Using Behavioral Psychology to Improve Your Website & Business

David M. Williams, CFP®

Business Enhancement Associates, LLC

We have 2 brains

ReflectiveProcesses and analyzes data at tremendous

depth and breadthResource intensive

Reflexive Intercepts input & monitors Reflective brainApplies intuition and emotion—feeds result to

Reflective brain

Interaction—part 1

Interaction—part 2

Interaction—part 3

Interaction—part 4

Reflexive brain reacts to squealing tiresSurprise, tension, ceases Reflective brain

Reflective brainDetermines no immediate dangerWants to see accident

Reflexive Brain’s Modus OperandiAlways onWatches for patterns—even where they don’t exist

Knows loss hurts more than gain feels good

Uses intuition and emotion on partial input in order to react fast

Intuitions (Biases)

Heuristics (Rules of Thumb)OverconfidenceMental AccountingFraming

Heuristics

1/n RuleOption overloadUrgency imperative

Overconfidence

“One of the most fundamental characteristics of human nature is to think we’re better than we really are.”

Survey of 50 driversOne in four people are crazy. If you have three sane friends, it must be you.

OverconfidenceOverestimate our chances at success.

Take risks we regret later.“Home bias”Illusion of controlHindsight bias

Survey regarding Nixon’s China visit.

Mental accounting

We value certainty and short-term gains over waiting for a benefit.$10 today or $11 tomorrow?$10 in a year, or $11 in a year and a day?

The reflexive brain doesn’t do math.Shopper who saved $100.

Framing

Our reflexive brains make judgments in very subjective and changeable ways, depending on the surrounding circumstances, feelings, context or point of view.

FramingWhat is the stateof this glass?

Framing

Theater A charges $7.50 per ticket, but gives a 33% discount for tickets from 5 to 6 pm

Theater B charges $5 per ticket from 5 to 6 pm, but charges a 50% primetime surcharge

Which theater gets more business?

Framing

Doctors avoid procedures that have a 12% failure rate.

Doctors adopt procedures that have an 88% success rate.

FramingIf you can win only 67% of the time, it sounds like slim odds.

If you can win 2 times out of 3, you’d take a chance.

We see 67% as just over half, but we can picture ourselves as a part of the 2 out of 3.

Practical ApplicationsDon’t give too many choices—it leads to paralysis by analysis.

People react to a sense of urgency.You are part of the odds. Only half of us are above-average. We are not above-average on as many things as we think we are. Nor is anyone else.

Practical Applications

Beware of putting short-term gains over long-term gains. Determine how certain “certainty” is.

Don’t spend to feel good. You won’t feel good when you add it up.

Practical ApplicationsWeigh pros and cons. It’s never as bad as it looks. It’s not that good, either.

Accentuate the positive with your customers.

Percentages apply to things, but we comprehend frequencies better when risk is involved.

Practical ApplicationsBe aware of “only” and “just,” as our reflexive minds diminish the object of the term.

Confuse clients with odd numbers. People buy at $19.95 when $20 is too expensive. We think we pay $2.54 per gallon when we really pay $2.55, because we ignore 9/10.