How behavioral science can help influence our decisions

@IE University

If someone said you were predictably irrational, would you take offense? It may sound like a strange insult, but some businesses have outperformed their competitors by 85% in sales because of it.

Since Sigmund Freud in the 20th century, we have been seriously investigating why we do what we do. While Freud said that it is our unconscious mind that makes decisions, modern insights have found explanations that are easier to implement into business processes.

Our amazing brains

Predicting our behavior is the holy grail for businesses looking to drive growth—and it’s also incredibly complex. According to neuroscientist Julia Sperling, “At any point in time, over 11 million bits of information hit our brain, and it’s able to filter them down to about 50 only. Then seven to ten of them can be kept in short-term memory.”

Such complex filtering can only happen without us knowing about it. And as you might expect, it’s extremely difficult to predict. The trick is not to control people’s behavior but to simply give them a nudge in the right direction or use different techniques to combat built-in bias.

Behavior within companies

How we manage and deal with people within organizations is changing thanks to behavioral science. Here are some of the most important areas.

Performance management

The application of behavior science is as effective when dealing with employees as it is with customers. Within a company, the most prominent area is performance management.

It may come as a surprise to some, but money is not always the best way to motivate people. With data-based behavioral science, “you can identify factors that actually hinder performance as well as those that foster it.”

Health and safety

As part of our inherent irrationality, we sometimes do things that don’t quite make sense. People are likely to turn up their noses at corporate procedures, even when it’s in their interest to follow them. Sperling recounts an interesting story that exemplifies this, recommending that you change the environment to make it easier to follow the rules rather than attacking people’s mindsets.

Sperling talks about the issue of managers in construction companies ditching their hard hats once they’re promoted as a sign of superiority. Instead of simply forcing the managers to wear their hard hat on-site, they gave them one of a different color—using the same bias for good. This way, neither their heads nor their egos are in danger of getting bruised.

Avoiding bias

Another way behavior can be influenced is with regard to bias during recruitment. It’s important to recognize that we are all biased to a certain extent. This can range from the “mini-me” bias, where we naturally favor those who remind us of ourselves, to groupthink, where we are unwilling to contradict a group’s emerging consensus.

There are wonderful little tricks and techniques to combat these biases. For example, during the hiring process, avoiding groupthink can be as simple as asking people to give their own opinion about the candidate before meeting to discuss it. Then, in the meeting, the most senior person should never speak first, as lower-level employees tend to echo their boss’ opinion.

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Influencing customer behavior

The general idea is the same whether you’re dealing with employees or customers. You generally want to nudge people in the right direction without restricting their free will or choices in any way. Doing this can represent huge growth potential for a company. Just look at Netflix.

How Netflix used behavior to influence growth

Before we talk about how Netflix influences customer behavior, it’s important to know where they get their insights from. You’ve probably already guessed it—data. Yes, data is the gift that keeps on giving for businesses around the world.

And since Netflix operates in over 190 countries and has a reported 150 million subscribers, they have plenty of data to work with.

Busting traditional personas

In marketing, you would generally segment people into certain personas or target audiences. Yet with Netflix, they found it virtually impossible to make assumptions on what each individual would watch. As Tod Yellin, VP of Product Innovation at Netflix, said:

It really doesn’t matter if you are a 60-year-old woman or a 20-year-old man because a 20-year-old man can watch Say Yes To The Dress and a 60-year-old woman could watch Hellboy.”

So, instead of relying on preconceived ideas of personas, Netflix focused more on what their customers actually do. They found that insights revealed through their behavior can give them a much more accurate result regarding what their customers want.

The personal touch

Personalization is the buzzword of the marketing world and for good reason. Alongside other big hitters like Amazon or Google, Netflix has taken personalization to the next level. Have you ever noticed that almost everything on Netflix is some sort of recommendation?

“Because you watched…” “Viewers also liked…” “Based on your interests…”

All these recommendations are essentially nudges based on your personal behavior on the website. But does it work? Well, recommendations account for 75% of Netflix and saves the company around $1 billion by not scaring away customers or causing them to leave, so it sounds like a yes.

Behavioral science is a fascinating subject that explores who we are as humans and how we can improve the way we act. Companies like Google, Netflix, and Amazon are breaking boundaries with how we can use these new insights, but there is plenty more still to be discovered.