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- [00:00]
A
Welcome back to the digital marketing Podcast brought to you by targetinternet.com and in this episode, we'll be exploring eight psychology experiments for marketers. Okay, so in this episode, we are going to be talking behavioral science. And I'm very excited that I've been joined by Philag, new of the Nudge podcast. And if you know Nudge, you'll know it's one of the leading marketing podcasts globally. He talks to lots of different interesting people about behavioral science, and his own expertise on the subject is really, really exciting to listen to and has some fantastic examples. So Phil is going to take us through eight theories and experiments that he has run himself and look at how we might apply those to our digital marketing. So over to the interview. Okay, so I'm here with Phil. Phil, why don't you just introduce yourself, tell people what you do? And we've just discovered that we thought we knew each other via our podcasts.
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B
Yes.
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A
But actually it turns out we go years back and we met back in Brighton, but we'll get into that later. So tell people who you are.
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B
Hi, everyone. Thank you so much for having me on. I guess we're rivals is probably how you describe us. Marketing podcast rivals. Oh, part of it. That's a much better way of frame
- [01:19]
A
building the whole podcast industry.
- [01:22]
B
Exactly. Let me reframe it in my mind. So I also host a marketing podcast. My podcast is called Nudge. It is about behavioral science. So this is really my background, my area of expertise. I essentially try to understand how and why the human brain makes decisions and help marketers use their understanding of the human brain to improve their marketing.
- [01:45]
A
We've kind of geared up some questions that we thought would be a good one to answer for the audience. So we'll kind of go through those and then we'll riff around them a little bit. But let's come back to some of the basic principles. It's the first thing we quite often think about in kind of online digital psychology, things like social proof. So is social proof still a key principle people should worry about? Does it still work?
- [02:03]
B
Well, it definitely still works, but I think people misunderstand it. So is it worth me sharing? You know, there's a classic bit of evidence behind social proof from Robert Cialdini. Would that be worth sharing, Daniel?
- [02:14]
A
Yeah, please. That'd be fantastic.
- [02:16]
B
So some of your listeners will have heard this before. They will have read Robert Cialdini's book Influence. Very popular. But in his book, he writes about six weapons of influence. He actually wanted to call the book Six Weapons of Influence, but was told not to because it sounded a bit too aggressive. Anyway, one of his weapons was social proof. And social proof is very simple. We all experience it. When we're walking down the seafront in Jersey, perhaps, Daniel, and you see a restaurant, no one's in it, or there's one table full, the rest of the tables are empty, There's a sort of needy looking waiter in there desperate for you to come in. And then the restaurant next door, packed queue out the door, people heaving and desperate to get inside. We all, every single one of us, feels the urge to go into the full restaurant. We feel this urge not because of any rational reason. We haven't looked at the menu. We don't know about the quality of the food, we don't know about the price. We are simply driven by the actions of others. When we see something is popular, when we see other people doing something, we have this urge to do the same thing. Typically, not all the time, but typically. Hereditary trait, something we developed over millennia as human beings, we follow the actions of others. Sensible to do. Robert Cialdini proved this in a quite amazing study in a hotel room in Arizona. It's such an important one because it's still followed today. In all of the studies I talk about, there are these randomized control trials. So you can really tell when you have a variant what the impact is. So the control, the norm essentially in his study is a piece of paper in the hotel room which is asking people to reuse their towels. We will have all seen this piece of paper before. It simply says, please reuse your towels. Help us save the environment. Classic environmental plea. Robert Cialdini creates a variant which removes all of that environmental plea and just says most people in this hotel room or most people in this hotel will use their towel. Nothing about the environment. If you ask people in a survey or focus group, which do you think will be more effective? Everyone will say the environmental plea. They'll say, no, I'm persuaded by environmental, Please, thank you very much. I'm not influenced by other people. It's not the case at all. They measure the tower usage in the world, which is quite easy to do. 37% of people reuse their tower with the environmental plea. Goes up to 45% when you say most people in this hotel room. 45% when you say most people in this hotel, 49% when you say most people in this hotel room. Which suggests that social proof is even more effective when it becomes more specific. But my problem with social proof is that it's often used too literally. We just say stuff like McDonald's famously had the sign on there on their stores saying 65 billion burgers sold. And Tunic's Caramel Wafers say 7 million bought and sold every year. It's a very literal way of applying social proof. And we don't like being sold to us consumers. We don't like it when someone comes up to us on the street and tries to sell us something. We feel this need to restore our autonomy. So a much better way of applying social proof is not by actually telling people, but by implying you are popular. Great example of this. To highlight it, it's from Sam Tatum, the late, great Sam Tatum, his wonderful book Evolutionary Ideas. He gives this example of a cafe in Sydney. Cafe wants to tell people it's really popular, but it doesn't want to just say we're the most popular cafe in Sydney. So what they do behind the baristas, they stick every single loyalty card that has been completed on the back of their wall. Now they are a very popular cafe. So this wall is covered with completed loyalty cards. So if you're new to Sydney, you've never been to this cafe before. You walk in the door, you see in an instant that this is an extremely popular place. Hundreds and hundreds of customers come here regularly. It must be good and they don't even have to tell you. And that's a more effective way of using social proof.
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A
I love it. So you've got some kind of practical examples from digital marketers kind of using this as well. So kind of like Reddit and email and those kind of things.
- [06:17]
B
Yeah, definitely. I mean, I've tested this myself. I've created Reddit ads which ask people to listen to my podcast. Some just show my podcast logo, another one will say nudge, it's a top marketing podcast. X amount of downloads. And then show some of my five star reviews. When I do that, I showcase that it is popular. I showcase it, more people are likely to click on the ad. I think the click through rate goes up by 22%. My example and I've tested this on Reddit as well. I think the maybe more interesting way that this is applied online is again by not showing specifically that you are the most popular. It's by trying to imply it in interesting ways. So, you know, an example here would be when I was working at Buffer, Buffer was the sort of last job I had before I went full time on the podcast. We had these very. Everybody listening to this who runs a website, especially if you're in B2B will have done this as well. Very classic social proof banner, sort of just below the fold on the page. Grayed out logos of companies that we all admire. Adobe Whisk's past, there's Amazon, you know,
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A
everyone on my website, I'm sure.
- [07:26]
B
Yeah, exactly. We all have it, right? Buffer, we tested everything and I was very keen to run sort of more tests on the social proof page because I thought we could get more effective. I thought we could get effective by getting more specific, which is what Cialdini taught us. With the hotel room example, you say most people in this room we use the towel. That becomes more effective. And I thought we could get more effective by not just telling people but showing the impact as well. So we removed these grayed out logos and instead we, we put Buffer's whole concept, by the way, it's a social media scheduling tool. The idea behind why you would use Buffer is to grow on social. That was the number one use case. So we would highlight people's, real people's accounts on this little banner. Say, you know, we're used to buy Crocs, for example. I think they were a customer and we would say, here's how many followers they had across their platforms when they joined Buffer. Here's how many followers they have now. And then that would specifically call out what, how they're growing. Now this is showcasing our social proof. We're still saying Crocs use us, but we're saying it in a slightly different way, which doesn't feel like we're just selling. We're actually providing a bit of value and we're being specific. I can't remember the difference in the control and the variant in that scenario, but that is still on the site today. And the reason why is because it worked and it was effective. So that's a good example about how to apply this to digital marketing.
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A
Love it. You mentioned loyalty cards a moment ago in the kind of coffee shop example. How do you think behavioral science can drive that loyalty? How does that play a role in
- [08:54]
B
this simplest way to drive loyalty is a very simple experiment. Yeah. From 2006. It's from Dres and Nunes and it was with a car wash. But you can apply this online as well. Very easy to apply this online. And the car wash had a simple loyalty card, same sort of loyalty card any Brit would have ever got in Cafe Nero over the past 10 years. Picture that loyalty card in your head. Essentially one group of participants. Again, it's a randomized control trial. So One group of participants gets a loyalty card with nine stamps they need to fill out before they get their free item. So imagine that free latte from Caffeinero, for instance. Another group gets a loyalty card with only seven stamps they need to collect, except those who get the nine stamp variant. When the barista or the car washperson hands over that loyalty card, they plug in so they stamp the first two. Now, an economist would look at this and say these two loyalty cards are identical. In both scenarios, the customer needs to buy seven products in order to get the next one for free. However, behavioral scientists would look at this and say these two things couldn't be more different. There is something about having a loyalty card where you feel like you're getting something for free. Something about the power of reciprocity, wanting to return the favourite, and something about this idea of in down progress, when a task has already begun, we're more likely to finish it. And they find that those who are given the loyalty card with the first two stamps plugged in are 82% more likely to keep going back and getting that final coffee for free. There is a benefit in giving your customers something for free at the start of their journey with you. There is a benefit in getting them started on their own journey. Very literal ways you can apply this is when people are filling out their profile. We'll have all seen this. Start filling out the profile for them with information you can already gather, they'll be more likely to finish it. Wonderful quote from Ernest Hemingway who said he never finished a night's writing at the end of a sentence because he knew if he ends the sentence it's harder to start the next day. So he ends mid sentence. And then I was about to say he loads up his computer the next day, but I don't think he was doing that. I don't know, whatever typewriter. I guess you get to sit down at this typewriter the next day and he could just continue where he left off. It's far easier for his brain to engage again. Same thing happens for us. It's far easier for us to drop back into a customer experience jet with a company if we feel the progress is ongoing. You know, classic example, whatever you're selling, loyalty card wise, make sure that every time they're engaging with your product they feel like they're making progress towards a certain reward, whatever that might be.
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A
So I love this because I've used almost exactly the same example and it really does spur some thinking, people, particularly in digital environment today, in terms of when we're building education platforms or we're building anything. It's like, actually, why are we not gamifying this? Why are we not encouraging people to kind of work towards something as well? Give us another example, then. So we looked at what's a common marketing mistake.
- [11:53]
B
Well, you don't really want to throw marketers under the bus. We're all trying. We're all trying to achieve the same thing. And you know, the evidence I'm sharing today, it has worked in the scenarios I'm talking about. It's not guaranteed to work for everyone. You should still test it yourself. It's probably better than going on your gut instinct, but it still requires a test that said marketers. I studied marketing at university. I actually asked this at the marketing Meetup conference last week. I told people, put your hands up if you studied. This is a conference about marketing for marketers. About 10% of the people in the room put their hands up. When I said, if you study marketing,
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A
that doesn't surprise me.
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B
So it's. And I think that's a good thing, by the way, because I think a lot of what you learn at university, not at Imperial, obviously, Daniel, where you're
- [12:33]
A
literary, or Aston or a few others we are connected to as well.
- [12:36]
B
They're fantastic universities. But what you learn isn't directly applicable to the sort of first tactical jobs you'll get as a marketer. For example, I was taught to always talk about the benefits. Talk about benefits when you're talking about your product, say the things people will gain if they use your product. And yet there is a lot of evidence from the world of behavioral science that gains are not as powerful in terms of persuading us as losses. So this is from Amos Tversky and Daniel Kahneman's fantastic work on loss aversion, which, for those of you who have had the patience to sit down and read thinking fast and slow, and believe me, it takes patience. That is a man who makes a point and then repeats it about 25 times. And anyway, he makes the point that losses are twice as painful as equivalent gains. And the best way to frame this is if a listener, if your boss tells you, at the end of the day, today, we're going to give you £20 more in your monthly wage, you'll feel okay, feel pretty good. But if they say we're going to be taking 20 pounds away from your wage to pay for the teas and coffees, whatever else it might be, you're going to be fuming, you will hate that. And it will Feel twice as worse as the equivalent 20 pound game would feel. Finding 20 pounds on the floor in a car park feels okay. Losing 20 pounds on your way back to your car feels really painful. And smart marketers can use this loss framing to make their message more appealing. Elliot Aronson, fantastic researcher, did a bunch of studies on this back in the 70s. And one of the studies which applies directly to Marketing, asked homeowners 404homeowners, they gathered and sent them materials to their homes and said tried to persuade them to install insulation. Some received a message that was framed as what they would gain so you could save 75 cents a day by installing insulation in your house. The rest received a message about what they would lose or about what they are losing. So it said you are losing 75 cents a day because you do not have insulation in your house. They find that when you use the loss framing message, I think it was an 82% uplift in terms of the amount of people who would then go and install insulation simply by framing things as a loss. Marketers struggle to apply. This really good example back in the day was credit card surcharges. So you used to get charged a surcharge for using your credit card. Awful way of applying this. Instead they should raise the prices and you should get a discount for using using cash. That would have been a much better way to do it. So you don't focus on the loss because people feel that pain by loss, focus on the gain. Same thing. We saw this. I don't think this has been introduced but there were pubs I think a couple of years ago who attempted to introduce dynamic pricing. I think it was Green King and they said in London especially we will charge 10% more during a peak period. Or for way of applying this. Could people feel the loss instead they should say if you come at off peak we give you a discount. What an amazing way to make you far more likely to go to the pub. And you can imagine how this applies online as well. You should frame things not always by what you gain, but also by what you lose. Amazon prime do this brilliantly. If anybody listening has tried to unsubscribe from Amazon prime, you will have felt viscerally the losses that you would experience. They don't just say you'll lose out on Amazon Prime. They don't just say you'll lose out on Amazon tv. They don't just say you'll lose out on Amazon Music and the rest of it. They calculate the exact amount you have saved in delivery fees over The X amount of years you've had prime and say if you continue to use this at the same rate, you will lose. And it will be an astonishingly high number. Unfortunately, it'll be in the hundreds. And that feels very visceral and it's a very effective way. According to Richard Chataway in his book Behavioral Business, that one message alone from Amazon that specifically called out how much people would lose if they stopped using their prime service, that one message alone, which they tested, reduced Churn for Amazon prime by 42%. So incredible way to apply this online.
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A
It is. And I think it's really interesting because getting that messaging right, getting the subject line right, getting the title right, all those kind of things has such a massive impact. Yet we're so obsessed with the latest shiny thing and getting on and doing things of AI and so on, and actually going back to some of these principles, I think is so important. The big thing at the moment, or has been for ages, I guess, is, you know, we have to be authentic. It's really important to create authentic content. And it leads me nicely into this kind of question that you've got a kind of a reference for, which is, does showing your flaws make people like you more? And I think there's something at the kind of heart of this.
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B
Yeah. Have you heard of the Prattful effect, Daniel?
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A
I have not.
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B
Prattful effect. I mean, hilarious effect, isn't it? It's like it literally has Pratt in the name. How memorable is that? And it is. It's basically from this 1960 study, incredible study again, by Elliot Aronson. So I referenced him earlier with the loss aversion. And in the study Aronson recorded, it was a tape recording at the time, because video recordings weren't very commonplace. A tape recording of what participants thought was a quiz contestant correctly answering a bunch of very hard questions perfectly. So the contestant is asked, what's the 70th prime number? And the quiz contestant, he knew the answer. What's the capital of Tuvalu? Quiz contestant knows the answer. Things you and I. You actually might know both of those things, don't you?
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A
No, not at all.
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B
You might tell me. I actually think I know the capital of Tuvalu. I think it's 5th Anna. Anyway, I'm not sure this guy knew the answer. He's not like me. Anyway, gets 93% of these questions correct. At the end of the. Towards the end of the recording, the quiz host takes them off stage. You sort of. You can hear the tape player continues recording. You hear the quiz Contestant go off stage, pick up a cup of coffee, take a sip, and then spill that coffee all down their white T shirt, white shirt. And they say to themselves, oh, I can't believe that I've spilled all this coffee down myself. In this recording, Aronson does two things. Now, I should say the quiz contestant is a stooge. By the way, it's not a real person, but that's always the case. If a psychologist ever asks you to engage with someone, just bear in mind it's an actor. Anyway, Aronson creates two versions of the recording with the quiz contestant. One where it is cut right after he answers the last question so you don't hear the coffee being spilled. Another where he keeps it playing for a bit longer and you hear him spill coffee down himself. He then plays those recordings to two groups of people. And remember, the only difference is one time he spills coffee down himself. And. And he finds, surprisingly, that people consider the quiz contestant considerably more likable. Considerably more when he spills coffee down himself. Now, I like my friends, but I also don't like getting third degree burns. So it's a surprise, right, that people would prefer that they find someone more likable if they're a bit more clumsy. And what Aronson has had essentially found is that if you showcase a flaw alongside a strength, so remember, this guy's a smart guy, showcase a flaw of the strength, it makes people more likely to like you. He repeats the experiment again, this time where the quiz contestant does not get all of the questions right, doesn't know the capital of tuvalu or the 17th prime number. Suddenly he is seen as less likable when he spills coffee down himself rather than when he doesn't. Now, brands intuitively notice, many brands intuitively notice they highlight some of their flaws because it actually makes them seem more likable. Classic example of this was KFC when they ran out of chicken in the uk. The this very simple ad where they apologized, said, fck, we've run out of chicken. They highlight the fact that they had a flaw, they didn't avert it, and that made them seem more likable, made people, you know, won awards, that ad. Same with Marmite. You either love it or you hate it. Avis say, we're second, so we try harder. Buckley's, the mouthwash, say the taste you hate twice a week. There's all sorts of examples. Guinness, you know, good things come to those who wait. Waiting for a pint is not a positive, it is a negative, especially if you're with your mates and yet they highlight it and it almost turns it into a flaw. I tested this myself. Now this is a tongue in cheek check test. But I ran two Reddit ads. One where I said here are five reasons why you should listen to Nudge. And it was, I mean it's dull copy, but it was, you'll get evidence backed insights into how to improve your marketing, you'll hear from industry experts like Rory Sutherland, that sort of thing. And I published this, I posted this add on when people were on threads like forward slash marketing places where people would listen to marketing podcasts. And I created a totally different variant which went to the same type of audience. Different people, the same type of audience that said five reasons why you shouldn't listen to Nudge. And I gave a bunch of tongue in cheek reasons. Stuff like you'll get so many ideas within just 20 minutes that you will, it'll ruin the rest of your week because you won't know what to do with it, that sort of thing. It was all tongue in cheek. I think one of them was you'll piss off your colleagues of all your knowledge. It was quite, you know, quite a big headed thing to say, to be honest. Anyway, I called out the reasons why you shouldn't listen to Nudge. And that message, albeit the first message wasn't that impressive. That message had a four times higher click through rate than the original message. A really significant one even though the original message wasn't that great. And I think it's simply, it's two reasons there. One is the prattful effect. We do like it when people showcase a flaw. But two, it also when you are, when you do showcase a flaw, you actually stand out compared to every other ad out there. Listeners, many listeners will remember an ad for a random ski chalet in I think it was Denver, Colorado and the ad, it went viral online and it was a two page ad for this ski chalet ski resort and it or sorry, ski slope I should say. And the ad just had a review out of five stars and it said one star, this ski resort is too complicated. I wasn't able to ski down in and then picture someone falling down the ski. And it went viral because it was promoting the ski slope, right. And in saying it was too complicated for a beginner they became more viral. Famous ad for the Bible app which is from pictured in New York Subways says Bible app rated one star by Satan. He doesn't like it, that sort of thing. So you can find these fun ways to apply this effect, yeah, I've seen
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A
it quite a lot when people have taken their most negative reviews and are posting those to kind of show, look, it's not for people like this, it's really for people like you. But we kind of get that. So I love that, that kind of distinctiveness. I mean, it leads us into the next thing as well, is like, how relevant is distinctiveness in a world where it is increasingly hard to stand out and there are more and more voices out there? How much of a kind of benefit is that?
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B
I would argue it's probably become more important in the last two years than it was in the last 10 years. And that's probably due to AI. So what you've seen with AI, large language models, they learn off the average. And it's harder to get distinct content out of AI than generic content. And also, it's very easy to get generic content. And so the Internet is flooded with generic content rather than distinct content. And yet the evidence seemed to suggest that being distinct does help you and your brand. This harks right back to a sort of infamous study in the 1930s by a wonderful researcher who fled from persecution from the Nazis. And her whole thing was she was obsessed with figuring out if distinct things were more memorable in the brain. Have you heard about this, Daniel? It's the von Restoroff effect. Quite a distinctive name. Yeah. So the idea behind her study, and it was run way back in the 1930s, was she gave participants four combinations of different. Four different letters. So S, E, R, T or Q, B, N, U. And you had to remember as many combinations as possible. It's quite hard to do, to remember many. So you get given this list, 30 minutes, come back, how many do you remember? Except within the list of the combinations of letters, she included just one combination of digits. 7, 3, 2, 1. What she finds is that the digits are 30 times more memorable than the letters. The idea being because they're distinct within the comparison set, they're more likely to stand out, more likely to be remembered, you might say. Well, Phil, that's because digits are easy to remember. After all, my PIN number is a digit. Well, Hedrick von Mestrov, she repeats the experiment. Now it's all digits you have to remember, and there's only one combination of letters. Suddenly, the letters are 30 times more memorable. That was back in the 30s, 1930s, been repeated by the brilliant Richard Shotton. He talks about this in his book the Choice Factory. He gives participants brands they need to remember, brands from, you know, all types of brands. In one of the scenarios, they're all brands from an automotive category. Nissan, Toyota, Hyundai. But there is one brand from the fast food category, Burger King in there again, trying to remember as many possible, go away for 30 minutes, come back, how many do you remember? Burger King is four times more memorable in his scenario than the automotive brands repeats it. It's all fast food brands, Subway, Pizza Hut, et cetera, et cetera, et cetera. And now Hyundai, which is the one off distinctive brand within the category set. It's more likely to be remembered. So distinctiveness really pays off. And yet it is commonplace to copy competitors. I really experienced this in sort of SaaS software, which many of the listeners who are listening who are in B2B software. I was director of product marketing at these companies and I was in charge often of working on the website, creating content for the website. And what we found within our space was that all of the websites from all of us and all of our competitors looked incredibly similar. Now there is some benefit from looking similar to competitors in that you've got an easy to navigate page and you immediately fit into the category set. And yet at the same time, that lack of distinctiveness probably means, especially for challenger brands, you're far less memorable and you don't stand out. And so what we would try and do, the companies I'd work at, is try and find ways to be a little bit more distinct rather than using the classic cartoons that everyone was using, create get some real world pictures that are different rather than using social proof in the way that we spoke about earlier. Change that. So it's something a bit, a little bit more different. We had, I worked at a company called Hotjar where we put a live demo on our site so people could log in and immediately see a heat map of the website, which is a really fun way of displaying what we did and was a bit different from the others. So it's really important to find ways to find ways to stand out, to be distinct. And if you want the best example of this, this is a really cracking one for any heavy metal fans out there, Google the company, Google the rock metal band party canon, spelled party canon, just as you would expect. And then look at them when they are placed in a festival poster promoting them alongside lots of other heavy metal band brands. They knew when they're compared to the competitors they needed to stand out. So rather than looking at like every other gothic styled heavy metal band logo, they created a logo that essentially looks like the Toys R Us logo, essentially looks like a logo you would expect from A soft play center in South London. And it guarantee, I guarantee it. When people look at Heavy Metal man festival and they see 50 different bands on there, party Canon will stick out in their minds because it is so distinct.
- [27:39]
A
We will put it into the show notes as well. So. Targetinternet.com forward/podcast. Let's, let's look at a few more of these as well. How does anchoring shape perception? I read into this one a little bit. This is great.
- [27:50]
B
Yeah. So again, we've all experienced this, right? We go to a restaurant and we look at the wine list and let's say in one restaurant, the number one wine on the list costs £50. You go down a bit and you find a wine on there for £30, you think, okay, £30 is an okay deal. Maybe we'll go to that one. You go to a different restaurant, perhaps the first bottle of wine is £15 on the list. You look down the list, you find one for 30. Suddenly 30s, that's a rip off. How dare they charge that much. You're anchored by the initial piece of information. You see, anchoring affects us in all sorts of ways. There's these amazing studies where people were shown newspaper headlines without the newspaper attached. So headlines like climate change bill to cost 500 million. And they were asked that was all the context they would get. And they were asked to rate how positively or negatively they viewed that headline. And then some of the individuals compared to the baseline who didn't see any logos, some of the individuals were shown a publisher headline. Some were showing a tabloid like the sun to say the Sun. Climate change bill to cost 500 million. Another was shown a sort of broadsheet like the Financial Times. Climate change bills cost 500 million. They ask Brits which, you know, do you think this message is positive or negative? When it's anchored by the tabloid, they think it's incredibly negative. Oh my God, I can't believe it's going to cost 500 million. What a waste of taxpayer money. When it's anchored by the, you know, maybe more respectable or maybe more diligently researched financial times, suddenly people think, oh yeah, 500 million is probably quite a good, quite a good price. So anchored by that initial piece of information, you can apply this online all the time. There's some evidence to say that if you've got tiers of pricing, it's better to start with the most expensive tier. You should anchor by, for example, comparing your price. Steve Jobs did a great example of this when he launched the ipod. The ipod was significantly more expensive than CD players, significantly more expensive than MP3 players. So he set a new anchor in people's mind. He didn't just show them the price. He showed them the cost per song and the cost per song, because the ipod could fit a thousand songs in your pocket, was significantly cheaper than obviously a CD and actually significantly cheaper than an MP3 player as well. So he used that as the anchor. That made his pricing more appealing. In fact, the best example I've found. I've studied Steve Jobs quite a lot actually for his keynotes. Behavioral science gold dust. He really understood the power of influence. And he did this best when he launched the iPad. Many of us listening will remember that feeling when the iPad came out. It was back in 2010, nobody really knew what the iPad was for. We already had the iPhone. That was quite successful. Many of us had laptops and a MacBook. The iPad, well, why would I use that? It's just a bigger iPhone. Lots of journalists debated how much it should cost. On the background of sort of this debate, most of them said, this really should be quite cheap. It's going to need to be cheap in order to attract the market because there's no need for it. They estimated it should cost around $300 at most. Still quite expensive, really. One or two said, it's a really big screen. From what we're seeing from the leaks, this touchscreen is bigger than anything we've ever seen before. Based on the cost. If we extrapolate the cost of the iPhones, it might cost a thousand dollars. Steve Jobs saw this. He thought, great, I've got my anchor. Because he then goes into his keynote and he is speaking in the room to all of the journalists that have essentially all predicted that it will cost $300. You can watch this summit. It's 2010 Keynote Summit, Apple. And on screen behind him, when he gets to the part of the presentation, when he introduces the price of the iPad, presses a button and the price, $999 appears behind him. $999. And he says, some of you in this room have predicted that the iPad will cost this much. He says, that's quite a fair prediction. The iPad has next generation technology, large screen, yada yada. Remember, only a couple of them actually predicted that. But he builds that as his anchor. And then he says, I'm so, so proud today, so proud because I am able to not charge this amount for the iPad. Presses a button on his clicker. 999 smashes into a million pieces. And the real price of 499 is revealed. He says, I'm so proud I've been able to get the price down to 499. The journalists in the room, who remember had predicted it would cost around 300. They're whooping, they're CHEERING oh, my God. Steve Jobs has done it again. What a mastermind. He's got this amazing product down to 499 simply because he's anchored them to a higher price before he shows the real price.
- [32:24]
A
I love it. I think it's a great example. Right there's. I want to go two more of these and I think I really enjoyed this. So why do people judge experiences by the peak and the end? I thought this was a. This is great.
- [32:37]
B
I've just had on Nudge. I've had Will Gadara. He's the author of the brilliant book Unreasonable Hospitality. He essentially created the world's number one restaurant in 2017. He's not a chef. He did it by applying behavioral science. And he spoke to me a lot about the pecan rule. Peak, end rule, again, is Daniel Kahneman's work. So the author of Thinking Fast and Slow, Nobel Laureate, he ran these quite harsh studies. I feel a bit sorry for the students in these studies and they always ask students because they're cash strapped and need something to do. He got these students to put both of their hands into cold, but not freezing cold water. The water was about 13 degrees Celsius, so quite painful, but not sort of horrible, just, you don't want to keep your hands in the water for that long. Anyway. He gets them to leave their hands in the water and then after 60 seconds, says, you can take your hands out. And then he gets another group of people and says, put your hands in that water for 60 seconds. But then for the remaining 30 seconds, he asks them to quickly take their hands out and then put them in another pool of cold water, but it's slightly warmer, it's 14 degrees or 15 degrees. Now, most people in this study who hear about this study would say, if they were asked which of these two options is better, they would say, well, it's the first option. They only have to put their hands in the water for 60 seconds. 30 more seconds in still uncomfortable water is obviously worse. And yet when he asks the individuals in the study, would you like to repeat this experiment, how much would you need to be paid to repeat it again? How enjoyable did you find it? He finds consistently that those who had the slightly more pleasant ending enjoyed the experience more, were more likely to do it. Again, asked for less money when they were asked for it. And the finding there is really simple. The final experience we have, it has an asymmetric and outweighed impact on our perception of the whole experience. Will Ghidara, this amazing restaurateur who knew all about the peak end rule when he was running 11 Manson park, applied this to two different areas of the restaurant. And if it's all right, I'd love to talk about both of them. I think you can apply to digital as well. So the first is when you give the bill. Now, fine dining restaurant, very hard to give customers the bill. If you give the bill too early, customers feel like they're being rushed. That's awful. If the customer has to ask the waiter for the bill, they feel that sense of agitation. Where's the waiter? Can't get their attention. We've all felt that. Right. So what do you do if you're a fine dine restaurant? You don't want to give it too soon, you don't want to give it too late. They came up with a solution which involved essentially giving something away for free, but easing that pain of payment. They had brewed their own cognac in bottles quite cheaply, but they basically used that. And they would go to the table right after they finished their meal, put the bottle of cognac down, a couple of glasses and say, we're so grateful for you dining with us today. As a token of our gratitude, please help yourself to our homebrew cognac. Have as much as you like. And I'll also just drop the bill down there as well. Whenever you're ready to pay, just get one of our attentions. But bill's will, if you already. What a wonderful reframing of something that was previously quite fr. Quite painful. Rather than you get the bill, you see the price. Oh my God, it's a lot of money. I can't believe we've just spent this much. You're enjoying a bit more of the experience with a glass of cognate. Probably enjoying a bit too much. And it's so reframed in that end experience rather than being a negative as a positive. And then he went even further. In winter, he said the experience, the actual last experience with the restaurant in winter specifically was trying to get your coat back from the cloakroom. So you'd give your coat into the cloakroom, you'd have these little tickets. And he essentially found that people lost these tickets. It was a sort of clumsy experience trying to get through all your pockets. Someone's lost theirs. Is it in my bag? Did I take them or did you take them? It's just not the nicest ended experience. And we know from Daniel Kahneman that the end is almost as important as any part of the meal. And so Will Ghidara devised this thing called the ticketless coat check. And what he essentially had was in the back of the restaurant, there was a big room which had piles where people could leave coats which linked exactly to the tables they were on. So you would give your coat to the maitre d, maitre d would take it to this big room or hand it to someone, take it to the room, and they would put your coat on a table which literally said, this links to the table nine. And this is this seat, this is this seat, this is this seat. The maitre d would be circling the room, and whenever a customer was sort of getting ready to leave, they would fetch their coats from the bigger room and then have them on hand with a number of different waiters ready to give to each individual person. So they're walking up to the front of the restaurant, they're looking for their ticket, because everybody is used to having a ticket. They don't have the coat on them. They must have got a ticket. They can't find it, and suddenly someone hands you your exact coat without you handing them a ticket. It's magic. What an amazing last experience. And that's how this restaurant, which, let's face it, would have had incredible food, but that is one of the reasons why they became the best restaurant in the world. Because they focused on things that others dismissed. Others didn't bother to think about the ticket because it was not important to them. The food was important. They focused on that because they understood things like the pecan rule. They understood that the last experience you have with a service is going to be one of the most memorable. So you better make it as good as possible.
- [37:59]
A
I love this because I'd read this before and I was thinking about. I had this whole series of lectures with my students at Imperial, and it's got to be pretty hard going. There's a lot of content. You know, these are smart students. We've got to do some really tough stuff. And then we always do this thing where the final lecture is this really fun, kind of gamified, upbeat. We end with a big selfie photo, this kind of stuff, and everyone's like, yeah, so much fun. It's like, actually there were seven of them that were really hard work for you. But actually, you do end on that lovely High as well, which is great. So, yeah, it does work. It's very interesting. So, okay, let's just do one more. Why does visible effort increase value? I love this.
- [38:36]
B
If, if I could only talk about one bias for a whole podcast episode, it would be this one. It's my favorite one. Covers a lot of different names. Input bias, IKEA effect, labor, illusion. But essentially the idea is if you put more effort into something or if you see somebody else putting a lot of effort into something, you will value that thing more. So cracking example of this IKEA effect. This is done on by Mike Norton. Studies with IKEA products. If you build your flat pack furniture yourself, you will value your creation more. 63% more. You'll ask for 63% more. If somebody wants to buy that off you, then an expert built version which you've also been given. We like the things we've created. If you look on all of us probably now, if we go and look on our fridge, we'll have a drawing probably by a partner or daughter. We love it because it's something that they created. We saw the effort that went into it. Same as if you ever go to an art exhibition, you start to see this a lot more. At the moment, an artist that has a bit of a TV screen or an iPad which actually shows a time lapse of them creating the art, will almost always have a queue of people wanting to buy that art. Because when you see the effort that goes into something, you value it more. Ryan Buell ran studies on this. He calls it operational transparency. And he finds that in the canteen in Harvard where they ran these experiments, if people who are dining at the restaurant can see the chefs cooking their food, they think the food is tastier, think it's better quality. And actually the chefs create better food as well. Him and his colleague Mike Norton applied this to websites. They did this amazing. So it's back in 2011 with Kayak.com, you know, Kayak is sort of, yeah, not as popular anymore, but it's where you go sort of an online travel agent sort of thing. And they, at the time is 2011, they had quite a long loading wheel. So it took quite a long time. Goes to a white page, loads, and then you get your results. He said if we show what is loading, what kayak is doing, people might enjoy that weight more. So they created this variant where instead of seeing a white page and a loading wheel, you would see a loading wheel. And then behind the loading wheel, Kayak searching through Delta, United, British Airways, all The different airlines, then all the different hotels, then all the different countries, all these things, things going on behind and then you get your results. That version took longer because it takes a website longer to load a page, which makes it look like the page is trading. Right. And even though that took longer to load, people were far more likely to stay on the site because they could see the work going into it, and then far more likely to actually buy a hotel off the end of it. And we've seen the exact same thing. You think that's a study from 2010? The exact same thing happened with AI and LLMs over the past few years.
- [41:11]
A
I'm just going to say exactly that.
- [41:12]
B
You remember it, right? LLMs. When we first used ChatGPT, it was just a loading wheel. Now, ChatGPT, or Claude, whatever you use will tell you exactly where it's searching, what it's doing, what it's working on. Especially if you use deep research, it'll actually show it looking at all these different web pages. It doesn't have to. That uses more energy than if it just did it by itself. It is a purely psychological play to make that weight feel less stressful. Uber is essentially only successful because of this whole policy, right? Uber only beats taxi drivers, not because they offer a better service. A lot of people say they don't. If you use a taxi in London, for example, Uber's much slower. It can't use bus lanes, for instance. The only thing that separates Uber is it makes the wait more enjoyable because you can see the work going into it. You can see it searching for your taxi, you can see it finding your taxi, you can see the taxi driver driving towards you and you value that effort more. So my plea to marketers, look at your website, look at the content you're creating, have a think about, oh, is there a way I could showcase my effort more? Okay, there. When I ask people to sign up for my newsletter, I don't say sign up to my newsletter. I say I spent. I spent around 18 hours a week reading, researching behavioral science. I translate the best insights into behavioural science. Tip. Every Friday. What a great way of showcasing the effort it goes into it, but as just to link it right back to what we said at the start. It's one thing to say you've put a lot of effort into, it's another thing just to show it it's more powerful if you don't even have to say it. So when I gave a talk last year in the south coast of the uk, in a place called Poole I did a talk on the psychology of effort, but I wanted to prove that it worked with the attendees. I wanted them to really feel this themselves. So I thought, I need to put a lot of effort into this talk to make them feel and actually experience the psychology of effort. I thought about all these things. I thought, maybe I'll write them handwritten notes. Maybe I'll draw them something and put it beneath their seats, trying to come up with all these ideas. And then I thought, no, I'll put a lot of effort into getting to the event. And so I decided this was such a dumb idea. I decided I would hike 61 km on the day before the event. That's a marathon. And then another half marathon, by the way. Right. I'd hike to the event, got to the event, and basically said to everyone, psychology of effort means you value more things when you put the CD effort going into it. And by the way, here's all the effort I took to get here and then shared some stories about the effort I took to get there. And, I mean, I don't want to say it was the best talk of the day, but people seem to really enjoy that talk because they could see the effort that went into it as well. So think about ways to highlight your effort.
- [43:49]
A
I love it. I'm walking to all my conferences from now on. That's. Yeah, I'm going to do it.
- [43:52]
B
I mean, a little hard from Jersey, maybe. Maybe you need a canoe as well.
- [43:56]
A
There might be a bit of swimming involved. Phil, thank you so much. I think it's been an absolute masterclass, and I think there's so much in there that we can apply to all the work that we're doing every day. Tell the audience a bit more about Nudge and the other stuff that you do as well, so they can kind of follow and connect there.
- [44:09]
B
Thanks, Daniel. Look, you folks are listening to a podcast. You're listening to a very good podcast. There aren't many good podcasts like this one out there, but I like to think that Nudge is good as well. Well, so when you're done listening to this, if you want to learn more about the sort of things I do, you can search for Nudge. You'll find an orange logo, you'll see my name, and just listen to an episode that catches your attention. If you scroll down a bit, you'll probably find one about Will Gadara and the peak end rule, which we spoke about earlier. So that might be a good one to get you started. But go to Nudge. Check it out. And listen to the show and we'll
- [44:39]
A
put the link through to all those episodes in the normal show notes as well. So targetinternet.com forward/podcast and we'll link through. And Phil, thank you so much for joining us. I've really enjoyed it. And as you say, there are, there's a lot of podcasts out there. They're not all great, but yours is one of the great ones. So thank you for being here.
- [44:54]
B
Thank you so much for having me on. It's been an honor.
- [44:58]
A
For more episodes resources to leave a review or to get in contact, go to targetinternet.com podcast.