8 Psychology Hacks Behind The World’s Biggest Businesses - Richard Shotton

One of my favorite studies that isn't very well-known, he gets a large group of people, shows them an e-commerce site and for every purchaser, one of the items they're trying to buy just isn't there. Now, sometimes on the site it's labeled as unavailable, other people see sold out. When he questions those groups as to how irritated they are with the website, he sees a swing of 15% with the people who see unavailable being the most irritated, people who see sold out the least irritated. If the website emphasizes unavailable, they're emphasizing their logistical inaptitude. If the website emphasizes sold out, they're emphasizing how popular this product is. People do not experience events, they experience the description of events, and if you s- change that description, you can radically change people's reaction.

(wind blowing) So, the last episode that we did, we managed to get through eight out of 16 and a half-

Yeah.

... psychological biases from your fantastic new book, which is now out and people should go and buy right now.

I like that as a bit of advice, yep.

Yes. The first new, this is half of a, half of an insight, base value neglect, what's that?

Um, so i- i- it's an idea here that people, when they are weighing up numbers, essentially respond to them naively. So, t- if you, um, show people a, you know, a bowl of jelly beans, for example, and one of the 10 beans is a, is a red bean-

Mm-hmm.

... and you tell people that, um, they will get a cash award for picking a red bean. You give them the option we're picking from either a, uh, 10 bean jar with one red or 100 bean jar with eight reds. You find that people will mistakenly want to pick from the larger number. So, even though the absolute chance of winning drops, the fact that there are literally more beans, uh, perverts the- their decision-making. So, so people re- react to the number rather than what the number represents. I think that's where we- we're getting to with this idea.

Ah, because eight sounds like more than one, but it's eight out of a hundred as opposed to one out of 10.

Ee- ee- exactly, exactly. So, if you're a marketer you can start to harness that idea to your, to your benefit. So, there's a lovely study from Gonzales, who's at Egade Business School, and she came up with a study where she shows some people a, uh, pack of balloons for 48 pesos. Some people see a 12 peso discount, some see a 25% discount, and in that scenario people prefer the 25% discount, uh, even though they are mathematically the same. Other set of people, she shows a jacket for 480 pesos, some people see a 120 peso discount, some people see a 25% discount. You know, the group that see the 120 pe- peso discount rate it as a better deal than the group that saw the 25% discount. So once again, people are reacting to the size of the number rather than what that number represents. So Jonah Berger heard about this study and he has a wonderful pithy turn of phrase, he said that there is a rule of a hundred. If you're selling a product that costs more than a hundred pounds or a hundred dollars or a hundred euros, you should talk about your absolute discounts. If you're selling a product that costs less than a hundred, you should talk about the percentage discount. You know, that way you're always tapping into this, this insight.