Podcast Summary: The Brainy Business | Understanding the Psychology of Why People Buy | Behavioral Economics

Title: Episode 444. Bridging the Intention-Action Gap: Behavioral Insights with Dr. Sudhi Majd
Host: Melina Palmer
Guest: Dr. Sudhi Majd
Release Date: November 12, 2024

Introduction

In Episode 444 of The Brainy Business Podcast, host Melina Palmer delves into the intricate relationship between consumer intentions and actions, a phenomenon often referred to as the intention-action gap. She is joined by Dr. Sudhi Majd, a behavioral scientist specializing in e-commerce purchasing behaviors. The episode explores practical applications of behavioral economics within businesses, with a focus on real-world challenges and solutions.

Guest Background

Melina Palmer introduces her extensive background in behavioral science and consumer behavior, highlighting her journey from a consulting role observing global consumer behaviors to earning a Ph.D. in psychology from Columbia University. Her expertise lies in consumer decision-making and applying these insights to enhance business effectiveness. Currently serving as an advisor at Candid, a clear aligner company, Melina brings a wealth of experience in translating academic theories into actionable business strategies.

Dr. Sudhi Majd shares her professional journey, emphasizing her expertise in behavioral science and e-commerce. With a focus on improving customer experiences, reducing costs, and increasing revenue, Dr. Majd has recently transitioned to Squarespace, further expanding her influence in the field.

Understanding the Intention-Action Gap at Candid

The episode centers on Candid, a direct-to-consumer clear aligner company. A significant challenge identified was the intention-action gap—customers purchasing a kit worth $1,900 but failing to return it with the necessary diagnostic photos and impressions, thereby not completing the purchase.

Dr. Sudhi Majd remarks on the intention-action gap:

“This one card was just not enough to push them over the edge.”
[09:07]

Melina explains that despite customers expressing interest and believing in Candid's effectiveness, their behaviors didn't align, highlighting a critical disconnect between intention and action.

Initial Behavioral Interventions and Failures

Melina recounts her initial approach to bridging this gap using behavioral science principles from the UK's nudge unit, specifically descriptive and social norms. She implemented motivational cards within the kits designed to encourage customers to return them promptly.

“These are going to work great. When people open up these kits, they're going to read this card and they're going to be so motivated to take these impressions and photos.”
[05:00]

However, the results were disappointing. Contrary to expectations, the return rates marginally decreased, leading to a humbling realization about the complexities of real-world applications of behavioral science.

“The behavioral science in business.”
[06:26]

Dr. Sudhi Majd emphasizes the importance of testing and not being discouraged by initial failures:

“If you just try once, it doesn't mean that that concept isn't valid.”
[06:26]

Adjusted Strategies and Success

Recognizing that a single intervention was insufficient, Melina and her team at Candid pivoted to a more holistic approach, integrating behavioral insights throughout the customer journey. This included:

1. Surveying Customers:
   They discovered that non-returners were more likely to be procrastinators.

   “Customers who didn't return their kits were more likely to be procrastinators...”
   [09:25]

2. Implementing Feedback Loops:
   To combat procrastination, they introduced incentives and penalties to create a feedback loop:

   • Incentive Approach:
     "This kit is free if you return it within seven days."

   • Penalty Approach:
     "If you don’t return it within seven days, we'll charge you the full amount."

   Dr. Majd explains the underlying behavioral concepts:

   “Loss aversion is factored in there where you don’t want to lose this $49...”
   [11:29]

3. Refining Messaging:
   Continuous testing revealed that framing the message as a penalty (charging if not returned) was more effective than offering the kit for free as a reward.

   “The one that worked better was the penalty where if customers didn't return their kits, we would charge them.”
   [12:34]

While the penalty framing increased return rates, it also lowered conversion rates. However, because the cost of acquiring customers was reduced, overall business metrics improved.

“...customers returned it at a greater rate. They actually converted worse down funnel for us, but they were much cheaper to acquire.”
[13:01]

Insights on Behavioral Economics in Business

Throughout the discussion, Melina and Dr. Majd emphasize key behavioral economics principles:

1. Procrastination and Time Discounting:
   Recognizing the tendency of procrastinators to delay actions, they implemented urgent actions with immediate incentives or penalties.

2. Social Proof and Priming:
   Initial attempts to use descriptive norms backfired by inadvertently normalizing the intention-action gap. This taught the importance of carefully crafting messages to avoid unintended effects.

   “Social proof is so important in websites and just the way that the message.”
   [19:22]

3. Customer Feedback Integration:
   Leveraging qualitative insights from customer interviews to inform hypothesis development and testing, ensuring that interventions address the real underlying issues.

4. Holistic Application:
   Success requires integrating behavioral strategies across multiple touchpoints rather than relying on isolated interventions.

Future Directions and Closing Thoughts

Looking ahead, Melina expresses a passion for applying behavioral science in both physical retail spaces and the digital realm:

“I would love to start incorporating behavioral science theories into big data applications...”
[23:09]

Dr. Majd echoes this sentiment, highlighting the potential of combining big data and artificial intelligence with behavioral insights to better understand and predict consumer behavior.

“Having as many data points as you can and something that can actually efficiently scan the information is necessary...”
[23:58]

Both agree on the importance of continuous testing and adapting strategies based on real-world feedback. Melina underscores the value of resilience in the face of setbacks, viewing each experiment—successful or not—as an opportunity to learn and refine approaches.

“It's not always quite as easy as we would like it to be.”
[18:41]

Notable Quotes with Timestamps

• Melina Palmer:
  “These are going to work great. When people open up these kits, they're going to read this card and they're going to be so motivated to take these impressions and photos.”
  [05:00]

• Dr. Sudhi Majd:
  “If you just try once, it doesn't mean that that concept isn't valid.”
  [06:26]

• Melina Palmer:
  “Customers who didn't return their kits were more likely to be procrastinators...”
  [09:25]

• Dr. Sudhi Majd:
  “Loss aversion is factored in there where you don’t want to lose this $49...”
  [11:29]

• Melina Palmer:
  “The one that worked better was the penalty where if customers didn't return their kits, we would charge them.”
  [12:34]

• Dr. Sudhi Majd:
  “Social proof is so important in websites and just the way that the message.”
  [19:22]

Conclusion

Episode 444 offers a compelling exploration of the challenges and triumphs in applying behavioral economics to bridge the intention-action gap in business. Through candid discussions and real-world examples, Melina Palmer and Dr. Sudhi Majd provide valuable insights into creating more brain-friendly business strategies that resonate with consumers' underlying motivations and behaviors.

For listeners seeking to enhance their understanding of consumer psychology and apply actionable behavioral strategies, this episode serves as an essential resource.

Connect with Melina Palmer:
LinkedIn: Melina Palmer

Resources Mentioned:

• Human BehaviorLab (HBL) at Texas A&M University: HBL.TAMU.EDU
• Show Notes and Additional Content: Available within the podcast app and at thebrainybusiness.com

Stay tuned for the next episode featuring Evelyn Gosnell and Isabel McDonald of Irrational Labs discussing a behavioral project with Lyft, set to air soon.