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

Six months ago, I did my behavioral economics analysis of Costco, which has zoomed into the 11th most downloaded episode of this podcast. My analysis of Apple Card is right above it, so we can say they share the 10th spot. Today, I’m doing another behavioral analysis of a business: Starbucks.  It’s not a coincidence that we are getting into Starbucks right around the holiday season. They have definitely done some things very right when it comes to the holidays…and I will touch on the controversy they’ve seen as well. In the episode we will talk about featured drinks, red cups, nostalgia, pricing strategy, scarcity…and a whole lot more. If you’ve been listening for a while, you know I love Starbucks. Not just for their chai tea lattes and marshmallow dream bars, or because I live in Seattle…but because of the amazing things they have done as a company to shape the world we live in today. Starbucks is a dynamic and large company with a plethora of examples I could have chosen to talk about today.  There isn’t time for everything. Instead, I have picked some of my favorite pieces for the episode – ones I think you will find valuable and interesting and be able to apply to your own business (whatever that may be). Whether you work for a global business like Starbucks, are a solopreneur or an academic or somewhere in between…you can learn from the smart things the company has done and how they have understood human behavior. In the episode, we will dig into their star rewards program, as well as featured drinks and products – from PSL to the Unicorn Frappuccino, as well as the coveted red cups (which just launched a couple days ago by the time this comes out), the personality and overall brand choices in their logo, locations and on social media and, of course, pricing. Show Notes: [04:31] Without the original brand and pricing, Starbucks would be just another coffee shop. [05:04] It really is an amazing feat when you think about the commoditized industry Starbucks was facing before it launched its first store. [06:04] One of the big aspects Starbucks had to overcome was the pricing anchor. The first number you hear (or a standard price) is the anchor, and the brain adjusts from that to determine what is reasonable. [07:02] The way we act is driven by our subconscious, and when you ask a logical question to the conscious, it doesn’t answer in a way that reflects true behavior. [07:19] To justify a higher price, Starbucks needed to invent a new category. [07:59] This wasn’t just about coffee – it was creating community…a “third place” – an experience that was something more.  [08:21] Functional fixedness: when all you have is a hammer, everything looks like a nail. [08:48] When you look at what everyone else is doing, herding will keep you stuck. [09:01] Howard Schultz and Starbucks took a step back, got out of their own way, and created a new category which changed the conversation about coffee. [09:12] Asking good questions can help you get there. [10:01] Ask questions that aren’t about what everyone else is doing. Don't get stuck in the herding or the anchors. Instead, it is about looking to what could be, and asking “How might we?” or “Why?” [10:07] For your business, look at all the things you do because everyone else does. Is that serving you well? What would make your customers excited? Delighted? [10:29] Price is never about price. It's about all the things that come to for the price. Starbucks is a fantastic example of that. [10:56] Studies about wine show that people get more enjoyment from drinking wine that is more expensive. [11:37] When you can break free from the herd and make it about something more, your business can reap benefits beyond what you even imagine. [12:13] Starbucks changed the game with all of their drink options. The first drink they made famous was the Frappuccino. [13:38] The brain gets what it expects. If you expect Frappuccinos to be delicious and you get something similar by a different name, it won't be as good. [14:46] Starbucks started the original pumpkin spice latte or PSL. The limited nature triggers scarcity and loss aversion. [15:53] For scarcity to be a value in your business, you actually have to take something away. [18:43] Starbucks is constantly testing, and they're not afraid to have something popular only available for a limited time. [19:20] The new thing that started this week is the red cups. Keeping traditions alive is something that Starbucks does amazingly well. [20:03] For many, the red cup has become part of a tradition on holidays. When you become a lifestyle brand, you bear the responsibility of becoming a part of peoples’ lives. [21:34] Starbucks had a set of filters that every brand aspect had to pass through. These included being handcrafted, artistic, sophisticated, human, and enduring. [23:46] Taking the time to stop and evaluate what is really going on is important. [25:11] When you think about the value of the brand, it's about the overall experience with the brand at its core. [26:33] Your business should learn to watch the trends. What is going on that is cool and interesting and that everyone is talking about, and how would it look if you were to incorporate that into your offering? [28:00] Star rewards are one of the smartest things Starbucks could have done for their business. In many ways, this built upon the wildly popular “treat receipt” where you can get a discount when you buy a second item after 2pm or 3pm. [29:06] The star rewards model is built to create habits for users and increase visits. [34:03] Star rewards are a smart balance of loss aversion, scarcity, relativity, habits, and more. All executed through a series of experiments to see what is bringing the most value to the company and its customers. [34:42] Don't get sucked into your brain’s natural tendency to herd. Just because everyone else is doing something one way, doesn’t mean it is RIGHT to do so. [34:59] Take a step back and think bigger. Look to the future and the possibilities. [35:11] Scarcity is a powerful tool when used correctly. Especially when paired with loss aversion to help people choose your product. [36:05] Making your brand a habit is about more than caffeine and sugar. Starbucks puts effort into getting more customers to choose them more often for more things. [37:59] Next week, we are digging into the concept of time pressure. 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.  Links and Resources: Episode 47. A Behavioral Economics Analysis of Costco Episode 42. Apple Card: A Behavioral Economics Analysis A Starbucks Barista Asked Me This 1 Simple Question, and Using It May Be a Great Way to Boost Your Sales Every Starbucks Growth Strategy Is Working 30 Interesting Starbucks Facts and Statistics (2019) | By the Numbers Episode 11. Behavioral Economics Foundations: Anchoring and Adjustment How Starbucks Transformed Coffee From A Commodity Into A $4 Splurge Episode 53. An Overview of Lazy Brain Biases Episode 19. Behavioral Economics Foundations: Herding Episode 4. Questions or Answers Episode 5. The Truth About Pricing Starbucks Didn't Invent the Frappuccino. Here's Who Did. Starbucks Has Made An Insane Amount Of Money From PSL Sales Starbucks Red Cups 2019: When Do Christmas Holiday Drinks Start Going on Sale? A Brief History of Starbucks’ Holiday Cup Controversies Episode 43. A Guide for You to Create a Brainy Brand Episode 44. Rebrand, Refresh or Reinforce? Starbucks Will Be Selling Fewer Limited-Time-Only Drinks That Can Be Super Hard To Make Episode 15: Behavioral Economics Foundations: Availability Episode 27. Behavioral Economics Foundations: The Sense of Hearing and Sound Episode 21. Behavioral Economics Foundations: Habits Episode 63. How To Set Up Your Own Experiments Episode 12. Behavioral Economics Foundations: Relativity Episode 23. Behavioral Economics Foundations: Reciprocity SPAM® Pumpkin Spice Master Your Mindset Free Mini Course

Roger Dooley is here to talk about his new book Friction. Roger is the founder of the Neuromarketing Science website, host of the Brainfluence podcast, a Forbes contributor, and the author of Friction, Brainfluence, and The Persuasion Slide. FRICTION―The Untapped Force That Can Be Your Most Powerful Advantage is about making customer’s lives easier by removing friction.  Roger is the perfect guest for me to have on this show because neuromarketing and behavioral economics are similar in many ways, and throughout the book Roger gives examples and shares concepts of behavioral economics: including relativity, nudges, framing and more. It’s a great book, and a perfect interview topic for this show.  If you’re a regular listener, you’ve heard me talk about Richard Thaler (the Nobel Prize winner and co-author of Nudge). Here is his review of Friction. “What do Amazon, Apple Google and Netflix have in common? They made life easier for their consumers by removing what Dooley calls friction. Reading this book will arm any manager with a mental can of WD-40.” CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes: [04:08] The book Friction intentionally has a slightly gritty cover to convey a sense of friction.  [05:35] Roger began his career as an engineer, but he was always interested in psychology and advertising. [06:03] When he was about 30, he was in charge of strategic planning for a Fortune 1000 company. This is also the time he chose the bailout and become an entrepreneur. [06:14] He co-founded a catalog marketing company at the very early days of home computers. Over the years, his businesses have evolved and become more digital oriented. [06:45] About 15 years ago, Roger noticed neuroscience and marketing beginning to come together. That's when he started his website about neuroscience marketing. He now has over 1100 blog posts on the topic. [07:48] Books, his podcast, and his website give Roger the opportunity to explore how neuroscience and marketing come together. [09:20] There has been a recent increase in business interest in behavioral science. Even Neilson has about 20 neuroscientists on board.  [12:50] 95% of the time businesses have too much friction in their processes.  [13:08] An example of when adding friction helps is a retirement plan that requires a form instead of a phone call for withdrawals.  [13:50] Amazon reduced friction with one-click ordering. They actually patented it. Steve Jobs paid Amazon $1 million to use one-click in iTunes.  [16:19] Friction is any unnecessary effort required to complete a task. [22:05] Total cost, time, and effort need to be looked at when creating ways to reduce risk. Many burdens are for stuff that isn't important.  [23:20] Where there is high trust, there is low friction.  [24:08] Expense reporting can create extra paperwork. Some processes can have unintended consequences and waste time and effort.  [27:40] Think how things can be made easier and how many people will be affected.  [29:20] A more difficult form can be a screen. This is a time when more friction may be better.  [31:15] To increase phone leads, eliminating the web form didn't work, instead the form had to made longer and less friendly to increase phone leads.  [32:25] BYAF (but you are free) technique. Letting someone know they are free not to do something relieves the pressure and helps them comply with the request.  [34:56] Buffer took all of the friction out of scheduling social sharing. They even used to have curated content.  [38:09] Never say “actually” when answering a support question, because it seems to correct the person. [40:36] Loyal customers are more valuable than new customers. What drives loyalty is low effort experiences. High effort experience doesn't inspire loyalty.  [44:23] Eliminating processes can also be an option. To board a cruise ship people had to go through a check-in process and fill out a health form. This useless process was eliminated.  [48:38] Open your eyes and look for things that take longer than they should. Is there something you can do to reduce the effort your customer has to take to do business with you? 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.  Links and Resources: FRICTION―The Untapped Force That Can Be Your Most Powerful Advantage Episode 12. Behavioral Economics Foundations: Relativity Episode 35. Behavioral Economics Foundations: Nudges and Choice Architecture Episode 16. Behavioral Economics Foundations: Framing Episode 32. The Overwhelmed Brain and Its Impact on Decision Making Episode 28. Behavioral Economics Foundations: The Sense of Touch Episode 63. How To Set Up Your Own Experiments Episode 60. Surprise and Delight Roger Dooley Roger Dooley on LinkedIn Roger Dooley on Twitter Neuromarketing Nudge Conversion Sciences Buffer Hootsuite

You may remember episode 68 on counterfactual thinking (why we ‘what if’ and ‘if only’). That episode and the Inc.com article I wrote on how to break the negative cycle of 'what if' thinking were incredibly well received. That episode talked about the different types of counterfactuals – upward or downward, omission or commission, and usual or extreme. Today, I’m going to build on that and talk about the difference between a prefactual and a counterfactual. I’ll explain how they can work differently to help you achieve goals (building on last week’s episode as well). Goals are so important at this time of year. As the year is ending, you’re looking back at what you have done, what you could have done, and also looking forward at what you can do in the future. This is all counter and prefactual thinking in action, and as I’ve already said, they can be a huge aid in reaching goals…or a massive hinderance. Understanding how they work is a big step toward being able to use them to your advantage, and that’s really the point of this episode. Before we jump in, I want to remind everyone that the cart for the Brainy Mindset Course is now open! Claim your spot by November 1st. The first of our six weekly live training sessions begins on November 5th. There are also lots of worksheets and a dedicated Facebook community where I will also be answering your questions. It’s going to be amazing, and we already have some fantastic people signed up and interacting in the group and getting a jump on things. Another amazing thing is that it’s only $199 for the entire six week course, which will give you all the steps to tackle mindset including live support with me walking through it with you every step of the way. To make things extra sweet for you podcast listeners, there is an extra bonus of 25% off. This brings the total down to only $149 if you use the code BRAINY50OFF at checkout. Sign up now!  Show Notes: [06:05] Counterfactuals are looking back at something that has already happened, and essentially undoing it in some way in your mind. [06:19] Ruminating isn’t the same as a counterfactual. Memory reflection itself isn’t enough…you need to change what happened or could have happened in your brain for it to be a counterfactual thought. [06:39] Prefactuals are when you look to the future, and think about what could be. Like counterfactuals, this can either be negative positive. [06:49] If you look to the future in a negative way, it has been called “defensive pessimism” and may involve anticipation of regret and building strategies to avoid that. [07:27] When you think about what could happen or how you might succeed in the future, studies show you can actually have great benefits in all sorts of tasks. [08:25] The brain does get benefit from dwelling and dread. [08:51] Your brain loves dopamine and it drives it to do all sorts of things. Anticipation is at the core of prefactual thinking. [09:48] The treat for the brain is in the pre-buildup or the prefactual. [10:31] I decided to send a Gratitude Discount to people on my mailing list for my Brainy Course, unfortunately there was an email mistake and about a dozen people received %firstname% instead of their name.  [13:06] I could dwell on this for hours in the counterfactual/prefactual world.  [14:37] Counterfactuals tend to focus on things that we really have no control over. [14:57]  Prefactuals are more likely to focus on things in your realm of control. [15:33] Instead of just predicting the possible future outcome, you want to identify a specific circumstance. [16:19] My 10/10/80 A/B test gave me a chance to think a little about what could happen (prefactual) and because I didn’t dwell too much on what might have been (counterfactual) I could take steps to actually make it better. [18:46] I also used the power of prefactual thought to prevent this from happening again. [19:41] One key to using counterfactuals and prefactuals for your benefit, is to look for the learning opportunity. [21:30]  When something goes wrong the inclination is to make a giant alert on the website, but you can't always do that because it will overwhelm the brain and make it so nothing else is noticed and draw attention to it. [22:15] If something goes wrong, and only affects 2% of the audience, there is no need for a massive alert to everyone. (It can actually make things worse.) [22:55] Knowing the true impact is really important before you send out that apology. Don't let prefactual and counterfactual thoughts blow things way out of proportion. [23:31] First – take a deep breath, pause for a moment to assess the situation. Then ask some questions. How many people were impacted? What really happened? Is it fixed already? If not, when will it be fixed? What can we do now to make it better? [23:47] Then take the actions that you know need to be taken. [24:09] Write out what you could do to make this situation and others like it better in the future. [24:23] Breathe, assess, questions, actions, reflection. [25:22] One study I really liked was looking at how counterfactuals and prefactuals impacted performance in a balancing task compared to a control group. [26:05] Three groups completed balancing tasks, one group used a prefactual prompt, another used a counterfactual prompt and the last was the control group. [26:37] The control group stayed the same. Positive structured prefactual/counterfactual thinking did 5-6 times better.  [26:55] Studies have also found that people perform better on a task after doing prefactual thinking even if they have no prior experience. [27:15] Role playing and visualization techniques are so important (and why they play a big piece in mindset work). [27:23] Planning for the future is how you shape it into what you want it to be. Moving out of negative counter and prefactuals into the positive space is such a useful and versatile skill for everyone. [27:53] Use the “Next time I’ll” language to program this thinking in your mind.  [28:35] You will get there faster and easier if you structure your counterfactuals and prefactuals to the positive. 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.  Links and Resources: Episode 68. Counterfactual Thinking: Why We ‘What If’ And ‘If Only’ (A Behavioral Economics Foundations Episode) How to Break the Negative Cycle of 'What If' Thinking The Brainy Courses Use the code BRAINY50OFF Episode 2. The Top 5 Wording Mistakes Businesses Make Episode 63. How To Set Up Your Own Experiments Improving Physical Task Performance with Counterfactual and Prefactual Thinking When Thinking It Means Doing It: Prefactual Thought In Self-handicapping Behavior Fixing Your Brain: A Guide to Balancing Neurotransmitters

How do successful people get things done? A lot of it has to do with setting and achieving goals. A topic that isn’t always as easy as it sounds. Today’s episode is about setting, reaching and exceeding brainy goals. We all have goals, and are all optimistic that we’ll achieve them “someday,” but the truth is if you don’t set your goals up correctly, there is a good chance life will move too fast, and you won’t achieve what you’re capable of. (I’ve linked to episodes on time discounting and optimism bias that help explain why our brains are fine with “someday”.) Everywhere you look, you’ll find advice on goal setting and tips and tools to help you achieve what you want. Success can be as simple as taking (and adhering to) the following three steps to set and achieve your brainy goals. All you have to do is 1) define your goals limiting them to no more than three. Then 2) break those large goals into small steps that will get you there, and 3) say NO to everything else, so you can focus on what really matters. Sounds easy right? Not so fast. Our brains are wired to rebel against this simple process. (Especially, step three.) Saying NO is the hardest part, and where most humans get hung up. We want to do a little of this and a little of that…multitask…not limit ourselves. You’ve likely heard some of these tips before, but I’m adding the extra (and very important) layer of explaining WHY your brain doesn’t want to adhere to the plan to help you fight it when it rebels against you. This show will explain the way our brains react to these steps, and if you want someone to walk through the steps with you the Brainy Mindset Course (cart opens next week!) can do that. CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes: [04:23] We all have goals, but if we don't set them up correctly, there's a good chance we won't achieve them. [04:48] The three tips for setting and achieving brainy goals are: 1) define your goals, 2) break it down into smaller steps, and 3) say no to everything else. [05:22] Saying no to everything else is the hardest one for humans to do. [05:37] In a few weeks, I'm going to have author Nir Eyal on the show to talk about his new book Indistractable. [05:51] One of my favorite insights from his book is that you can’t call something a distraction unless you know what it is distracting you FROM. [06:07] The opposite of distraction is traction. [07:26] When it comes to goals, you need to limit them. You cannot have 85 goals or even 10 or 5, because you can’t achieve them. It’s too much for your brain to handle. [08:53] To limit your goals, you first need to list out every goal you would like to accomplish in the next 5, 10, or 50 years. (Use the free worksheet in from the Master Your Mindset mini-course...link below.) These are the things that you want done when they read them at your eulogy. [09:09] List out everything you want to do and then think about how they might combine together and into an overarching goal. [09:40] Now that everything's listed, pick three goals. [10:51] Setting these goals can take some time but don't get caught in perfectionism or analysis paralysis. These are mindset blocks. [11:13] Keeping you stuck is a tactic used by your brain to delay change. [11:42] Your inclination is to have the top three be the most important, but still let goals 4-15 take up mental energy and be out in the world as things you are interested in. But they can't. [12:16] Items 4-15 are a distraction that you should avoid at all costs. [13:02] It's important to declare and OWN those top goals so everyone in your life knows what is most important and is on board. [19:17] Setting three goals and then sticking to them is really hard. [19:50] Once you know what the top three are, the next step is to break each big goal into small steps to get there. [20:54] When it comes to the big overarching goal all of these other things are little steps to get there. [21:55] Break the big lifetime goal into sub goals for the year. [22:25] With tiny habits, you break your big goal into the smallest possible component, something that would be impossible to say no to. [24:06] You can also use habit stacking to accomplish the small steps. [24:46] Now that you have your goals, how tiny can you make the steps to reaching them? [25:06] Every goal is reached in lots of small steps. It’s a sum of all the effort to get there, not the end result, and if you don’t plan for them, they won’t get done and you won’t challenge the status quo your brain loves and you won’t reach your goals. [26:04] The subconscious brain is the filter that determines what your conscious gets to focus on. You need to be incredibly particular about what it sees all day to help guide the filter. [29:21] Use reminders on your phone – set an alarm that repeats your mantra back to you or that you read. Put sticky notes on your bathroom mirror, or paint a picture that reminds you of the goal. (Master Your Mindset free mini-course has tips and a worksheet to help you with this) [30:11] Determine what three things are important to you and shout them from the rooftops and put every single egg in their baskets. That is how you set, achieve, and exceed brainy goals.    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.   Links and Resources: Melina@TheBrainyBusiness.com Join the October 24 webinar for a discount on the Brainy Mindset Course Episode 29. Resolutions and Keeping Commitments Episode 67. How to Get (and Stay) Motivated Episode 69. Management Mess To Leadership Success, an Interview with Scott Miller, Management Mess to Leadership Success Master Your Mindset Free Mini-Course Brainy Courses Episode 51. Behavioral Economics Foundations: Time Discounting Episode 54. Biases Toward Novelty and Stories Indistractable: How to Control Your Attention and Choose Your Life 3 Ways You Can Limit Everyday Distractions Friction: Passion Brands in the Age of Disruption  

After a year of doing this podcast, I’ve noticed trends in the topics I’ve been requested to do. My Human Behavior Lab interview with Dr. Palma was very popular. People also know that I read and do a lot of research, so I get a lot of requests for book recommendations. Today, I’m incorporating a new segment to the podcast where I interview authors who have written great books about or incorporating concepts from brain science. When I find a fit for the audience, I’ll have the author on the show, so that we can really dig into the lessons and how they apply to business.  Today’s episode features a great discussion with Scott Miller, Executive Vice President of Thought Leadership at FranklinCovey, and author of the new book, Management Mess to Leadership Success. Scott is the host of the On Leadership podcast and Great Life, Great Career on iHeartRadio. He is also a fellow columnist on Inc.com. I’m super excited to share our conversation with you.  Show Notes: [06:22] Scott's book sold 20,000 copies in the first 6 weeks. (Wow!) [07:25] Scott is Executive Vice President of Thought Leadership at FranklinCovey. They are the world's most prominent leadership development firm and have been in business for over 40 years. [07:42] Their influence is built upon a variety of thought leadership books including The 7 Habits of Highly Effective People by Stephen Covey. They do a lot of consulting around leadership development, productivity, and executing strategy. [08:07] Out of the hundreds and hundreds of business leadership books written every year, Scott never had one that spoke squarely to him, so he wrote his own. [08:30] He wrote a very vulnerable and relatable book that challenges conventional wisdom. He talks about the 30 challenges that every leader faces not only in business but in life. [09:01] His book is raw. He lays out his messes and his successes. It's also short and digestible, which is part of the reason it's done so well in the four months since the launch.  [12:13] Scott's philosophy is that we all have messes, but let's not wallow in them or make excuses for them. It's hard to improve if you don't acknowledge your mess. [14:01] The 11th challenge is Check Your Paradigms. One of Dr. Covey's gifts to the world was understanding your paradigms or belief systems. Leaders don't always have the full picture. Their lens is tinted by what they believe to be true. [16:21] Stereotyping and brain bias is an issue for everyone. They serve us in some ways, but we also need to know how they impact us.  [17:48] Challenge two is to Think Abundantly. Having an abundance mindset means you believe that there is enough to go around. [22:00] Being loyal to the absent. Defending those who are absent obtains the trust of those who are present. [22:49] Great leaders don't speak about people when they're absent any differently than they would if they are present. [26:18] Challenge 23 and 24 are about setting wildly important goals (WIGs). WIGs are like BHAGs (big hairy audacious goals). Leaders need to be very articulate about elevating some goals over others.  [27:36] Properly defining goals is also super important. You can influence lead measures but not lag measures.  [28:37] Align your actions with the goals. To accomplish a wildly important goal, you either have to learn something new or do something different. [32:40] Most people confuse opinion and emotions with facts. [34:39] Assume good intent and declare your intent.  [36:10] Leadership in organizations has been positioned as it's easier if you just keep doing what you've been doing. Leadership is hard and it's not for everyone. Acknowledging and understanding your messes can make you a genius maker. [37:13] Leadership is a combination of confidence and vulnerability. [40:57] Scott is giving up some things on B level like his radio show to do more things at A level.  [41:45] The tips in Scott's book align well with the concepts of this podcast even if the terminology is different - I’ve linked to some relevant episodes and other items we discussed below. 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.   Links and Resources: Melina@TheBrainyBusiness.com Management Mess to Leadership Success: 30 Challenges to Become the Leader You Would Follow Everyone Deserves a Great Manager: The 6 Critical Practices for Leading a Team On Leadership with Scott Miller Scott Miller on Twitter Scott Miller on LinkedIn The 7 Habits of Highly Effective People Episode 42. Apple Card: A Behavioral Economics Analysis Episode 47. A Behavioral Economics Analysis of Costco Episode 33. Inside the Texas A&M Human Behavior Lab Episode 23. Behavioral Economics Foundations: Reciprocity Episode 45. Overview of Personal Biases Episode 46. Biases Toward Others – Including Groups Episode 14. Behavioral Economics Foundations: Scarcity Episode 68. Counterfactual Thinking: Why We ‘What If’ And ‘If Only’ (A Behavioral Economics Foundations Episode) Emotional Agility: Get Unstuck, Embrace Change, and Thrive in Work and Life Susan David Ted Talk The Gift and Power of Emotional Courage Multipliers, Revised and Updated: How the Best Leaders Make Everyone Smarter Master Your Mindset Free Mini-Course Good to Great  Built to Last How the Mighty Fall

I love the concept of counterfactual thinking. In fact, it was one of my favorite things to read about in school – I find it to be fascinating in many ways, but perhaps it’s because it relates to something we all do, all the time, and don’t really stop to think about why. And more importantly – we don’t stop to think about if it is doing us harm or good, and how we might control this natural state of the brain. Counterfactual thinking is a fancy way to say “what if..” or “if only...” Maybe you have memories of your childhood or choices you made, and then think that with a little more discipline (or focus or effort or training) you could have been an actor or doctor or run that marathon.  We all have regrets on actions taken or not taken, and these are represented in our brains via counterfactual thinking. This may seem like a hurdle to overcome, but it is actually central to being a human being – our emotions and the way we think - and can be a VERY good thing (listen to learn the 1 important step to shift from vicious cycle to goal-achieving awesomeness). Studies have found counterfactual thinking happens across all cultures and as early as 2 years old. CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes: [02:42] Counterfactual thinking is a fancy way to say "what if" or "if only." [04:05] Counterfactual thinking can be very useful for setting and accomplishing goals.  [04:20] There are different types of counterfactuals, and they do different things. When you are thinking about a better alternative it is called an upward counterfactual, and those with worse alternatives are downward counterfactuals. [04:57] Upward counterfactual are tied very closely with regret. Anticipated regret (or prefactuals) will be the focus of a future episode. Regret and counterfactual thinking really go hand in hand. [05:17] The first theoretical explanation of counterfactual thinking came from Kahneman and Miller back in 1986, and was called norm theory. [05:39] When looking at counterfactuals consider if they are omissions or commissions, ruminations or undoings, usual or extreme, actions of ourselves or others, and if they cause negative impact or how they can be used for good. [06:29] An omission is when you wish you had acted. A commission is wishing you had not taken an action.  [07:10] A rumination is where you think about what happened, but you don’t have any thoughts about how things might have been different. Undoing is where the counterfactual “if only” or “what if” comes into play – what might have been if you had or hadn’t done something. [08:40] Usual or extreme: the way you do your counterfactual thinking will be different if it was coming in through the same door as you always do versus coming in a way you never do. [11:24] Ourselves or others. Whose actions the counterfactuals are targeted at. We tend to focus our counterfactual thoughts on ourselves – what we coulda shoulda woulda done – more often than we look at others. [12:24] Distress and anxiety. While there is a healthy side to counterfactuals, when used in excess it can be really damaging to the psyche. [14:25] Thinking and counterfactualizing doesn't change what happened. [16:02] Putting too much into ‘what if’ and counterfactual thinking can often make a mountain out of a molehill. It can be unhealthy and cause you more harm than simply letting it go and moving on would do. [16:12] Your conscious brain can only focus on so much and the brain gets what it expects. [18:16] A study was published in 1995 in Personality and Social Psychology Bulletin on counterfactual thinking and undoing traumatic life events. [20:58] A study found that 80% of those that lost loved ones in a car accident had ruminative thoughts of the event, and 59% said they had thought about the events leading up to the accident within the past month. [21:49] Over half of the respondents were actively undoing the event in their heads – having counterfactual thoughts – within the last month, for an event from 4-7 years earlier. [22:20] 69% focused on a usual activity. 28% focused on an exceptional activity. [23:34] 41% of those undoing reported wishing that they had done something. 31% reported wishing that they had not acted as they did. 17% reported both. [24:24] 55% focused on their own behavior, while the other 45% were focused on the behavior of the deceased. Not one person reported trying to undo the other driver’s behavior (even though in most cases that person was legally responsible for the accident). [26:29] The person thinking about the process is more likely to undo the actions of the focal actor – themselves or the person they knew. [27:26] If you go through counterfactual “if only” and “what if” sort of thinking…remember that just because your brain is only focusing on you…it doesn’t mean it is right or the only option. [28:39] Undoing may, at least partially, be a distress-driven cognitive process. [31:09] The more you continue to focus on undoing, the more you will have continued distress. [32:28] Highly distressed people come to undo more frequently, thus perpetuating their distress. [33:06] The only item that led to increased levels of distress was the frequency that someone was going through the process of undoing. [33:55] Your mood and focus is created by your own brain. And while it is perfectly normal to partake in counterfactual thinking, too much can be harmful.  [34:30] Counterfactual thinking is a critical way we regulate our behavior and how we are able to reach our goals. [34:50] When you fail to reach a goal, you are more likely to have counterfactual thoughts. [35:23] Instead of having counterfactual thoughts, decide what you could do better next time. [37:47] You need to allow yourself to move on and not let it take over everything else in your life and work.  [38:57] Next time you get into a counterfactual spin…think about how someone else might think you’re the luckiest guy or gal in the world! [40:17] Whether you are naturally a silver lining person or not…acting as if you were is often enough to trick your brain into starting to think that way. DON’T FORGET to sign up for the Free Master Your Mindset Mini Course now to tackle mindset issues and be on the waiting list for the full course, on sale October 24! 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.   Links and Resources: The Functional Theory of Counterfactual Thinking Norm Theory: Comparing Reality to Its Alternatives The Undoing of Traumatic Life Events Episode 62. Behavioral Economics Foundations: Game Theory Fierce Conversations: Achieving Success at Work and in Life One Conversation at a Time Episode 4. Questions or Answers Episode 12. Behavioral Economics Foundations: Relativity Free Master Your Mindset Mini Course

Motivation is definitely a key piece of the mindset puzzle, so it’s no wonder its been taking up brain space for me recently. My Instagram followers already know I’ve been working on getting back into running. In this episode, I get vulnerable and share with you my very personal relationship with running. It revolves around a limiting belief that was created in my mind, as well as mindset and motivation issues.  I also talk about the two types of motivation. Motivation can either be intrinsic or extrinsic. Essentially, that means it either comes from your own self (intrinsic) or from an outside source (extrinsic). I also talk about apps and other things that can help you with motivation (or you can use to motivate employees or customers in your business). In fact, this is where today’s topic came from. While on a run I was thinking about the apps I use and how their pricing could be better aligned with motivation and the way the brain actually works. Hopefully, you’ll walk away with motivation inspiration and pricing insights for your business. CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes: [04:03] Motivation is definitely a key piece of the mindset puzzle. [05:01] I'm going to get vulnerable and share a story about my relationship with running. [06:14] Unfortunately, words from a misguided ballet teacher helped cement a limiting belief in my mind that I couldn't run. [08:27] I wanted to run again and tried, but I still had mindset blocks. In 2013, an executive coach helped me to break through my mindset blocks.  [10:36] I had overcome my running mental demons, but was then hit by two cars on the freeway. This led to new mindset and motivation struggles. [12:09] In August, I decided to apply all of my mindset learning and make a change. I started Couch to 5k all over again from the beginning. [13:30] Running gives me clarity. The spark for this episode came from my thoughts around the running apps that I used and how their pricing could be better aligned with motivation and the way the brain actually works. [13:59] Motivation can either be intrinsic or extrinsic. Essentially, that means it either comes from your own self (intrinsic) or from an outside source (extrinsic). [15:12] Thinking about something from a fresh, new angle will allow you to shake off the cobwebs and old rules to refresh your motivation. [16:16] A lot of people get hung up on is sales calls or some other version of drumming up new business. [16:28] the act of making the call is scary – that’s fear talking. You are intrinsically dwelling and keeping the whole conversation inside your own head. [17:02] You could make a commitment to a friend that you will both make a certain number of sales calls by the end of the week. [18:10] Loss aversion and other brain motivators can help you get over the mindset block and into motivation territory.  [18:29] When you are feeling a lack of motivation or want to motivate yourself, think about the mindset block that is keeping you stuck. [19:25] Understanding your priorities so you can say no to things that are outside the goals is key to getting (and staying) motivated. [20:37] Couch to 5k is a free app, but you have to pay to upgrade to get some bonus features. [22:19] One thing I think this app really lacks is it stops tracking when their prescribed course is done. [22:42] They are conditioning me to not want to put in any extra effort or push myself beyond their 30 minutes because there is no benefit to doing so. [25:04] Also, I am pushed outside the app to get my pace, which decreases the value of the sell and makes me less likely to pay. [26:56] If ZenLabs and Couch to 5k was my client, I would recommend that the monthly payment include access to all the apps and benefits.  [27:34] If it does not include all the apps, I recommend the extrinsic motivation / loss aversion model. [29:30] If you don’t plan (which conditions for the importance of mental preparation around fitness) you pay if you miss. Lazy Jar does exactly this. [30:10] This is like stickK which I believe was the first app to use brain science for motivation in this way. This app was created by behavioral economists and has helped people reach all sorts of goals. [31:18] Runkeeper allows you to store your running data. You get tons of free stats. You also get badges, and it does gps tracking. [33:31] I can pay up to track how similar runs get better or worse.  [34:32] Little pulls from an account on a regular basis could be a motivational tactic as well. [34:53] Runkeeper is definitely catered to the one time annual payment (which I believe is opposite of Couch to 5k). [35:33] Isn’t it funny how the big price disparity makes one thing look like a better value?  How one small shift makes it look completely different? [36:10] If you have a business with subscription models that depend on regular usage and enjoyment…the goal is really to keep motivation up. [37:55] My 3 tips: 1) Limit your goals. Having too many goals is a recipe for motivation failure. Get your total goals down to 3 max. [38:18] 2) Flip the script (reframe). Look at the mind block and ask if its intrinsic or extrinsic and then switch to the other. [39:11] 3) Look at the small steps. Start by thinking big and then putting together small action steps to get there. [40:00] If social media is a priority, you can break it up into small steps. Once something becomes a habit, you can incorporate more things. [40:55] Keeping motivated doesn’t have to be as elusive as it might seem. It’s all about understanding the brain and how to work with its rules around mindset to achieve your big dreams. [42:11] Sign up for the free Master Your Mindset mini-course to get a jump on conquering your mindset AND get on the waiting list for the full mindset course. 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.  Links and Resources: Your Sales Maven Episode 66. Ultimate Pricing Confidence with Special Guest Interviewer Nikki Rausch Master Your Mindset - Free Jenn Bays on Instagram The Brainy Business on Instagram Couch to 5k Episode 21. Behavioral Economics Foundations: Habits Episode 22. The Power of Habit Peter Myers on Twitter Runkeeper Episode 9. Behavioral Economics Foundations: Loss Aversion Episode 29. Resolutions and Keeping Commitments The Brainy Business on Facebook The Brainy Business on Twitter Episode 65. Can Behavioral Economics Increase Savings? Episode 16. Behavioral Economics Foundations: Framing Episode 51. Behavioral Economics Foundations: Time Discounting Episode 34. Behavioral Economics Foundations: Optimism Bias Lazy Jar stickK Episode 8. What is Value? Episode 12. Behavioral Economics Foundations: Relativity The Brainy Business Courses

The Brainy Business Pricing Course is now live. For a fun twist on today's episode, I am interviewed by my good friend and client: the amazing Nikki Rausch of Your Sales Maven. Nikki helps entrepreneurs learn to sell easily and authentically, and we all know that sales and pricing go hand in hand. I gave Nikki a walk through of the course, and she has been along for the ride while I’ve created it.  We talk about the course, what it entails, why it was the perfect first topic to kick off the Brainy Courses, and the positive impact brain-friendly pricing can have on your business. Nikki is the perfect person to interview me about this, because she understands the questions a potential student would be interested in. Nikki is also the author of new book The Selling Staircase: Mastering the Art of Relationship Selling and an all-around awesome friend and client.  Pricing Course Workshop Bundle Save $100 with code BRAINY100OFF  Pricing Course Only Save $50 with code BRAINY50OFF Master Your Mindset Free Mini Course CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes: [04:42] Nikki calls herself a super fan. She is excited about the course. [06:48] I put pricing first, because it's the thing I get asked about the most. Price is such a huge factor and having the right price makes such an impact.  [08:49] This course is about all of the stuff you need to think about when creating a pricing strategy. We don’t talk about specific prices until the very last module. [09:58] There seems to be a huge gap in all of the ways to think about the numbers. The course helps to understand numbers in a more robust way and factor in things that matter (like time).  [11:10] There is also a step by step walk through on how to raise prices. That discusses what to talk about now before raising your price (and how to change the language/plan for current and new customers). [12:10] There also scripts for presenting the price depending on the platform.  [13:50] I also review and explain specific framing examples using real-life ads and email subject lines from companies.  [15:32] The Brainy Pricing Course has comprehensive worksheets to guide through all the steps and possible situations.  [18:38] I structured the courses and workshops to be evergreen and updated when new relevant content comes out. Purchasers can revisit the course over and over.  [21:35] The workshop component helps put a deadline in place to complete the work and it's an avenue to get questions answered and overcome hurdles that may come up. [25:07] The workshop emulates a mastermind hot seat format. There is so much extra value from hearing other people's experiences. [26:58] You can purchase the course and then add the workshop, but you will save $100 purchasing both at once.  [28:55] Having the ability to set the right price and be confident about it is like the course paying for itself. [31:41] The course has 10 modules. You can also get the mindset module for free (Master Your Mindset mini-course) to see what a full course might be like.  [35:26] You can find all the courses in the Brainy Business Member Vault. You can also save by buying the bundle, and use the above discount codes for an even better value.  [37:24] This course is an investment you make in yourself and in your business. If you follow the steps, I guarantee it will more than pay for itself. 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.  Links and Resources: Your Sales Maven The Selling Staircase: Mastering the Art of Relationship Selling Pricing Course Workshop Bundle Save $100 with code BRAINY100OFF  Pricing Course Only Save $50 with code BRAINY50OFF Master Your Mindset Free Mini Course

I’m so excited to finally talk to you about my study on behavioral economics and increasing savings rates. In my master’s program, I was required to do my own study and submit it to at least one location for publication. I already had a relationship with the Filene Research Institute, so I decided to reach out to them before choosing the focus of my project. Their top choices were helping people save money and increase loyalty. A group of researchers from Duke University did an experiment in Kenya to try and find ways to increase savings. After six months, the surprising results were that a using a gold coin to mark off weeks of savings outranked sentimental reminders and matching funds. I loved these findings and wanted to see if this could be replicated if modified for the US. My white paper is now published, and I finally get to talk about the study and share it with you. I was privileged to have a conversation with Dan Ariely which helped me narrow down my three main concepts for the study which are time discounting, reciprocity, and a physical manifestation of savings. I hope you enjoy the results. Before I begin, I also want to remind you that the Brainy Pricing Course is now live. This 10-module course will walk you through mindset, priming (and finding your scent of the cookies), framing, anchoring, and relativity for pricing as well as knowing your numbers, notes on discounts and how to raise prices. Brainy Courses are a little different because they include a workshop component. Here’s all of the info along with money saving discount codes.  Pricing Course Workshop Bundle Save $100 with code BRAINY100OFF  Pricing Course Only Save $50 with code BRAINY50OFF CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes: [06:19] Publication wasn't a requirement for graduation, the study just needed to be submitted. [07:27] The study done in Kenya on savings behavior stuck with me. [08:17] The gold coin was the condition that did the best. It even did better on its own than when paired with matching funds. [08:32] Finding a way to encourage saving without matching funds is like the holy grail. [09:05] I was interested to see how this would translate in the United States. [09:20] Problem number one was replicating the gold coin in the US. [09:53] The coin was a constant reminder to save. This needed to be replicated at least in premise. [11:17] The three main concepts I wanted to focus on were time discounting, reciprocity, and a physical manifestation of saving. [12:02] We started with 240 members, who were narrowed down based on a few factors, including age, income, and time with the credit union.  [12:36] Filene requested we look at loyalty scores as well. [12:48] One item we used to narrow down the list was if they had completed a Net Promoter Score survey in the six months or so before the study began. [13:41] The 240 members were randomly assigned to one of three groups. The control group received no communication at all.  [15:05] We tracked savings until the Monday before Black Friday so we wouldn’t end up with totally skewed numbers when people went shopping after Thanksgiving. [15:29] I also had the previous year's data for comparison. [16:31] It was decided to not have the members precommit to wanting to save or sign up for a program. [17:50] Two of the groups groups received communication from the credit union talking about the importance of saving and this new information they found on helping people to save. (The other group was control.) [18:29] About a week before the planned study, the two non control groups received a letter with very similar text. One group also received a refrigerator magnet. [21:23] The magnet group’s letter also had an image of the magnet in the corner. All envelopes were the same. [21:44] After 12 weeks, the 160 individuals all received an email reminding them of the importance of saving, and letting them know it was never too late to start or pick up where they left off. [21:52] And after the 24 weeks were over, they received an email thanking them for participating, encouraging continued saving, and everyone – all 240 members – received an email with an NPS survey to see if the loyalty numbers were different after 24 weeks. [22:55] Making the future self more tangible today is important in combating time discounting. [24:15] Even though I was only using three main concepts, these others still had to be considered and incorporated for the best chances of adoption. [24:53] The hypotheses of the study were that the magnet group would save more than either of the other two groups and that the magnet group would have a higher increase in loyalty score than the other two groups. [26:14] Physical representation is the magnet itself, which was specifically designed to be a reminder of money and savings. The letter only group was encouraged to make their own note and place it somewhere to be a reminder of savings and goals. [26:37] Time discounting is represented in the verbiage on the magnet, “I care about my future self” and that same verbiage was included in the letters and emails for both groups. [26:50]  Reciprocity was in both the “gift” of the magnet, which was called out specifically in the language on the letter for that group, and the less physical gift of tips to save money and have a happier, more financially secure life. [28:22] The hypotheses were that the magnet group would save more and have a bigger change in their loyalty scores over the 24 weeks. And they did! [29:16] The control group savings went up 1.42%. The letter only group went up by 1.35%. The magnet group went up by 4.51%. [30:07] The most significant jump in loyalty score was by the magnet group. They went up to 9.2. [30:49] The main thing to learn from this study is that the magnet group went up in both categories, and while we cannot say with 100% certainty it is because of the nudges, there aren’t any other explanations that readily explain what else might have happened. 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.  Links and Resources: Episode 63. How To Set Up Your Own Experiments Episode 64. How To Make Concepts Tangible Pricing Course Workshop Bundle Save $100 with code BRAINY100OFF  Pricing Course Only Save $50 with code BRAINY50OFF Can Behavioral Economics Increase Savings and Member Loyalty? PDF to the Study How to Help the Poor to Save a Bit: Evidence from a Field Experiment in Kenya Episode 51. Behavioral Economics Foundations: Time Discounting Episode 23. Behavioral Economics Foundations: Reciprocity Point West Credit Union What Is Net Promoter? Episode 18. Behavioral Economics Foundations: Priming Episode 11. Behavioral Economics Foundations: Anchoring and Adjustment Episode 16. Behavioral Economics Foundations: Framing Episode 19. Behavioral Economics Foundations: Herding Episode 31. Mirror Neurons Episode 61. Color Theory Episode 54. Biases Toward Novelty and Stories Texas A&M Human Behavior Lab The Chicago School of Professional Psychology

The physical representation of concepts is an important tool to use in your business. Things like colors and shapes can be recalled by our brains and associated with other non related things. This topic is really an amalgamation of other concepts, but it’s still a valuable tool to understand and use when communicating about your business. This episode gives examples of making concepts tangible, and their practical applications in business.  This topic is the last main concept from my research paper that I announced last week. I also gave tips on running experiments like: keep it small, be thoughtful, and test often. I am super excited about next week, because I’ll finally be sharing my study on on increasing savings behavior and its results.  And...speaking of exciting, the Brainy Pricing Course goes live Monday, September 9! Learn all about it and save with special discount codes below: Pricing Course Workshop Bundle Save $100 with code BRAINY100OFF  Pricing Course Only Save $50 with code BRAINY50OFF CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes: [04:59] This isn't really a topic you can easily look up. It's more of an accepted premise. The physical representation of concepts is an amalgamation of various other concepts. [05:35] The brain works on associations.  [07:47] Colors and shapes bring a physical presence that can be recalled easier than words. Your brain has been trained to recognize this physical representation of the concept of street signs (as explained here). [08:56] Logos are physical representations of the concept of a business. [09:27] The physical manifestation of the brand makes the business more real in your mind because there is a logo to relate to. [10:21] This is not exactly the same as anthropomorphism, which is when animals or objects are given human-like tendencies; it can be a similar concept because it helps you relate to the item in question. [10:52] Abstract concepts are everywhere in business, and they can easily cause miscommunication in conversations or messaging. Providing a physical reference point makes everything feel more real.  [15:16] I did not want to get rid of my DVDs during a decluttering session. The reason why was because the physical, tangible, representation – the box and the item itself – was tied to my emotional center and triggered loss aversion. [16:06] Where could you inject physical form we're only concepts exist in your business today? [16:48] How Progressive took the concept of insurance and made it tangible. [18:41] When you take something from conceptual to tangible, it makes it easier for the brain to categorize, relate, and remember. [19:19] Pictures, logos, and icons make your business and its features feel real. [19:29] Physical representation can help remind you of associations that you have made previously or that are important to you. [19:56] Physical items are a constant reminder to your brain. [21:57] You can make physical items that remind people of your business without having your name plastered all over them, that will be subtle reminders of you and your business. [22:04] A strong brand is able to live through the lack of words and evoke feelings – they leave an impression even without their name. [23:31] What could your business do to be a constant association and reminder in the brains of your customers? [25:01] I share a credit union concept where the idea of using logos on items could have gone very wrong. Keep in mind that small associations matter. [25:53] For your business, consider the emotions you want to convey – the things you want people to think when they consider your brand. Or, when they might be most likely to need your brand. What can you provide that will help them and remind them of you? [27:10] You can also create visuals around what you want to do to help achieve your goals. What you surround yourself with has a HUGE impact on your approach to life, business and your success. This is priming in action. [27:32] I want to help you surround yourself with the right physical representation of the concepts you care about to help you be successful. 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.  Links and Resources: Episode 62. Behavioral Economics Foundations: Game Theory Episode 23. Behavioral Economics Foundations: Reciprocity Episode 51. Behavioral Economics Foundations: Time Discounting Pricing Course Workshop Bundle Save $100 with code BRAINY100OFF Pricing Course Only Save $50 with code BRAINY50OFF Master Your Mindset Free Course Getting to the Top of Mind: How Reminders Increase Saving 9. Behavioral Economics Foundations: Loss Aversion Progressive TV Commercial For Name Your Price Tool Progressive TV Commercial 'The Box' Jogger Commercial | Allstate Mayhem Episode 12. Behavioral Economics Foundations: Relativity The Brainy Business on Facebook The Brainy Business on Twitter The Brainy Business on Instagram The Brainy Business on YouTube Episode 61. Color Theory Episode 18. Behavioral Economics Foundations: Priming