The article “What Was I Thinking?” in The New Yorker presents the latest reasoning about humans’ irrational ways. The thesis is that people make bad decisions but they do it systematically and therefore it is possible to explain why they act like this. Some of the insights are extracted from the book Predictably Irrational: The Hidden Forces That Shape Our Decisions

Dan Ariely, a professor at M.I.T., offers a taxonomy of financial folly. His approach is empirical rather than historical or theoretical. In pursuit of his research, Ariely has served beer laced with vinegar, left plates full of dollar bills in dorm refrigerators, and asked undergraduates to fill out surveys while masturbating. He claims that his experiments, and others like them, reveal the underlying logic to our illogic. “Our irrational behaviors are neither random nor senseless—they are systematic,” he writes. “We all make the same types of mistakes over and over.” So attached are we to certain kinds of errors, he contends, that we are incapable even of recognizing them as errors.

When you walk into Starbucks, the prices on the board are supposed to have been determined by the supply of, say, Double Chocolaty Frappuccinos, on the one hand, and the demand for them, on the other. But what if the numbers on the board are influencing your sense of what a Double Chocolaty Frappuccino is worth? In that case, price is not being determined by the interplay of supply and demand; price is, in a sense, determining itself.

People aren’t just loss-averse; they are also effort-averse. They hate having to go to the benefits office, pick up a bunch of forms, fill them out, and bring them all the way back. As a consequence, many eligible employees fail to enroll in their companies’ retirement plans, or delay doing so for years. (This is the case, research has shown, even at companies where no employee contribution is required.) Thaler and Sunstein propose putting this sort of inertia to use by inverting the choice that’s presented. Instead of having to make the trip to the benefits office to opt in, employees should have to make that trip only if they want to opt out.

Read the full article.

Why do I blog this? In order to understand the drivers of technology and service adoption it is necessary to have a deep understanding of consumers. Tapping into the field of behavioral economics and consumer behavior can be the basis for extraordinary services and consumer experiences.

Photo courtesy of Anne-Sophie Leens

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I have an account on Facebook for quite a while now but I actually don’t use it a lot. The main reason for this was that I didn’t get it - I just didn’t understand why I should poke or superpoke someone.

On the other hand I could see the benefit of a huge number of friends (like Robert Scoble, who frequently complained about the limit of 5000 friends) because by “friending” you, they give permission to receive updates from you which can be used as a new communication channels. Nevertheless this reasoning didn’t explain why millions users spend time on Facebook when you are not trying to sell something or spread ideas.

And then I heard the speech from Robin Hunicke at lift08, a researcher at Electronic Arts and suddenly it made sense. When you play computer games like World of Warcraft your fantasy is to be a “warrior who wants to fight in a land of war”. Facebook also helps its users realize a fantasy - the fantasy is “I am a person living a fun life……and I am loved”. And just like in other computer games where you can collect points and stars for for certain activities, in Facebook your score is determined by the number of friends, graffiti, gifts, hugs, laughter, wins and photographs on your Facebook profile. The most important aspect is that everyone of your friends can see whether you are “living a fun life and are being loved”.

How many other applications do you know that make you feel loved?

Watch the speech online:

 

 

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Cap Gemini published a study in 2007 titled “Future Consumer: How Shopper Needs and Behavior Will Impact Tomorrow’s Value Chain”.

The vision report titled “2016: The Future Value Chain,” published in late 2006 by the Global Commerce Initiative (GCI), Capgemini and Intel, describes the trends and developments that will impact the consumer products and retail industry over the next 10 years, with consumer behavior being a key driver of these changes.

This new report presents the results of Capgemini’s “Future Consumer” research. This study was designed to test some of the main hypotheses stemming from the “2016” report, including:

• Health and wellness will be key factors influencing consumer behavior.
• Consumers will increasingly consider sustainability aspects in their buying decisions.
• Consumers will become smarter in using new technologies.
• Consumers will expect to enter a true dialogue with companies, and will be willing to provide relevant information.
• Consumers increasingly will value personalization.
• Physical stores will remain important, but the online channel will grow rapidly.
• Consumers will increasingly demand the option of home delivery.

 

Some interesting charts in the chapter “Consumer Behavior: Using Technology, Expecting a Personalized Approach”:

 

 

 

 

Download the full report.

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BusinessWeek featured a story in 2006 about the use of ethnography to deeply understand customers. Titled "The Science of Desire" they go into details how ethnography is used in various companies to develop new products and improve services.

Companies have been harnessing the social sciences, including ethnography, since the 1930s. Back then executives were mostly interested in figuring out how to make their employees more productive. But since the 1960s, when management gurus crowned the consumer king, companies have been tapping ethnographers to get a better handle on their customers. Now, as more and more businesses re-orient themselves to serve the consumer, ethnography has entered prime time.

 

They also published a nice playbook with best practices on how to apply anthropological research in a corporate environment. (Click on image for full view)

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Reinier Evers and his team have published their consumer trend report for 2008, summarizing the eight most important consumer trends in the coming year.

The eight trends are:

Status spheres
"Here’s something trend watchers, CMOs and other business professionals should be able to agree on: in the end, when dealing with (and selling to) people, everything always comes back to status. In a traditional consumer society, he or she who consumes the most, the best, the coolest, the most expensive, the scarcest or the most popular goods, will typically also gain the most status."

Premiumization
Basically, with more wealth burning holes in (saturated and experienced) consumers’ pockets than ever before, quick status fixes derived from premium products and premium experiences will continue in full force next year.

Snack Culture
SNACK CULTURE thus embodies the phenomenon of products, services and experiences becoming more temporary and transient; products that are being deconstructed in easier to digest, easier to afford bits, making it possible to collect even more experiences, as often as possible, in an even shorter timeframe.

Online Oxygen
Ah, the Online Revolution, the mega-trend that keeps on giving, one that single-handedly dominates the ‘connecting sphere’. While Web 2.0 has already single-handledly created young brands that are now bigger and more valuable (at least on paper) than many an old economy stalwart, Web 3.0 and 4.0 and 5.0 guarantee enough motion for this innovation-orgasm to continue uninterrupted for years to come. Five years ago, we introduced ONLINE OXYGEN as the engine behind all this excitement: control-craving consumers needing online access as much as they need oxygen

Eco-Iconic
Over the past few years, the ECO trend has moved from ECO-UGLY (ugly, over-priced, low performance alternatives to shiny ‘traditional sphere’ products and services) to ECO-CHIC (eco-friendly stuff that actually looks as nice and cool as the less responsible version) to ECO-ICONIC in 2008: "Eco-friendly goods and services sporting bold, iconic design and markers, that help their eco-conscious owners to visibly tout their eco-credentials to peers."

Brand Butlers
Consider this for 2008: if consumers value the authentic, the practical, the exclusive, and they’re also forever looking to make life more convenient, even save some time, then why persist in bombarding them with your mega-million dollar/euro/pound, one-way advertising campaigns? Instead of stalking potential and existing customers (which is not very 2008), why not assist them in smart, relevant ways, making the most of your products and whatever it is your brand stands for? Remember, giving is the new taking

MIY - Make it Yourself
Let’s have a more in-depth look at the ‘participation sphere’. For years, we’ve been going on about GENERATION C, with the C mainly representing ‘content’. In other words, digital creation. Pictures. Movies. Blogs. Music. So what’s next for GENERATION C? With (in particular younger) consumers having come to expect to be able to create anything they want as long as it is digital, and to customize and personalize many physical goods, the next frontier will be digitally designing products from scratch, then having them turned into real physical goods as well. In fact, expect MIY | MAKE IT YOURSELF (and then SIY | SELL IT YOURSELF) ventures to become increasingly sophisticated in the next 12 months.

Crowd Mining
When co-creating, co-funding, co-buying, co-designing, co-managing *anything* with ‘crowds’, the emphasis in 2008 will move from just getting the masses in, to mining those crowds for the rough and polished diamonds. How to do that? Shower them with love, respect and heaps of money, of course. Two examples, from Netflix and Google, setting the standards for CROWD MINING in 2008.

Read the full report online or download the PDF.

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