Through the years, the Duncan Anderson Design Lecture Series has invited top professionals to share their knowledge and experience with design students at CSULB. This coming year marks the expansion of that series to a bi-monthly event. Thanks to Cecelia Anderson-Malcolm and the Duncan Anderson Endowment, CSULB now has an ongoing design lecture series to rival those at private design schools. The CSULB Industrial Design Program is working closely with IDSA-LA, and its student chapters, to schedule an exciting line-up of speakers. Please let your chapter officers know of professionals you want to meet and hear at future events.
In this lecture, I introduced why designers have to adopt behavioral science to understand customer experience deeply. For instance, prospect theory neatly elucidates why once people have a single extraordinary experience, they can no longer revert to previously satisfactory mundane experiences. It is because the extraordinary experience can become a reference point, while the mundane experiences transform into sources of negative affect. Since loss looms larger than gain, people avoid mundane experiences.
This paper presents a critique of expected utility theory as a descriptive model of decision making under risk, and develops an alternative model, called prospect theory. Choices among risky prospects exhibit several pervasive effects that are inconsistent with the basic tenets of utility theory. In particular, people underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty. This tendency, called the certainty effect, contributes to risk aversion in choices involving sure gains and to risk seeking in choices involving sure losses. In addition, people generally discard components that are shared by all prospects under consideration. This tendency, called the isolation effect, leads to inconsistent preferences when the same choice is presented in different forms. An alternative theory of choice is developed, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights. The value function is normally concave for gains, commonly convex for losses, and is generally steeper for losses than for gains. Decision weights are generally lower than the corresponding probabilities, except in the range of low probabilities. Overweighting of low probabilities may contribute to the attractiveness of both insurance and gambling.
Many design practitioners aim to enhance the beauty of an existing product or develop novel products and services. However, market does not always pay off their effort. Carefully designed products often fail to attract consumers. What should designers do to enhance sales?
One solution is to borrow insights from behavioral economics. Studies show that behavioral economics can increase the adoption rate of newly designed products because it overcomes consumer resistance.
I was once invited by Palermo University in Argentina to share findings about the commercial impact of behavioral economics in the context of design. I shared my experimental findings about three Korean companies.
(1) Samsung’s printer would sell more if its ugly version is placed next to it because joint evaluation helps consumers consider aesthetics importantly,
(2) LG’s Styler would sell more if the clock in the store presents time in analog not in digital because doing so encourages consumers to think abstractly and creatively to appreciate the value of something new, and
(3) SK Telecom’s AI speaker would be used more often if it has a human feature and viewed as a foreigner or child because people become more tolerant about the mistakes of the AI speaker.
Coming January 3rd to 6th of 2022, EBS Business Review will broadcast “Behavioral Economics for Dummies.”
The world-renowned bestseller book, Nudge, by Richard H. Thaler, winner of the 2017 Nobel Prize in Economics, is well known for its coverage of behavioral economics. The term nudge which has an idiomatic meaning of nudging with an elbow refers to guiding people’s choices through gentle intervention instead of compulsion or coercion. Different from normative economics and descriptive psychology, prescriptive behavioral economics intervenes and guides people’s choices by closing the gap between behavior and mind.
What is the hidden key of behavioral economics? You will learn its various cases which show the power that moves the world.
The secret of 99% adoption of organ donation (January 3rd)
As medical dramas suggest, hospitals need more organ doners. In order to solve the supply-demand problem of organ donation in Korea, a policy was implemented in 2007 which inserts a statement regarding donation into the driver’s license upon issuance or renewal. However, the survey result in 2018 showed that the actual number of those who wish to donate is only about 3%.
What about other countries? If we look into the organ donation rate in European countries in the early 2000s, Denmark had a rate of about 5%, Germany had a rate of about 12%. However, there are many other countries boasting a rate of 99%, such as Portugal and France. What is the secret behind these countries with a high donation rate? We will explore successful uses of behavioral economics that change people’s behavior.
Public institutions can be smarter (January 4th)
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In 2020, an experiment was conducted in US to find out how to increase the vaccination rate for the flu. As a result of sending 20 messages that encouraged people to get vaccinated, the most effective one was the combination of messages sent three days before vaccination saying “a flu vaccine is available for you” and one day before vaccination saying “a flu vaccine has been reserved for your appointment.” For those who received these messages, they made a promise to themselves to get vaccinated, resulting in an increased vaccination rate of about 5%.
Since behavioral economics brings great results with little cost, it is actively applied in many public institutions. Let’s listen to other cases of public policy which solve tough social problems.
When tech giants meet behavioral economics (January 5th)
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Marketing is a key area in which behavioral economics is actively applied. Various mechanisms can be used to target customers, which can lead to an increase in revenue and market share. Lyft, a ride-sharing company once conducted an experiment to encourage users to drive during peak demand times, Friday nights, instead of quiet mornings on Wednesdays.
They divided drivers into two groups randomly. One group was given information that their income would increase if they worked on Friday night. The other group was given information that their income would decrease if they did not work on Friday night. More people in the latter group chose to drive Friday night because people tended to avoid loss, helping Lyft mobilize the drivers’ behavior. What are the other special secrets of behavioral economics that change peoples’ choices and help companies increase profits?
Nudge yourself (January 6th)
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Self control is a process of paying the small pain in the present to obtain a greater gain in the future. But when the pain in the present is overwhelming to bear, people lose their motivation to control themselves. To solve this problem, we have to go beyond the present bias and go back to the past self.
Imagine that alarm wakes you up in the early morning. If you want to overcome the thought of having sleep for one more hour, you need to go back to the ‘me’ last night who set the alarm. To make a rational decision, you have to remember your own attitude of yesterday when getting up early eventually leads to a greater benefit than oversleep. We will introduce the secret of behavioral economics that makes a better ‘me’ based on deep understanding of human.
Jaewoo Joo is a field researcher who applies academic insights to solve real world problems. He received a Ph.D. in Marketing from the University of Toronto after obtaining a Bachelor degree and a Master degree from Seoul National University. Jaewoo is interested in developing customer experience by utilizing empathic design thinking and counter-intuitive behavioral economics. He is an associate professor of marketing and participating professor of experience design at Kookmin University.
References
Johnson, E. J., & Goldstein, D. (2003). Do defaults save lives? Science, 302(5649), 1338–1339.
Milkman, K. L., Patel, M. S., Gandhi, L., Graci, H. N., Gromet, D. M., Ho, H., … Duckworth, A. L. (2021). A megastudy of text-based nudges encouraging patients to get vaccinated at an upcoming doctor’s appointment. Proceedings of the National Academy of Sciences of the United States of America (Vol. 118).
Scheiber, N. (2017). How Uber uses psychological tricks to push its drivers’ buttons, The New York Times, April 2, https://www.nytimes.com/interactive/2017/04/02/technology/uber-drivers-psychological-tricks.html.
Soman, D., & Shi, M. (2003). Virtual progress: The effect of path characteristics on perceptions of progress and choice. Management Science, 49(9), 1229–1250.
In previous research on in-app purchasing, one of the revenue sources for mobile games focuses on users’ unilateral relationships, such as their achievement, loyalty, and perception. However, little has been discussed about the commercial impact of the bilateral relationship. We extend discussions by examining an unprecedented issue, that is, the role of the bilateral relationships between users and mobile game companies in increasing in-app purchasing intention. We borrow from the business literature and psychology to hypothesize that when mobile game users co-create value with a mobile game company, their psychological ownership of the mobile game increases, which in turn increases their in-app purchasing intentions. To test this hypothesis, we conducted a carefully designed study by recruiting eighty-six Chinese game users. Half of the participants were exposed to an imaginary mobile game whose interface allowed them to co-create value with the mobile game company and the other half were exposed to an identical mobile game whose interface did not. We recruited participants from the two online platforms in which Chinese mobile game players gather—Weibo and WeChat Moment. Using SPSS 26, we conducted an independent samples test to test the effect of value co-creation and employed Hayes Model 4 to test whether psychological ownership mediated the relationship between value co-creation and in-app purchasing intention. We found that (1) when participants were allowed to co-create value, their in-app purchasing intentions increased, and (2) the relationship between value co-creation and in-app purchasing intention was mediated by psychological ownership. Our findings provide fresh insights for mobile game designers and marketers.
This research examines the effectiveness of traffic-boosting mobile coupons through a randomized field experiment of over half a million South Korean consumers. The research question analyzes the effectiveness of the content (six message types) and context (three days out of the week for coupon distribution) of mobile coupons on response-to-coupon, store visits, and purchase amount for a health and beauty retail chain. Big data on individual customers, gathered from a field experiment, was analyzed through bivariate probit, mediation analysis, and tobit regression. The results show that message content affects store visits, which was fully mediated through response-to-coupon. In particular, messages that “made the amount of discount salient” and “formed a personal connection” were more effective than other messages. In terms of context, messages sent during the weekdays were more effective in increasing store visit, than those sent during the weekend.
Keywords
Mobile promotion · Mobile coupon · Message content · Message context · Coupon distribution · Field experiment
Acknowledgements
We would like to express our deep gratitude to Hyojung Kim, Sul Namgoong, and Joongjae Lee at Shinhan Card for their assistance with the collection of our data.
A wide range of businesses actively use cute characters such as the globally popular LINE FRIENDS characters for product design to increase consumers’ product adoption. Prior research has found that whimsical cuteness—which elicits fun and playful mental representations—can lead to higher product adoption. The effectiveness, however, has been investigated mostly in indulgent contexts. This article aims to uncover the opposite phenomenon, that is, whimsical cuteness could be detrimental for product adoption, in particular, in a non-indulgent context. In a pre-test, we measured the different types of cuteness of nine LINE FRIENDS characters, selecting one pair of characters differed only in terms of whimsical cuteness. Additionally considering product newness, the main study tested whether product adoption differed depending on the level of whimsical cuteness and product newness. The results demonstrate that participants were less likely to adopt a non-indulgent product when it was highly whimsically cute compared to less whimsically cute because the indulgence provoked by fun and playful mental representations conflicted against the restraint reinforced by a product for self-control. The adverse effect increases when the product has lower product newness whereas high product newness dampens the effect. The findings suggest that practitioners should carefully consider product nature and newness when applying whimsically cute features to product design and marketing promotions. This study has originality in that it is the first to demonstrate the adverse effect of whimsical cuteness on new product adoption and verify the moderating effect of product newness.
Keywords
Whimsical cuteness, New product adoption, Product newness, Self-control, LINE FRIENDS
The key practical significance is that a product design which makes products seem whimsically cute has potentially detrimental effects on consumers’ product adoption, especially when the products are non-indulgent. Although nudge is an interesting lens for designers (Chen et al. 2019), our finding suggests that whimsical cuteness can have counter-nudging effects (Saghai 2013; Sunstein 2017) that make consumers not to adopt self-control products, contrary to the expectation of designers and marketers. For instance, cute characters with high whimsical cuteness might in fact hinder consumers’ adoption of products for self-control such as diet foods and time and study management products. Thus, practitioners should beware of using whimsically cute characters on products related to self-control (pg. 629).
Mental illness has always been an important issue for young adults. Moreover, initiatives resulting from the outbreak of COVID‐19 have had an even greater impact on the mental health of young adults. This study sought to examine the effect of gamification on whether young adults adopt in‐person counseling. One hundred twenty young adults (42 males and 78 females) with an average age of 29 years participated in our experiment. In the experiment, a 2 (Gamification: no vs. yes) × 2 (Vividness: low vs. high) between‐subjects design was employed. In the “yes” gamification condition, participants decided whether or not to read introductory material about in‐person counseling, and also whether or not to adopt in‐person counseling in the future. The results of the study show that: (1) gamification increased adoption, (2) participants’ perception of subjective usability of in‐person counseling mediated the effect of gamification to adoption, and (3) vividness of presentation moderated subjective usability. Our study demonstrated that gamification nudges young adults to adopt in‐person counseling while subjective usability mediates the relationship, and vividness moderates the relationship between gamification and subjective usability. Our findings provide counselors fresh insights into motivating people to access counseling services.
“… gamification has the primary purpose of promoting human motivation and performance in a particular activity. The importance of gamification has been thoroughly discussed theoretically and practically in an increasing number of research studies for health professions education (Van Nuland et al. 2015; Verkuyl et al. 2017;Buttetal. 2018). Ourexperimental study found that gamification does have a positive effect on people adopting in-person counselling” (pg. 1360).
Contemporary electronic manufacturers struggle with how to develop attractive bundles by combining their existing smart products. In the present work, we propose Goal Based Bundling (GBB) by drawing on the academic research of goal systems theory (Kruglanski et al., 2018) and shed light on two previously ignored aspects of bundling strategy: service and glue product. We applied our GBB to a collaborative project with Samsung Electronics, whose goal was to develop new product bundles for kids by combining multiple smart home products. We constructed a framework of Samsung Electronics’ smart products and then visualized it on its sales website. A UI design conveying the value of smart products bundle was developed based on GBB structure. We discuss the process and the result of our project to provide insights into the product managers who combine existing smart products to develop a bundle.
“Although bundling tactics are frequently called upon in business, marketing research on product bundles is surprisingly sparse (Russell et al., 1999). This paper represents an attempt to identify bundling smart products by borrowing the key concepts from the Goal Systems Theory (Kruglanski et al., 2018). We posit that constructing a products bundle following a hierarchical goal structure overcomes the limitation of combining categorically dissimilar products. Moreover, it addresses an important role of service in smart product bundling.” (pg. 2898)
Mental illness has always been an important issue for young adults. Moreover, initiatives resulting from the outbreak of COVID‐19 have had an even greater impact on the mental health of young adults. This study sought to examine the effect of gamification on whether young adults adopt in‐person counseling. One hundred twenty young adults (42 males and 78 females) with an average age of 29 years participated in our experiment. In the experiment, a 2 (Gamification: no vs. yes) × 2 (Vividness: low vs. high) between‐subjects design was employed. In the “yes” gamification condition, participants decided whether or not to read introductory material about in‐person counseling, and also whether or not to adopt in‐person counseling in the future. The results of the study show that: (1) gamification increased adoption, (2) participants’ perception of subjective usability of in‐person counseling mediated the effect of gamification to adoption, and (3) vividness of presentation moderated subjective usability. Our study demonstrated that gamification nudges young adults to adopt in‐person counseling while subjective usability mediates the relationship, and vividness moderates the relationship between gamification and subjective usability. Our findings provide counselors fresh insights into motivating people to access counseling services.
I find myself reading books challenging. Most books are too long to start and I am too busy to finish reading book. Therefore, I have applied numerous insights obtained from behavioral research to force myself to read books.
So far, the most effective method is to buy a physical book. This is particularly effective when the book is not available at a local book store and it needs to be delivered to me in the mail. My intention to finish reading the book *irrationally* increases because it has a physical form and I do not want to waste, interestingly, its delivery cost.
Digital goods are, in many cases, substantive innovations relative to their physical counterparts. Yet, in five experiments, people ascribed less value to digital than to physical versions of the same good. Research participants paid more for, were willing to pay more for, and were more likely to purchase physical goods than equivalent digital goods, including souvenir photographs, books (fiction and nonfiction), and films. Participants valued physical goods more than digital goods whether their value was elicited in an incentive compatible pay-what-you-want paradigm, with willingness to pay, or purchase intention. Greater capacity for physical than digital goods to garner an association with the self (i.e., psychological ownership), underlies the greater value ascribed to physical goods. Differences in psychological ownership for physical and digital goods mediated the difference in their value. Experimentally manipulating antecedents and consequents of psychological ownership (i.e., expected ownership, identity-relevance, perceived control) bounded this effect, and moderated the mediating role of psychological ownership. The findings show how features of objects influence their capacity to garner psychological ownership before they are acquired, and provide theoretical and practical insights for the marketing, psychology, and economics of digital and physical goods.
The second most effective method is to bookmark with sticky notes after briefly reading the table of contents. I often stick only three notes on the pages I want to read to relieve burden. When I see them, I *mistakenly* think I already started reading the book.
The goal-gradient hypothesis denotes the classic finding from behaviorism that animals expend more effort as they approach a reward. Building on this hypothesis, the authors generate new propositions for the human psychology of rewards. They test these propositions using field experiments, secondary customer data, paper-and-pencil problems, and Tobit and logit models. The key findings indicate that (1) participants in a real café reward program purchase coffee more frequently the closer they are to earning a free coffee; (2) Internet users who rate songs in return for reward certificates visit the rating Web site more often, rate more songs per visit, and persist longer in the rating effort as they approach the reward goal; (3) the illusion of progress toward the goal induces purchase acceleration (e.g., customers who receive a 12-stamp coffee card with 2 preexisting “bonus” stamps complete the 10 required purchases faster than customers who receive a “regular” 10-stamp card); and (4) a stronger tendency to accelerate toward the goal predicts greater retention and faster reengagement in the program. The conceptualization and empirical findings are captured by a parsimonious goal-distance model, in which effort investment is a function of the proportion of original distance remaining to the goal. In addition, using statistical and experimental controls, the authors rule out alternative explanations for the observed goal gradients. They discuss the theoretical significance of their findings and the managerial implications for incentive systems, promotions, and customer retention.
Certainly, I want to read more books without these tricks. However, I have insufficient self control resources and frequently mispredict my available time. I wish these tricks drive me to start as well as complete reading books.
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