Biases in creditworthiness perception

Despite wider availability, credit scores still baffle consumers It’s now easier than ever to see your credit score for free thanks to a growing number of credit card providers offering free credit scores to cardholders. But according to a study released March 12 by the credit bureau TransUnion, more access hasn’t led to more understanding. Many consumers remain mystified by the three-digit number. The study, which included results from a February 2015 poll of 1,000 adult American consumers, finds we are especially confused by the data that goes into our credit scores and are frequently uncertain about what’s included in … Continue reading Biases in creditworthiness perception

Gentle nudge for shoppers

Reusable-Bag Users Might Buy More Junk Food Bringing your own reusable bags to the grocery store is a very good thing for the environment, as (obviously) it’s less wasteful than coming home with an armload of plastic bags you’re either going to throw away or stuff under your sink and forget about. The only problem, perhaps, is that we know it’s a very good thing we’re doing — and as such, researchers at Harvard Business School report in a new working paper, we reward ourselves by buying more junk food. Using about two years’ worth of customer loyalty-card data from … Continue reading Gentle nudge for shoppers

Choice architecture

The only thing worse than never having a choice is always having to choose Choice can be a mixed blessing – as you know if you’ve ever spent an evening browsing hundreds of titles on Netflix only to repair despondently to bed without watching a movie. One famous if controversial study found that people were much more likely to purchase a jar of jam when faced with a choice of just six flavors than with 24, which short-circuited their brains. Even if we overcome “analysis paralysis” and make a decision, other research suggests that we’ll be less satisfied with our … Continue reading Choice architecture

Honesty and rationality are not for bargainers

What Obama Could Learn About Negotiating With Iran From My $2,000 Used Car Years ago, less than a week before going on leave from Washington University, I put my car on the market. I had bought the car used for $5,000 a year earlier, but to sell fast I knew I had to be flexible. My asking price was $4,000, but the first serious buyer who got in touch smelled a bargain — he immediately offered $1,000 less than the asking price. Then, in spite of living just a couple of blocks away, he took two days to come and … Continue reading Honesty and rationality are not for bargainers

Behavioral economics in prison

The Behavioral Economist’s Case for Prison Gangs It may seem counterintuitive that gangs can exist in what is perhaps the ultimate tightly regulated environment. Gangs, however, have been thriving in American prisons since the 1950s, and are now ubiquitous. Why is it that the corrections system has been unable to eradicate gang activity from the facilities they run? A recent article in Behavioral Economics by M. Garrett Roth and David Skarbek makes the case that gangs have actually become necessary elements within the prison system, allowing inmates to create and sustain an internal economy centered on contraband, eliminating much of … Continue reading Behavioral economics in prison

The Gulag of optimization

A Sucker Is Optimized Every Minute Not long ago, our blockbuster business books spoke in unison: Trust your gut. The secret to decision-making lay outside our intellects, across the aisle in our loopy right brains, with their emo melodramas and surges of intuition. Linear thinking was suddenly the royal road to ruin. Dan Ariely’s “Predictably Irrational” tracked the extravagant illogic of our best judgment calls. The “Freakonomics” authors urged us to think like nut jobs. In “Blink,” Malcolm Gladwell counseled abandoning scientific method in favor of snap judgments. Tedious hours of research, conducted by artless cubicle drones, became the province … Continue reading The Gulag of optimization

Customers are researchers

The Psychological Motivations of Today’s Buyer and the Paradigm-Shifting Result The better we understand our customers, the better we become at conversion optimization. Although the digital age has given rise to new forms of marketing, it has not fundamentally changed human psychology. Regardless of how digital marketing innovations change, we can still depend on the findings of psychology to support powerful conversion optimization techniques. I want to explain how an understanding of your customer’s psychological curiosity can change how you approach your marketing initiatives. Prepare for some pleasant surprises and rude awakenings. Customers are researchers. Satisfy their need for information. … Continue reading Customers are researchers