? Where are you leaning in on that negativity? There are options there to see how it’s showing up for you, for your team and for your customers. Next is time pressure. The way people make decisions changes when they’re under pressure. Think about that countdown clock when you’re trying to buy tickets on Ticketmaster with plenty of time. We’re more risk averse. We evaluate, we procrastinate. But once a deadline comes up, you know, maybe we realize that that thing is due on Friday. All of a sudden we’re loss averse and we’re much more likely to act. That’s really important when you think about how and when you present information for people. Finally, for this category we have familiarity bias. You know, we like things that are familiar and we believe them more too, just from repeated exposure. Seeing a headline a few times makes us like it and believe it more. That’s why consistent taglines and logos and brand messaging matters, and unfortunately why misinformation can perpetuate the way that it does. So to sum up foundations, my top nine concepts for you are habits and status quo bias, system one and system two thinking, herding, choice architecture, nudges, framing, optimism and negativity bias, time pressure, and familiarity bias. And remember, anything that speaks to you is fair game, even if it’s not on the list. I could easily argue for a dozen others on the list. And while that holds across the board for this category especially, definitely feel free to follow your heart.
Top Habits, Mindset, and Productivity Concepts (Red Content)
Melina Palmer: Now let’s move on to our next category which is about habits. Mindset and productivity are red content. This is your own personal habits. Maybe you want to exercise more, you want to be more consistent about pitching and outreach, you don’t want to get distracted by your phone. But it’s just as important when you think about the habits of others. Maybe it’s a leader and you’re thinking about your team’s habits and how they’re going to react to change. Or perhaps it has to do with this brand messaging and you’re thinking about what your customers are going to do, what their habits are. I work with a lot of FMCG clients—that’s fast moving consumer goods—and they operate in that habit territory constantly. If you sell soap or toothbrushes or coffee machines or you want someone to download your app, you need to understand the habits they already have and when it’s optimal to become the new one, how you can help them to see that they would want to break whatever habit they’re already working with. So not surprisingly, the first concept here on our list is habits. We covered the basics and foundations, so here I will just add, if you’re serious about changing habits, you want to dig into what triggers them, what fuels them, and why they’re so sticky in the first place. Next is rituals and how they differ from habits. Most habits live in that subconscious, efficiency driven space. Rituals have a bit more consciousness to them. Like if you skip a step, something feels off. You can think about all the little quirky things that a baseball player might do before they step into the batter’s box and they’re ready to swing. Rituals are great for our mental state, and you can build them into how you open meetings, kickoff projects, or design a customer experience that people actually notice instead of doing on autopilot. Next is our DOSE brain chemicals. That’s dopamine, oxytocin, serotonin and endorphins. Habits are really built around the brain chasing more of these feel good chemicals. So understanding what triggers each one and how that lines up with your goals or against them is a genuine win. Herding is next, and it shows up here too. A lot of our habits and mindset are rooted in social norms, in wanting to look good in front of others, or worrying about what they’re going to think. It’s worth knowing as you think through mindset and general habit change. Next is bike-shedding, what I call productive procrastination. You know you should be working on the proposal, but suddenly cleaning out your inbox or doing the laundry feels urgent. Your brain makes it feel important in the moment, even though it isn’t, because that distraction keeps you rooted in the status quo. Expecting this and planning for it is huge for actually changing behavior for yourself, team, and customers. Next is time discounting, what I call the “I’ll start Monday” effect. Research shows that when we think about our future selves, the brain lights up like we’re thinking about a totally different person. Which is why it’s easy to commit to a 5am run tomorrow and so much harder when the alarm actually goes off. There are huge implications if you’re a personal trainer, maybe if you’re at a financial institution and you want to help people save more money now or for retirement, or if you’re selling anything that requires future follow through. Now we have overwhelm. This happens faster than you’d think and it changes the choices we make. One of my favorite studies had people remember either a 2 digit or 7 digit number while doing a series of tasks including choosing a snack. Those remembering the two digit number were much more likely to choose the healthy fruit salad. And those with the seven digit number were more likely to choose chocolate cake. Overwhelm pushes us right into that status quo or those brain chemical sugar rushes—all those things that maybe are keeping us stuck and making it harder to change. Somewhat related to that is the planning fallacy. When we plan, we tend to explain away all the external factors that always come up, like you’re going to get distracted, that there’s going to be a client emergency that lands on your desk, someone is going to send you a last minute meeting invite. If you pair that with optimism bias and time discounting, you can see why it can be so hard to actually change habits when you don’t understand what’s going on. And just as a side note, whether or not this one makes your five, I do recommend you always just add at least a 20% contingency to any timeline or budgets that you’re sending moving forward. You’re welcome in advance.
Melina Palmer: Okay. Our last concept in this category is choice architecture. To reduce overwhelm, you often need to present fewer options, which means thinking carefully about what someone’s trying to do, picking the right choices for them and presenting them in the right order, and the combination of how you present that information. That does of course still lead directly into nudges. So you’re probably going to be getting some of that peripheral knowledge as you go. But I selected choice architecture here specifically and recommend it the most because it has to do with thinking about how the brain decides and how you’re going to present information, and about understanding choice on this deeper level that gets into those micro moments and habits and being more productive. It tends to feel like the best concept to really lean into if we only get one.
Melina Palmer: Speaking of which, let’s sum it up for this habits, mindset and productivity category, which is our red content. We have habits, rituals, DOSE brain chemicals, herding, bike-shedding, time discounting, overwhelm, planning fallacy, and choice architecture.
Top Leadership and Internal Communication Concepts (Orange Content)
Melina Palmer: Now the leadership and internal communication category. This can apply to advancing your own career, but mostly I think about this as leading and inspiring others. Because how can you call yourself a leader if no one wants to follow you and you can’t get buy in on your ideas? Having influence and being more strategic at work is what most people are really looking to do. And that can be about advancing a career, but we want to think about those other people around you. With that in mind, here are the top nine concepts I recommend most. First, the IKEA effect. People like things more when they’ve had a hand in creating them. I like my wonky table more than the nicer one that someone else built because it’s mine and I had a hand in building it. In business, people are more likely to rebel against even a perfect ready-made plan when they didn’t have a hand in creating it. So give them a piece of the design, and they’re far more likely to take ownership and rally behind it. Next is vulnerability loops, a concept I don’t think gets talked about enough. When you’re vulnerable with someone, they’re often inclined to be a little vulnerable back, and that deepens your relationship and builds trust. You do have to go first, which is genuinely uncomfortable, and that’s kind of the point, but it’s so worth it. Whether you’re working on your own career through networking or you’re looking to foster trust on your team or anything else, just being a little bit more open can really work to your advantage. Next is one of my very, very, very, very, very, very favorite concepts: reciprocity. When people are given something, they feel compelled to give back. With teams, that can mean clear communication, being generous with your time, sharing agendas in advance, asking good questions, and actually listening to the answers, and then applying that with the work that you do. Honestly, if no one does anything else on this list except be a little more thoughtful and generous, I feel like that’s still a win. It’s a big part of why “be thoughtful” is the mantra around here. So giving first and knowing that the universe will take care of you in the long run is where reciprocity comes in. Framing is next, and you know this one by now. How you share ideas, opportunities, and even bad news with your team matters more than what you’re actually saying. Frame it around what they value, and it goes a long way toward getting buy in. Next, we have a pairing of overwhelm and status quo bias. People are so likely to feel overwhelmed already in work these days with competing priorities, too many ways to be contacted if you’re constantly asking them to change. On top of that, it adds stress and pushes people back into that status quo. So when we feel overwhelmed, we’re less open to change, more likely to be rooted into that status quo, and it can very quickly become a vicious cycle if you let it. Next is planning fallacy, which you already heard about in habits and probably can see how it applies to teams as well. If people don’t account for the extra stuff that always comes up, you end up pressuring them into unrealistic timelines, which makes them shrink their estimates even further. Overwhelm gets worse, you keep missing deadlines, projects don’t go, and nothing closes out. It’s just a really terrible space to be in. Related to that, bringing back that optimism bias and negativity bias balance, which you can decide based on your team and its needs. So if you have people who talk big and consistently miss their goals, optimism bias might be the more useful lens. If you have people who are constant naysayers afraid of what might go wrong, negativity bias is probably the better fit. Next, we have inequity aversion. When people perceive something as unfair, they get upset very fast and no amount of other benefits are going to fix that. If your team has real dysfunction or difficult dynamics, fundamental attribution error or confirmation bias might be worth a look too. But inequity aversion is usually at the core of it, and as you look into this, you’re going to figure out the difference between inequity, inequality, and fairness. It all really goes together and can be a root problem that is worth solving.
Melina Palmer: So our last item here is getting into that strategic approach that I mentioned at the intro and this concept is functional fixedness. This is when all you have is a hammer, everything looks like a nail. People get stuck solving problems the way they’ve always solved them. Taking more time to be curious, to ask questions and test new approaches to break out of functional fixedness is really important when it comes to business and all the change we’re being asked to undertake these days. Overall, this category does have the most nuance because teams and companies are complicated. If team dynamics are your focus, these nine are a great place to start. But what’s best for you is going to depend on, again, your specific goals. Remember, your five aren’t set in stone. So if you’ve given a concept some real time and realize something adjacent to it is a better fit, go for it. Have some breathing room. Give yourself the grace to find what works for you. But you know, digging in and taking some time based on what your goal is is going to help you to make some really good progress that can do wonders for you and the team moving forward. Now to sum up, the leadership and internal communication category, our orange content: we had the IKEA effect, vulnerability loops, reciprocity, framing, overwhelm, planning fallacy, optimism bias, inequity aversion, and functional fixedness.
Top Customer Experience and Marketing Concepts (Blue Content)
Melina Palmer: Now our fourth of five categories is focused on customer experience, marketing, brand strategy, and consumer insights. This is really anything customer facing, whether it’s in person, on social media, in your ads, when someone’s on hold with your call center, when they’re waiting on a delivery. All that interaction that people have with you that’s building up their overarching experience is in this blue category. If you’re thinking about something explicitly in sales, pricing or pitching, or even into developing a product that you’re going to be selling down the line, that is going to be our green content, which I’m going to talk about last. But know, you know, blue and green really do go hand in hand.
Melina Palmer: First we have the peak-end rule. This is fundamental to any kind of experience. If you’ve ever done experience mapping, you essentially plot every touch point on a scale from plus 10 to minus 10. And the whole map does matter. It’s important to know where you have really negative moments or really positive moments. But when people look back and evaluate their overall experience with you, they do tend to rely on just two data points: the peak and the end. If you can optimize those, remove your biggest negative peaks, be really thoughtful about the end, it can make a really big difference in how people consider their entire experience with you. And know that when I talk about the end, it’s often further out than you think it is. And you’ll figure out what that means as you dig in, if you choose this one.
Melina Palmer: So as you remove those negative peaks, we’ll start with those: you want to be on the lookout for friction, or some call it sludge. So often things are harder than they need to be. You have extra steps or forms or questions or buttons. When you make it easier and reduce that friction, it can go a long way in overall experience. And often you’re asking for stuff that’s more about you than it is about them. And so by making that shift and knowing what they need now to make that next logical step, instead of something you might want to have information about six months from now when you want to pitch them about something else, it can go a long way. So do know occasionally there is a genuine case to add friction or sludge when it’s going to help you say if you want to try to change a habit on purpose. There are cases of that, and it’s good to know both of them. I call that thoughtful friction, but for the most part, most people need to focus on reducing this. So that was about reducing the negatives.
Melina Palmer: Now let’s talk about bolstering those positive peaks. And for that, you have surprise and delight. Delighted customers are more loyal than average ones. Research shows one is worth about 11 average customers. Delight lives in the unexpected. And it’s such a fun concept to work with. I love assigning it to people, because who doesn’t want to be looking for ways to sprinkle shareable joy into your experience and looking for ways to be delighting people all the time. It’s just a really great way to live, I think. So a fun one to include to help bring the fun into it. One of the best ways to create that joy is through that lens of reciprocity. When you delight someone, you’re giving them something and they’re more likely to give back—to buy again or tell a friend. And there was some research done asking people, what is the number one thing that businesses did that delighted them? It was just being nice to them. It’s kind of a bummer given the state of customer service today. But hey, low bar for you! You can definitely be nice. And that’s a great way to open that door into creating that delight that’s going to be important for your overall experience.
Melina Palmer: Now framing is next again, because how you say something matters more than what you say. You want to consider what your customer cares about. Frame your headlines, emails, website copy, social posts, scripts for your call center, all those things around that. Now we have social proof because we’re that herding species. Social proof is huge for brands. These are your five star ratings, your reviews, case studies, endorsements. Maybe you work with influencers of various degrees. And know that as we start to kind of layer our concepts in here, the way you frame around your social proof matters. Saying 80% of our customers buy again hits differently than 4 out of 5 buy again or saying that most buy again, even though we might be talking about the same stat. So if you were to choose framing and social proof as two of your five concepts, you can see how they work together. Now a bit of a pivot.
Melina Palmer: The next concept is color theory. This doesn’t necessarily apply to everyone, it depends on your role, but it is worth knowing. So colors carry a real halo or horns effect. Like let’s say you want to convey that your product is soft or for sensitive skin or something. If you make that be pink because, hey, pink is soft and feminine, that sort of thing, you could actually be repelling a large group of the potential audience, say men who don’t want to carry around a pink product. Whereas a pastel green or something might have a better approach for you. So that on product design and thinking about your overall brand is important to know what each of those colors mean. And a way that applies to a larger group is also to understand how important contrast is when you’re trying to draw someone’s attention to something with that activity of what you want them to do. So I like to give the example of on the Walmart website, a blue button is not really going to stand out like it would on the Target website. But a red button wouldn’t stand out there as much as it would on the Walmart website because of that contrasting color. So knowing that if you really want to draw attention to a button or to a particular area on a photo or something, using color in a thoughtful way can be a really helpful way to guide an experience without having to use a lot of extra words, which is really cool.
Melina Palmer: Next we have the paradox of choice. People say they want all the options, but if you give them too many, it will create overwhelm and they default to their status quo and do nothing. In this case, I like to relate it to the menu at the Cheesecake Factory. If you’ve been there or not, maybe you already know their menu is literally a book. It goes on for pages and pages and pages. But it doesn’t have to be overwhelming. People still are able to choose what they want because of the way they categorize the information. Right? So you can know pretty quickly, I just want an appetizer, or I’m only interested in pizzas, and you can find your way through that experience pretty quickly. But imagine if that same menu was in alphabetical order. It would be absolutely impossible to get anything done. So you might be presenting your information in a way that it’s like an alphabetized menu at the Cheesecake Factory. And so people are bailing because it’s not worth it and they can’t make a decision. But if you are really thoughtful to the decisions they’re making, you can help to present choices in a better way—some of our choice architecture there to specifically reduce or eliminate that paradox of choice so they’re ready to decide and to buy.
Melina Palmer: All right. Our last item in this category is the balance of novelty versus nostalgia. People like things that are new and different, but if it’s too different, it doesn’t feel safe. And they also love nostalgia. But if nothing ever changes, it goes stale. So you have to really find that medium place between novelty and nostalgia. Disney is a master of this. They have new movies that refresh on a cycle. So it’s not a coincidence that all the movies that I loved as a kid are out at the time that I probably have kids that might be around the same age to enjoy those, and we can go to them together. If you go to Disneyland, there are some rides that never change, but others that have a new face on something familiar—again, a really good balance of being new and novel, but also really holding those emotional nostalgic pieces that keep us coming back. Okay, so to sum up customer experience, marketing and brand strategy, our blue content: we have the peak-end rule, friction or sludge, surprise and delight, reciprocity, framing, social proof, color theory, paradox of choice, and novelty versus nostalgia.
Top Pricing, Sales, Pitching, and Product Design Concepts (Green Content)
Melina Palmer: All right, we’ve made it to the final category. Our green concepts of pricing, sales, pitching, and product design. I know that I’m talking about this from the angle of external pitching for clients, funding, investment versus internal budget asks, which is more in like that orange category, but the concepts can still apply there. So I’m going to start with three you’ve already heard today: we have framing, social proof, and reciprocity. They matter here for a lot of the same reasons as customer experience. You want to frame around what the person you’re pitching to cares about, know who they’d want to emulate (that’s your social proof), and be thoughtful and generous first, trusting that reciprocity is going to come back around. But that doesn’t mean you have to be giving out freebies or giving discounts. As a side note, if this green category is your focus, I highly recommend my book, The Truth About Pricing. It walks through my whole process, including deciding whether you’re a value brand or quality brand, and really just walks you through as if you were a client of mine. So really good thing to look at overarching.
Melina Palmer: Okay, so next, let’s move on to some new concepts. Our first is priming. Something that happens just before a decision point shapes the choice that someone makes. Your brain is constantly scanning for threats or rewards, even if you don’t recognize it on a conscious level. So the words, images, and details in your experience are all priming someone toward buying or walking away. Next, scarcity. We value things more when they’re rare. Say if there’s only one of something, oh my goodness, we are ready to spend way more for it than if there were a hundred thousand of something. Is it silly? Perhaps. But it is how our brains work. And so it might feel like, you know, you’ve probably heard of this one and you know, hey, scarcity, scarcity, I know what that means. But there are actually four different types of scarcity. And which ones are going to be best for you really depends on whether you’re a value or quality brand. And there are different ways to apply this concept throughout your branding. It does even apply without physical products. Like, if you’re a consultant, your time is scarce as well, so know that there’s definitely more to this one, and you can really dig deep on it if you want to. And it’s a very motivating concept for people. Somewhat related is loss aversion. Probably doesn’t surprise you to know that humans don’t like to lose things or miss out. That’s why FOMO exists. It’s a really powerful motivator. If there’s no risk of losing out, there’s nothing pushing someone to act now instead of just waiting forever, and people are busy. So this does pair really well with scarcity. Say, a sale that actually ends on a real and specific date or a proposal that’s only good for 10 days. Those are more likely to get people to act than if it just goes on forever. Next, we have anchoring. And while you can anchor with more than numbers, that is really the most common way that this comes up or a really good starting place for people in business, specifically when we’re talking about pricing and sales. So we’ll focus on that. Any number that’s presented before your price shapes how that price feels, even when they’re unrelated. Saying, oh, yeah, we have over 3 million happy customers, and then mentioning that, you know, it’s just $10,000 bucks to work with us makes that number feel smaller. But if you were to say something along the lines of, oh, yeah, you know, I talked to one or two people this week who might also be interested, and it’s just $10,000, that feels much bigger when we’re coming from just 1 or 2 versus that 3 million. So being thoughtful about how you present your packages so you have a high anchor doing some of the work for you, making it so your best offer feels like truly the best offer, is really important.
Melina Palmer: And that loops in our next concept of relativity. I mean, honestly, these two are peanut butter and jelly. They go together so much. This concept shows that we’re really bad at evaluating things in isolation. We need context to help us determine what is best and really move forward with a choice. As an example of really combining relativity, anchoring, and framing here: a $200 espresso machine may feel expensive when you’re just thinking about, hey, I’m just spending five bucks a day, having to drop a full $200 can feel like a lot and something that you want to put off. But if that gets reframed to shift your anchor from that low anchor of $5 a day to say, hey, you know what, in 40 days, this thing is going to pay for itself. And since you’d be spending, you know, over $1,800 a year if you actually buy $5 coffees every single day, you’re going to save $1,500 just in the first year from getting this machine. I mean, really, it’s hard to say no, right? When you think about it in this reframed, relative way about something that somebody cares about. It’s the same price, but it feels completely different based on how you present that.
Melina Palmer: Now, finally, our last concept of all the 45-ish we’ve talked about here today is the intention-action gap. Even when people want to do something, they know it’s better than what they’re doing now, they may still not do anything. And that’s important to know. And it really goes both ways. So I like this one in this category—it can be both. For those customers who might be ghosting you, like life got in the way, it might feel like they hate you and they’re out forever, but you know something else is going on, it’s okay to follow up. And that’s kind of the other side of this coin. Pitching people and selling all the things you know you should be doing, sending those follow up emails, whatever it is, you may have the best of intentions, but you don’t necessarily do the thing. And so helping your team to follow through on its own outreach and actually to send things can help make more of a virtuous cycle for you instead of a vicious one when you understand how that intention-action gap is impacting behavior again on both sides.
Recap and Actionable Next Steps
Melina Palmer: So to sum up for our pricing, sales and pitching category, which is our green content, our concepts were framing, social proof, reciprocity, priming, scarcity, loss aversion, anchoring, relativity, and the intention-action gap. That’s quite the list, huh? Hopefully you had some that stood out for you that were interesting and you want to learn more about. As a reminder, you’re going for five here and you want to start with your goal: both an overarching one for the year and something more immediate to let you point to your specific category. As a reminder, we had purple for foundations, red for habits, mindset and productivity, orange for leadership, blue for customer experience and brand stuff, green for pricing and sales. Once you know your theme, you can think about what you want to test or improve in the next three to six months to help you improve in that. If you only did one thing toward incorporating behavioral economics into your business, what would move the needle most? Once you know what you’re trying to achieve, find your top five concepts, the ones you want to get to know really well over the next six months to a year. You get to start to understand their nuance and how they can apply, and it ripples out in a really cool way as you start using them more often. And like I said, the reason we limit it to five is so that you can remember it without having to go to a big checklist or something. But it’s also robust enough that you can be feeling like and knowing that you’re actually doing more than just jumping in on the first thing that seemed interesting. And that’s really how you build your habit so that this becomes second nature. And once you have a habit of these first five, maybe you could bring in a few new ones based on what your next goal would be. Or you could drop a couple and bring in two new ones that are going to be more important for you as you go and know that the ones that you did spend some time with are always going to be more in the back of your mind since you spent so much time with them. Before you know it, you’re going to be more behaviorally minded in everything that you do, with ripple effects across your whole organization. I am genuinely excited for you. And so I would say when you do make your choices, please come share your five with me. You’re going to find me as @thebrainybiz pretty much everywhere and as Melina Palmer on LinkedIn. Or if you prefer and feel more comfortable, you can always email me melina@thebrainybusiness.com to share those. I would love to hear what stood out for you and all your thoughts about that. And again, for everyone who heard this whole episode and thought, “That’s great, I love it in theory, but I don’t want to do it myself,” maybe you’re worried about choosing wrong, since there really are hundreds of concepts that could have been used on any of these lists. Or if you want help in narrowing your goals first or just understanding the nuance to help pick what your five are and then wanting some guidance as you start to apply and use them, that is exactly the work I do with clients from solopreneurs to global companies, and I would love to work with you. I do this often enough that it’s pretty quick to get your concepts to you with a full packet describing them, how to use them in your case, along with some summary questions you can ask as you’re incorporating them based on your goals. Typically I have that to you in 30 days or less. And we can also work together on applying them if that’s helpful. If you’re interested in learning more, even just have that like inkling of “Oh, should we talk about it?”, head over to thebrainybusiness.com/contact and you can fill out a form or book a discovery call right there to connect with me. Or if it’s easier, feel free again to email me melina@thebrainybusiness.com. I can’t wait to hear from and hopefully work with you.
Melina Palmer: One last thing before we close out the show. I know there were a lot of concepts and things I shared today. I called it rapid fire for a reason! You can of course at any time go to thebrainybusiness.com/podcast or thebrainybusiness.com/books and you can sort by these color coded categories to find these concepts I already talked about in their dedicated episodes, as well as some other ones, if you do want to learn and experiment a little bit more there. Lots of options for you as you get started. I am also going to be sending out a series of emails to my newsletter subscribers over the next several weeks that are going to showcase each of these categories and the top concepts that I shared in the episode today that will have direct links to the related episodes and books, making it easy for you to just get started. You can bookmark it, save it, whatever that happens to be. So if you are not yet subscribed to the newsletter, I recommend going to thebrainybusiness.com/join. All I ask for is an email address—make it easy to remove the friction there for you. And I’m also going to be doing some fun giveaways soon and newsletter subscribers are always going to either know first or be automatically entered depending on the giveaway. So it’s worth having that coming into your inbox. Again go to thebrainybusiness.com/join so that you can start getting those right away, and know that there will be ways to get it even if you’re listening to this later. And yeah, excited to have you there with me, and if you’re already subscribed, don’t worry, you’re going to be getting them. I’m also going to be sharing some on LinkedIn. I have a vision of these coming through with image carousels that I’m excited about that might go on Instagram too. So if you don’t already follow me, please do. I’m @thebrainybiz pretty much everywhere and Melina Palmer on LinkedIn. Connect with me and follow there. I love to be connected with listeners and to learn more and always happy to help where I can. As a reminder, there are links in the show notes to make it easy to get everything we talked about today, a few of the top related past episodes and books, ways to get in touch, and more. And don’t forget to sign up for that newsletter at thebrainybusiness.com/join. Everything’s waiting for you in the app you’listening to and at thebrainybusiness.com/588. And just like that, episode 588 on Find Your Five is done.
Conclusion
Melina Palmer: Join me next time for another Brainy episode of the Brainy Business Podcast. It’s going to be a lot of fun. You don’t want to miss it. Until then, thanks again for listening and learning with me, and remember to be thoughtful.
Announcer: Thank you for listening to the Brainy Business Podcast. Melina offers virtual strategy sessions, workshops, and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness.com.
