When Bolt wanted to attract potential drivers in Slovakia, they faced tough competition from Uber and other taxi companies. They knew they had to stand out, so they’ve decided to give a shot to behavioral economics principles.
All it took was a couple of cleverly chosen words to make candidates feel like they can’t miss out on the opportunity: “Would you rather sit at home in the evening or easily make an extra €60?” The answer was a no-brainer – who would give up such easy money? In the end, the conversion of Bolt’s job ads increased by 57%.
Behavioral economics
Science can come in handy when you try to change that default “no” of people fatigued by advertisements and constant decision-making.
“Our society is obsessed with productivity and efficiency. Whenever we face a problem, we think that technology, an algorithm will solve it,” says Matej Sucha, Founder and CEO and MINDWORX. However, there are more straightforward solutions for the issues we can’t seem to crack. “Behavioral economics is cheaper, more efficient, and easier to implement,” he adds.
Simply put: relying on complicated calculations often won’t work in a place where a basic understanding of behavioral principles would—one of the reasons being that a lot of our decisions aren’t strictly rational. “When deciding to buy something or choosing a country for holidays, to a large extent, it’s driven by our subconscious mind,” Sucha outlines.
Motivation and friction
When companies sell their products or services, they tend to steer towards motivation increase. Communicating the benefits and great deals the customers would get may not be enough to hit that sweet spot. That’s because changing human behavior should include another mechanism: decreasing friction.
“You can have the best product in the world, but if there is one little uncertainty which a customer might have, chances are they won’t buy it. You can increase the benefits, decrease the price, but it won’t work,” Sucha says.
Loss aversion
MIDWORX has worked on a fascinating problem with a client in the insurance business – their customers didn’t want a reliable 1-year free travel insurance. Matej Sucha and his team kept wondering what could be the barrier that caused such resistance. “Turns out we didn’t need any sophisticated algorithm, AI, or complicated psychological profiling,” he says. They implemented the decades of existing research on behavioral economics and consumer psychology and found the point of friction: it was uncertainty. “This is the point where we turn back and abandon the decision,” Sucha explains. In this case, the customers were worried that they would forget to cancel the renewal after a year.
They have decided to slightly change the offer that initially sounded negative and used a method of “framing” to give the whole message a completely different vibe.
The initial message:
After the first free year, your insurance will automatically renew for € 21.60.
The reframed message:
After the first free year, your insurance will automatically renew for € 21.60 so that you won’t need to worry about your next traveling season.
“We used a principle called loss aversion, which says that we are roughly 2.5 times more sensitive to losses than gains. We can either talk about the benefits of this travel insurance or reverse it and point out what the customer would be missing out on,” Sucha describes. Potential customers suddenly realized it’s a great deal, and so they were hooked.
You don’t need AI to understand humans
According to Sucha, around 90-95 percent of purchase decisions are not rational. Utilizing that means that solutions to complicated problems can be quite simple – you need the right tools and mindset of a behavioral scientist.
“If you’re trying to apply rational solutions to irrational behaviors, it simply won’t work,” he says. “Admitting that not everything that makes sense works and not everything that works makes sense is the right mindset. If you embrace that and bring in behavioral principles, you can achieve huge efficiency, productivity increases, and rising revenues. Combining this with tech is, I believe, the future,” he sums up.
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Matej is the founder of MINDWORX, a unique consulting company helping clients understand and use insight from psychology and behavioral economics in domains like marketing, sales, HR and behavior change. He started focusing on the topic of behavioral economics during his studies at the University of Copenhagen in Denmark and ETH Zürich in Switzerland. After gaining experience in the corporate world, he quit in 2015 and fully focused on MINDWORX. Nowadays they are consulting for banks, insurance companies, telco industry and many more.
