(Preventing) Manipulation Through Irrationality

Through the theories discussed in Dan Ariely’s Predictably Irrational (and largely based on the excerpts in Chris Yeh’s outline of the book), two articles have emerged on different sides of one topic: our irrational decision-making in terms of products and purchases.

One on how to take advantage of our irrationality when marketing products, and another on preventing manipulation by being aware of our own irrationalities.

One point from each article, per section:

Price Relativity and the Encouraging of False Comparisons

  • Offer a premium version of your product/service and make it easy to compare.
  • Realize that some premium options exist as decoys — that is, they are there only to make the less expensive options look more appealing, because they’re easy to compare.

The Fallacy of Supply and Demand and the Reinforcement of Anchoring

  • Set yourself against “premium” competitors in premium markets. Positioning is critical to the perception of value.
  • Scale your purchases to your needs, not your circumstances or wallet size. Try to objectively measure the value of what you’re buying.

The Zero Price Effect

  • Offer free stuff (especially to those whose affections/actions you desire most), but make sure you get ROI from it.
  • Do not overestimate the value of items you get for free. Resist this by viewing free stuff sceptically rather than welcoming it with open arms. What are the hidden costs involved (restriction on future choices, time and effort expended, etc.)?

The Exploitation of Social Norms

  • The mindset of volunteers vs. employees (free vs. paid) is very different — consider which behaviour set you want before deciding on the type of labour to attract.
  • Consider carefully before choosing to participate [for free].

The Influence of Arousal

  • Arouse your audience and their behaviour (especially their decision-making) changes drastically.
  • Be aware when you are being aroused (not just sexually).

Designing for Procrastination

  • Procrastination is an extremely common human behaviour — plan for it in your business and take advantage of it where it can help (trial offers that turn into paid services, for example).
  • Either favour fixed-rate, fixed-term plans — or become meticulous about cancelling unused recurring services, or services with automatic price increases.

The Endowment Effect

  • ‘Free’ products are valued less than purchased products. It’s easier to get more money from your existing customers than it is to attract new ones.
  • Be willing to walk away from–and never rely on your internal value judgment of–already purchased goods/services. Ask an impartial third party for their objective advice.

Capitalisation of our Aversion to Loss

  • Narrow your customers’ choices and they’ll be more likely to commit.
  • If your choices are artificially narrowed, don’t passively get funnelled towards the goal you’re being herding toward. Don’t pay extra for options, unless you can point to hard evidence that you need those options. Some options exist just to make you doubt yourself.

Engender Unreasonable Expectations

  • Take advantage of expectations of value creation. Position your brand so that users expect great things, and they’ll get them.
  • Let your own opinions guide you, not the opinions of others. Don’t let marketing set your expectations. Rely on evidence and facts.

Leverage Pricing Bias

  • Higher pricing means higher expectations, but also more fulfilment, even if the product isn’t actually more fulfilling. The placebo effect is strong.
  • Price often has nothing to do with value. Don’t fall prey to the ‘moneymoon‘.