Monday, 21 April 2014

What the monkey sees...

The Apprentice final: BE at work

Wed, 6 Jun 2012

The TV series ‘The Apprentice’ may or may not be your sort of thing but Sunday’s final was a must-see for anyone with an interest in behavioural economics.

Consider, for example, Nick Holzherr – one of Lord Sugar’s three finalists. He proposed a software app that would do away with the need for the family cook to work out the ingredients they need for the weekly supermarket shop. They would just select the recipes they intended cooking and the number of people they were cooking for and the app would do the rest, ordering up the ingredients and delivering them to your door. In short, the chore of writing up a weekly shopping list would be done away with.

“The first factor in creating (market) domination is the role of convenience,” notes the behavioural economist Neale Martin in his book Habit. “Starbucks is willing to open a store across the street from an existing Starbucks if traffic justifies it. The typical logic of not wanting to cannibalize existing store sales is replaced by the knowledge that you sell a lot more coffee if you don’t make customers cross the street to get it.”

This is re-enforced in the findings of a study by Johnson & Goldstein, which showed how in countries where we have to ‘opt in’ to be organ donors around 20% of people are registered, but in countries where we have to ‘opt out’ of being organ donors around 80% are signed up. Principle or rational thought has little to do with it; people will always take the easy option.

Holzherr’s “recipe idea” plays to this human tendency perfectly. Personally I’d take it a step further, adding a pop-up reminder for the start of cooking time and loading the recipe to my calendar.

But Lord Sugar didn’t go for it. Maybe he doesn’t do the shopping and cooking in his house and so wouldn’t have the detailed knowledge of current behaviour to see how Holzherr’s idea could make life easier. Or maybe he had concerns over how to monetise it in the long term. But I suspect if he conducted detailed observational research to understand the “bumps” in the online shopping journey he would see what an opportunity this could be.

Lord Sugar certainly displayed his own behavioral tendencies in the final decision, which was between the “safe option” of a tried-and-tested recruitment agency and a “dangerous gamble” – a fine wine hedge fund.

A behavioural economist would have known instantly who would win. Just like the vast majority of humans, Lord Sugar’s decision was determined by an in-built and overwhelming desire to avoid risk. The recruitment agency triumphed.

Comments (1)

The London riots and Herd behaviour

Tue, 9 Aug 2011

As the riots spread throughout London and the rest of the country last night, I grabbed for my edition of Herd to see what it held to explain behaviour such as this.

In the book, author Mark Earls talks about how people’s behaviour can be influenced by a “system that is primed”. A great example he gives is the anger caused by Russell Brand and Jonathan Ross in October 2008 when they left what was widely considered to be an offensive message on an elderly actor’s answer machine.

While the original broadcast generated just two complaints, the priming of the system – talk of overpaid celebrities, bad manners, complaints about the youth of today, as well as a bit of stirring by the Daily Mail – ultimately led to 40,000 complaints and public outrage.

And as with the riots, the system has been primed:

  • Talk about the failings of the police force – illustrated by the shooting of Jean Charles de Menezes at Stockwell in 2005, the death of Ian Tomlinson at G20 protests in 2009, and the police’s role in the News of the World hacking and bribery scandal to mention but a few
  • The bleak economic outlook and the constant talk of government cuts and council cuts.
  • The uprisings spreading across the Arab world.

All of these stories getting into the zeitgeist – rather than just the shooting of a Tottenham man by police last week – are likely to be some of the things that are truly responsible for the rioting.

Comments (4)

Closing down sales

Wed, 13 Jul 2011

After relentless and ongoing revelations about alleged bad behaviour, Rupert Murdoch’s son and News Corporation heir apparent James announced the closure last week of arguably its most treasured printed asset, the News of the World (NOTW).

The public at large, and most significantly NOTW’s advertisers, reacted as one.

They had finally had enough of the phone-hacking scandals linked to the paper’s newsroom – even if its current crop of reporters plead their innocence.

But despite the widespread outrage at the paper’s actions, its final edition went on to sell a record four million papers on Sunday, a 10-year high.

Why is this?

One factor at work here is the scarcity bias. This is where things become more desirable as they become less obtainable. Incredibly last editions of NOTW are already selling on eBay for £30 each.

A second factor is that by being the last edition ever, it made it socially acceptable to buy the paper again – something that had been socially unacceptable all week. Knowing our behaviour is within the social norm (however unconsciously) is vital to us acting in a certain way.

Finally, the NOTW effectively maximised one of its existing drivers of purchase – the fact that people do not want to miss out on something juicy. This is why even AB readers will regularly buy NOTW alongside a quality newspaper.

At least, they used to.

Comments (2)

How did Jedward get the UK’s douze points?

Tue, 17 May 2011

Saturday night’s Eurovision cheese-fest was painful to watch, but among the mass of mediocrity Jedward, the Irish twins, stood out for their tuneless singing and uncoordinated dance moves. So why did they get top points from the UK (and others)? And are they any clues as to why Azerbaijan won with such dire schmaltz?

The problem in the past has been blamed on the judges. They were seen as following narrow national interests and simply voting for their country’s friends and neighbours. To overcome this ‘diplomatic bias’, the voting system was changed a couple of years ago. Give the population of each country 50% of the vote and no longer would a small coterie of judges be able to put politics ahead of art.

Alas, the new system has not worked the way the organisers hoped. As The Guardian points out, voting patterns are much the same as they ever were, with the eastern bloc still largely voting for each other and Greece still voting for Cyprus and vice versa. So are we all motivated to behave like diplomats and back our neighbours in support of national interests, or might there be something else going on?

On Saturday night 25 songs were performed in quick succession over two hours. And in the UK at least, there was not even the small mercy of an ad break.

Behavioural economics suggests that when we are blitzed with information like this, we abandon reason and rely on ‘heuristics’ or metal shortcuts to make decisions; we can’t process the information in a rational way so we defer to our gut instincts.

“In making predictions and judgments under uncertainty, people… rely on a limited number of heuristics which sometimes yield reasonable judgments and sometimes lead to severe and systematic errors” (Kahneman & Tversky, 1973)

But what shapes our gut instincts?

There are a range of factors but what we are familiar with is key. If we have heard a song before or the song sounds like something we have heard before then we are much more likely to latch on to it.

So perhaps it is not so much rational diplomacy but emotional familiarity that makes us vote for neighbouring countries in Eurovision.

Jedward’s familiarity to us in the UK (rather than a bias towards the Irish) is much more likely to explain why we voted for them. And we gave eight points to the people from Moldova who were a very familiar cross between Madness and the Monster Mash.

And what of Azerbaijan? Was there not something very familiar about their song Running Scared? The costumes seemed to come straight off an Abba set.

Outside Eurovision, familiarity also helps explain many of our purchasing decisions. It helps explain why, after Eurovision, with our cracking headaches, we reach for branded aspirin when unbranded versions are available for a fraction of the price.

Comments (10)