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

Dec 11, 2020

Today I am very pleased to introduce you to Dr. Henry Stott, cofounder of Dectech, a behavioral science consultancy in the UK.  As you’ll hear on the show today, Dectech works with all sorts of companies and industries, from banks to insurance and food delivery. They use randomized controlled trials and other techniques to help companies understand behavior and properly apply it within their businesses.

Dectech is not new to the space. It was founded nearly two decades ago in 2002, so they have lots of background and foundations they build upon. 

During our conversation, Henry and I talk about all sorts of concepts, like nudges, anchoring, relativity, framing, habits, and more—and all those past episodes are linked for you in the show notes, as well as the book The Mind is Flat written by Henry’s cofounder of Dectech, Dr. Nick Chater.

I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation.

Show Notes:

  • [00:40] I am very pleased to introduce you to Dr. Henry Stott, cofounder of Dectech, a behavioral science consultancy in the UK.
  • [02:43] Dr. Stott started Dectech about 20 years ago with his cofounder, Dr. Nick Chater. They have spent the last 20 years refining their view on how you harness those methods to more accurately predict how consumers and other people will behave in novel situations.
  • [03:54] There are two classes of problems. The first class of problems is a precedent problem when you are trying to forecast the future.  
  • [04:46] The second class of problems is harder (and often more valuable) where there has never been anything like it before. These are the types of problems they have set out to understand.  
  • [06:06] Dr. Stott shares about the Deliveroo project. The question was whether they were going to launch a subscription product or not.  
  • [09:04] Pricing is not about price.  The way you present everything before you get to the price matters more than the number. 
  • [10:34] Designing the proposition so it fits snuggly into what people want is the first objective.  A lot of people fail to do that. They often have to drop the price because they haven’t added value.  
  • [12:06] A lot of the designs of features and propositions are driven by an excessive fixation with competitors and an excessive self-confidence of the management. 
  • [14:36] Looking to competitors when determining your pricing is a mistake.  
  • [16:58] At least half of the judgment is made up of the movement of prices within a store as opposed to contrasting across stores. 
  • [17:40] People are much more sensitive to the order of things than the size of the differences.  
  • [19:54] When you are able to feel like you are part of the process waiting can feel less painful. 
  • [22:51] Sometimes a time delay can be a good thing.  
  • [23:36] Dr. Stott shares about the Lloyd’s Bank case study and the customer journey optimization process. 
  • [24:31] They were looking to design a home insurance renewal process that worked best for the customers and the bank.  
  • [25:37] They also tested a “name your price” condition, but it ended up not being very popular (which is good to know because it would have been very expensive to set up and would have been a waste of time and money). 
  • [28:28] In experiments, Dectech runs as many as 20 variances. Sometimes they are all run together and other times they build on each other.  
  • [29:33] The best approach is to immerse customers in a decision-making environment that is as close as possible to the environment they would naturally encounter.  
  • [32:01] You can get quite close to replicating the kind of mindset people will be in using an online decision environment.  These trials have to be run entirely virtually just because of the number of participants.  
  • [33:20] More and more commerce is taking place online, so virtual testing and formats like this will be increasingly relevant.  The pandemic has accelerated this trend.
  • [35:05] Small changes can have profound effects on the economics of your business. 
  • [36:29] Before you start testing, think of the best ideas and try to innovate. 
  • [38:34] Something novel or fun is often one of the best outcomes in the experiment.  
  • [40:43] I love all the work Dectech is doing, it’s really fascinating stuff, and you will be hearing about them again in an upcoming episode featuring Dr. Benny Cheung.

Thanks for listening. Don’t forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. 

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