Insight: Anchoring is important to consider in pricing strategy.
Insight: Existing products in a market influence (anchor) prices for new similar products.
Insight: New, unique products can set a reference anchor price.
Insight: You can create an anchor price for your user base if they do not have experience buying what you are selling. Consider creating another product with a higher price, to anchor expectations high.
Insight: By understanding social science, product managers, marketers, designers, and engineers can build products and experiences that people use and love.
Insight: Choice architects can design environments that help people make better decisions.
Insight: The more choices, especially difficult choices, that we have to make during the day, the more exhausted we become - making it harder to make further decisions.
Insight: Ego depletion can substantially affect important decisions, including financial and personal decisions.
Insight: Willpower is like an exhaustible resource - the more we exert earlier in the day, the less we have later on.
Insight: Ego depletion can be manipulated in purchase decisions - placing options at the end of a form will have a likelihood of the user sticking with the default option.
Insight: Two causes of friction that lead to depletion: making decisions, complexity and the number of options.
Definition: A sense of ownership increases our valuation of the thing in question; we overvalue what we own.
Example: The free trial in software. Creating a free account before requesting payment gives the user a sense of ownership and they value it more highly.
Insight: The strength of the endowment effect is determined by: (1) A sense of completion (2) The amount of effort invested in the item.
Insight: The IKEA effect is a version of the endowment effect.
Reference: Daniel Kahneman experiment - free mugs or pens. Half of a group was given free mugs or pens, and the other half was asked what they were willing to pay for the mugs or pens vs the price that the group given the free mugs or pens was willing to accept for parting with the newly owned items. The amount the sellers were asking was around twice as much as the buyers were willing to pay.
Insight: We adapt to pleasures and get used to them.
Insight: We can have too much of a good thing.
Insight: People are happier when they have small amounts of things regularly instead of a few big things less frequently.
Principle: Consume small amounts more frequently over big amounts less frequently.
Definition: The idea that the present looms largest in our decision making, and the future is significantly discounted.
Example: Given the choice of a small box of chocolates today rather than a larger box of chocolates in a week - most people choose the small box. If the choice is the smaller box in a year or the larger box in a year and a week, most people would choose to wait a week for the larger box.
Insight: The future does not motivate us as much as what is in front of us.
Insight: Hyperbolic discounting is a reason why we over eat, under save, overspend.
Insight: The more time energy and effort we invest in something (to completion), the more value we tend to put on it.
Insight: We sort money into categories - for example A for rent, B for food, C for entertainment. This is mental accounting.
Insight: When designing products it can be useful to analyse what current purchases are made by target customers that your product could displace (where would you fit in their mental accounting?).
Example: Automated savings, or pension enrolment.
Insight: Creating a new status quo can be a way to positively change behaviour, which can be applied to ourselves, or in business: (1) determine the behaviour you want (2) make the desired behaviour the default option.
Reference: Garrett Hardin 1968 paper - cows and common pasture - each farmer seeks to add more animals to their herd and has incentive to do so to maximise gains.
Insight: Adding more resources to a common good has positive utility for the individual (the proceeds of farming or fishing), but negative utility for the entire resource as a whole. The negative utility is spread among all individuals such that the individual feels it less.
Insight: "Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all."
Insight: Ulysses pacts are extremely effective for savings.
