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

This behavioral economics podcast continues our series about the five senses. Last week, I talked about the sense of sight. This week I’m talking about the sense of smell. No matter what type of business you have, these episodes will apply to you. The senses are all powerful and create memories the brain uses to make decisions, and decision making is a big part of successful business. Understanding how our brains use past experience to interpret the world around us is super important when it comes to understanding how to integrate stimuli from our senses in business. We have all experienced a certain scent bringing back a memory. Today, I talk about the sense of smell and how awareness of it can help make your business better. CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes [09:48] The sense of smell is made up of olfactory bulbs, which are part of the limbic system. [10:06] The sense of smell is one of our oldest senses, and it connects directly to memories and emotions. [10:17] It's one of the first senses we use as infants, and it ties to certain emotions and memories by the time that we are five years old. [10:43] Our sense of smell developed through evolution to help our species survive. We can detect danger through our sense of smell, and we can find our children in the dark. [11:35] Molecules of items separate from the item in question (like bread baking) and those little pieces travel into our noses and are read by our olfactory epithelium (which are like the taste buds of our nose), sending a direct message to the brain. [11:55] Sight, sound and touch do NOT have this connection, so they are not as closely linked to memories or emotions. [12:19] Adult humans can distinguish between approximately 10,000 unique odors using 40 million different olfactory receptor neurons. [12:54] Because it has a direct route to the limbic system, certain scents can trigger fight or flight while others bring up vivid memories and others can make your mouth water. [13:27] Scent is also linked to physical attraction and our noses are trained to like people who are dissimilar to ourselves. [14:46] Smell is linked to where, when and why – thus the power of memories and really taking us back. [16:24] Being able to understand how these memories are formed and how to create positive associations can help with your business and customers. [16:47] Most of our scent memories are formed when we are around the age of five. [19:59] Scent marketing and scent logos are a thing. [22:02] Melina shares a story of how smelling Lush products made her hungry for P.F. Chang's food. [22:53] ScentAir made grocery store sales go up by 7%. 83% of shoe shoppers preferred a floral scented room when shopping and valued the shoes at a higher price. [23:40] An experiment with scented slot machines. Casinos have branded scents. A gas station was able to increase coffee sales by 300% with coffee scented air. [25:08] Rosemary essential oil made test subjects perform tasks faster. [25:23] People can remember a scent and its related memory with 65% accuracy after 12 months. [25:47] An inhaled vanilla aroma decreased anxiety for 63% of MRI patients. [26:42] If you have a physical location, the scent you infuse makes a huge difference and you want to make sure it ties in with your goals. [27:38] There are companies who are experts on scent branding. You can actually hire them to help you choose a scent for your business. [28:53] Scents are used to create an experience, and it will be a different experience for each business. [30:10] Bad scents can impact behavior and make it difficult to focus on anything else. [31:10] Our world and the way we think about it impacts everything we do. Our memories – and particular scents – can trigger emotions. [32:05] Even showing a picture of someone smelling something can trigger mirror neurons. [34:01] If you don’t sell food and you don’t have a physical location, it is still important to know the power of scent. You can use the power of sent to prime memories. Just be smart and intentional about it or things can backfire. [36:43] Next week on episode 26 we are diving into the sense of taste. 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 24. Behavioral Economics Foundations: Sense of Sight A Fresh Wave of Marketing: An Intentional Approach to Marketing for Visionary CEOs Casey Gromer on Instagram Virtual A Team The Buying Brain 2-Minute Neuroscience: Limbic System How Do We Smell? - Rose Eveleth The Power of Scent Hippocampal Projections to the Anterior Olfactory Nucleus Differentially Convey Spatiotemporal Information During Episodic Odour Memory The Neuroscience of Smell Memories Linked to Place and Time Smells Ring Bells: How Smell Triggers Memories and Emotions How Does Scent Drive Human Behavior? Fragrant Flashbacks Perfume Directory Episode 18. Behavioral Economics Foundations: Priming Let Them Sniff, Customers Will Buy More The Science of Smell: How Retailers Can Use Scent Marketing to Influence Shoppers Good Smells are Good Marketing: How to Use Scent to Your Advantage Making Sense of the Hotel Guestroom The Impact of Ambient Scent on Evaluation, Attention, and Memory for Familiar and Unfamiliar Brands Smells Like Psychology The Smell of Commerce: How Companies Use Scents to Sell Their Products The Science of Sensory Marketing Productivity Hack Of The Week: Use Aromatherapy To Improve Your Work Inside the Invisible but Influential World of Scent Branding The Art of Scent Marketing

Did you know that the sense of sight has a huge impact on your business? About a quarter of our brains are involved in visual processing. This behavioral economics podcast is all about the sense of sight. I share the surprising truth about what percentage of the body’s sense receptors are in the eyes and why our subconscious is so visual and the impact that has on our businesses. This is the beginning of a series on the five senses – beginning with sight and moving through sound, touch, taste and smell (not necessarily in that order). I am starting with sight because it is the most powerful of our senses by far and the things I am going to share with you in this episode are going to just blow your mind. CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes [14:48] There is so much more to know thank you think about the sense of sight and how it absolutely impacts your business. [15:23] I'm beginning with sight, because it's the most impactful. About a quarter of our brains are involved with visual processing. [16:05] About 70% of the body's sense receptors are in our eyes. This is why our subconscious is so visual. [17:11] Is vision in your eyes or in your brain? [17:24] The sense of SIGHT takes place in the eyes. It is all the little bits of information coming into them. But Vision? Vision does not actually happen in your eyes. VISION is in your BRAIN and is much more complex than simple sight. [17:56] Vision is actually built on expectations in the brain based on past experience. [18:39] The sense of sight is bringing in a lot of stimuli it can’t actually interact with – light, color, contrast – in a big flood of information all the time. The process of INTERPRETING that information is a task for the brain. [20:30] When we present our product data for our business, people's brains will fill in the gaps and tie things together. [21:47] Inside the retina are photoreceptors – perhaps you have heard of the rods and cones in your eye. They are shaped differently (hence their different names) because they do different things: rods are sensitive to dark versus light and cones are sensitive to color. [22:57] Color Illusions can trick the brain into thinking that it sees a different color. [24:30] FOCUS Our eyes interpret information with the highest resolution in the middle. [26:19] Impressionistic paintings were styled because of diseases in the eye. Monet's early work was full of blues and purples that were absent in later work. Brush strokes became thicker, because he had cataracts. [28:07] Degas developed retinal disease at the age of 36, and he could not be in intense light. [28:38] When we see a Monet or a Degas you still know what the images are. Our brains piece together what they are looking at based on prior experience. [29:33] Our brains are actually conditioned to see and pick out faces. This can either be to see predators, or understand allies. [30:14] Being able to focus forward is what creates our depth perception. This is why optical illusions and a drawing on a flat sheet of paper can look three-dimensional to us. [31:47] Binocular disparity is this state of two eyes pointing in the same direction from slightly different spots (test it by looking at objects through different eyes and watch how they appear to move). [33:03] With 3D images one side is red and the other side is blue (cyan). With 3D glasses, one side takes in each color making things appear three-dimensional. [36:02] Our brains are constantly scanning and interpreting information. We scan the world around us three times every second. [37:02] This is why priming impacts behavior and ads have impact on people even though they say they don't watch them. [37:42] Our brains take things in but don't alert the conscious brain unless there's a reason to. [38:17] Remember vision is in our brains. We have evolved so we can focus on one thing while constantly scanning our environment. [38:45] Saccades are why things like flip books work – our brain weaves together a stream of basically still images and connects the missing pieces. [40:24] When the actor on camera is supposed to be watching something go from one side of the shot to another, they need to actually watch someone (or something) go from one side to the other so the camera doesn’t pick up their eyes darting all over the place. [41:52] Our brains need to deploy selective attention to only flag the conscious brain of what matters. [46:58] What is reality? Do we all live in the same reality? Or is my reality different from yours? [48:20] Miscommunications come up often because we are unwilling to believe that our way is not the only way and that multiple people and perspectives can still be right. [49:18] Our brains can often attach meaning to all sorts of things when they aren’t there. [51:26] Our brain mostly thinks in images and emotions and processes them constantly and basically instantaneously. [52:00] When it comes to your brand and business it is worth investing in great images. DO NOT use clip art or stretch out images to fit a size so that your logo or a person’s face is stretched out. The brain picks up on the discrepancy immediately and assumes you are amateur. [53:39] You can say MORE with a lot LESS if you have a strong and strategic image with a lot less WORDS. [54:58] Basically, everything has too much copy. We need to decide the ONE THING to focus on and then put everything into that effort. [56:51] Our life is a string of memories – including the way we interact with brands. Brands are memories. And because the memory is heavily composed of visuals and emotions – the visuals you choose to use will impact how people think of you, your business, and your brand. [59:26] Be intentional about what people see when you create a video or when they walk into your store or place of business. 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: Estate Planning Mom on Instagram BizChix on Instagram Britt Joiner on Instagram The Knotted Wood @theBrainyBiz on Facebook Episode 11. Behavioral Economics Foundations: Anchoring and Adjustment The Buying Brain The Science Behind the Dress Colour Illusion Optical Illusions Show How We See | Beau Lotto Seeing the World as it Isn't | Daniel Simons | TEDxUIUC Eye Diseases Changed Great Painters' Vision of Their Work Later in Their Lives How 3D Glasses Work How Does This Work? Stare at the Red Dot and See the Woman in Full Color on the Wall How Do Our Brains Reconstruct the Visual World? Episode 18. Behavioral Economics Foundations: Priming Episode 15: Behavioral Economics Foundations: Availability How Vision Works Prefontaine Selective Attention Test The Invisible Gorilla: How Our Intuitions Deceive Us

Reciprocity is the perfect topic to talk about this time of year. Today’s behavioral economics podcast is another foundations episode, and it’s all about reciprocity. I explain how our brains process gift giving and why we often give reciprocal gifts of higher value than the original gift. I talk about how reciprocity can be used in your business and how it relates to generating leads. I also share insights into Sheldon's theory of reciprocity on one of my favorite shows The Big Bang Theory. I talk about how our subconscious really feels about gift giving, three ways to use reciprocity in your business, and more. Show Notes [10:07] Ways to use reciprocity in your business. [10:23] Reciprocity is what happens when someone gives you something (whether you wanted it or not, whether you really value it or not) and you feel obligated to give them something in return. [11:37] One thing I really appreciate about The Big Bang Theory (and Sheldon in general) is how they apply complex scientific concepts in ways that they are funny and relatable (although a little extreme of course) [12:22] Sheldon says, "I know you think you’re being generous, but the foundation of gift-giving is reciprocity. You haven’t given me a gift, you’ve given me an obligation." [13:22] In reality, our brains overestimate the value of the gifts we're given and overcompensate. [13:47] Tips go up when customers are given a mint with their check. The gift of kindness and a little effort goes a long way. [16:50] The subconscious feels obligated to pay back for gifts it receives and it often gives back more than it received. [17:10] Reciprocity presents itself in many ways. I'm going to talk about three main categories: the free gift, the small ask on the path to something bigger, and the big ask to get something more realistic. [17:22] The free gift is like mints or a lead magnet or the free content I put out on my blog and podcast. [19:15] The Brainy Business is about providing strategy to make messaging more effective and impactful. I've had many listeners reach out to me about partnering after listening to my show. If you’re interested, I’d love to hear from you too! [20:20] Free samples are also great for things that are a little obscure. Samples have another benefit of dopamine release with anticipation. [22:56] The free gift of a sample for something that people might be hesitant about trying (but you know is amazing) is a great double whammy of reciprocity and the dopamine release with anticipation. [23:06] Reciprocity and free gifts are often used when asking for donations. [25:35] Some other examples of “free gifts” are sales or discounts. Sales and discounts need to be offered strategically and not as a crutch. [28:02] I share a quick story of how giving out gum made my high school life a little bit easier. [29:46] My friend Nikki Rausch, Your Sales Maven, has written several books on relationship selling and she speaks on this around the country. One of her tips is to be of service to other people. [30:39] A small ask to get something bigger. Giving someone a button and a yard sign is more likely to influence them to vote for you then just asking for the vote. This is because of the escalation of commitment. [33:06] When asking for a donation cold turkey, there's a good chance they will say no. Asking someone like a store owner to put a small sign in the window will actually influence them to donate to you. [34:34] This is because of the “foot-in-the-door” technique which creates a small shift in the way a person thinks. [35:26] This is also why loss-leaders work in business. [37:19] You start with a BIG (and somewhat ridiculous or unreasonable) ask to make the thing you actually want to ask for seem more reasonable and appealing. [39:27] An example of using a big ask to get volunteers on a college campus. [42:41] One obvious place to use this is in negotiations of any kind. This concept of reciprocity is why you hear concepts like “give and take” or that people are expected to “meet halfway.” [43:46] An example from money coach Mikelann Valterra on how to pick a “resentment number” when pricing client work or bidding projects. [46:44] I have always been one to reward people who ask for things (my own version of reciprocity). It takes a little something extra to step away from the norm and ask for something outside the status quo. [48:52] So here is a GIFT FOR YOU: Anyone who commits to six strategy sessions before the end of the year, instead of $499 a piece, they will be $450 – so you will save almost $300. And you get priority space on my calendar, which fills up pretty fast these days. [49:23] If you commit by the end of the year to 12 strategy sessions in 2019, I will do them for $400 apiece. That means you will save almost $1200! That is two free strategy sessions plus some gravy cash in your pocket. Interested? Let’s chat. 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: Jen Mueller Casey Gromer Episode 3. Do Lead Magnets Work and Do You Need One? Natalie Eckdahl A Fresh Wave of Marketing: An Intentional Approach to Marketing for Visionary CEOs Sweetening the Till: The Use of Candy to Increase Restaurant Tipping Poll Reveals Who Are the Best, Worst Tippers Episode 19. Behavioral Economics Foundations: Herding Episode 9. Behavioral Economics Foundations: Loss Aversion Nikki Rausch The power of yard signs II: Escalation of commitment Compliance Without Pressure: the Foot-in-the-door Technique Episode 12. Behavioral Economics Foundations: Relativity Reciprocal Concessions Procedure for Inducing Compliance:The Door-in-the-Face Technique Episode 16. Behavioral Economics Foundations: Framing Episode 18. Behavioral Economics Foundations: Priming Need to Set Rates? Find Your “Resentment Number” Episode 20. Behavioral Economics Foundations: Defaults The Knotted Wood

This behavioral economics podcast is building on the most recent foundations episodes to really dig into the power of habit. Last week I really went deep into what habits are and how they work. Today, I am going to share a bunch of examples of ways businesses use habits to their advantage (and how you can too!) I talk about how advent calendars can actually build anticipation and release dopamine. I also discuss clever ways that Starbucks keeps customers coming back. I talk about how 95% of purchases are habitual and how this habit formation can be combined with reciprocity and loss aversion. I give several examples from big companies and my personal life. Then I break it all down so you can apply the same principles to your business. CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes [11:36] Last week on episode 21, you learned all about what makes habits so powerful and the best way to form a new habit (either for yourself or in business). [12:11] Advent calendars are a staple of the holiday season. [12:59] Some big manufacturers have found a way to boost their sales before the holidays (and probably increase the likelihood that their bigger toys will be the focus of the big day). [14:10] A LEGO City Advent Calendar will generate interest in Legos all the way up until the holiday. [14:35] The excitement about what is going to be inside, and getting to see the next one...building anticipation... That is where the real enjoyment is for the brain. Once it has opened the box? Dopamine release stops. [15:15] You are also creating a habit of opening a gift every day! The brain wants to keep getting those small toys for the dopamine. [15:55] Is there something your business could do to incorporate advent calendars with your clients or customers? [16:52] The Starbucks app helps create the habit of coming back. They have also Incorporated loss aversion and integrated the power of habit into their app. [18:05] Be careful what lines you cross when it comes to knowing your customer, you may be inadvertently offending some people (like their set up that I can only get bonus stars by buying items I am allergic to). [18:57] They've also done the same thing with their treat receipts. Where you can get a discount in the afternoon. [19:26] Scarcity can become a habit if it is ingrained in who you are. Costco shoppers have the ingrained mindset that they better buy now because the item won't be there the next time they visit.   [20:33] 95% of purchases are habitual. [21:15] Daily active users are important for apps. You get bonuses each day in a row that you play. This is a combination of reciprocity, loss aversion, and habit - and it works very well. Our brains love it. [22:53] The most common “problems” solved by habits (the reward in the brain) are STRESS and BOREDOM. [24:48] KIT KAT was having a sales slump. They paired Kit Kats in the consumers’ mind as something that goes along with their break. Tying in with coffee and breaks made it so when people think “coffee” they think “Kit Kat”. [26:42] Availability was also used in this campaign. [27:29] McDonald's hired a research team to increase milkshake sales. They discovered that people were hiring the milkshake to prevent their boredom on the way to work. [30:40] The research found out what was causing the habit and then made it really easy for more people to take up the habit. [31:06] You have to ask the right questions to get the right answers. [31:42] If you find people using your product in a way that you didn't intend, that creates a new opportunity to market. [32:17] The cycle of habits. You want to use the cue/reward part of the habit cycle, not the craving/response part. [33:14] “If you lived here, you’d be home by now,” is a genius marketing and a good way to break the habit cycle and try to form a new reward option. [34:23] Payment habits. Every time you pay the mortgage and don’t look for another provider, you are habitually rebuying that loan. [35:07] Breaking the payment into very regular, small amounts, makes it easier to keep paying and doesn’t flag the brain negatively. [36:50] You get a renewal notice and your premiums have gone up a little bit. Suddenly that large yearly payment is something that prompts you to shop around for more affordable services. [37:41] Being on auto pay is easy and becomes a habit. [39:10] If you work on appointments, you should encourage a regular day and time for people to come in. People like to feel like they are important. [41:16] A pre-scheduled appointment can become an EXPERIENCE that you will pay more for. [42:38] When you can make it a habit and preschedule for people, it makes it less likely that they will break that cycle. [44:09] “Be seen to the point people don’t remember the space without you.” Jen Mueller of Talk Sporty To Me [44:43] Many people including my friend Debbie Page say that the key to networking is showing up. [45:53] Engage with people on social media and selflessly share their content. This can make your name a cue for rewards. [46:51] Be consistent if you want to be part of people's habits. The human brain likes repetition and reliability. [48:47] I knew I had to have a weekly podcast in order to make it a habit. [50:53] Consistency is a huge key to habit and now you know why – your brain expects it and is looking for those cues. [EXCITING ANNOUNCEMENT!] How to Launch an Amazing Podcast (using behavioral economics) online course is coming soon! Want to be on the list (possibly even a beta tester)? Email me - melina@thebrainybusiness.com with the subject line “Podcast Course” for more details. 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: Web Your Brand Carol Morgan Cox BizChix RESET Your Mindset: Silence Your Inner Mean Girl Natalie Eckdahl Episode 21. Behavioral Economics Foundations: Habits LEGO City Advent Calendar Episode 2. The Top 5 Wording Mistakes Businesses Make 21 great Advent calendar ideas for Christmas 2018 Episode 9. Behavioral Economics Foundations: Loss Aversion Episode 14. Behavioral Economics Foundations: Scarcity Revival and Growth of an Iconic Brand Episode 15: Behavioral Economics Foundations: Availability Clay Christensen’s Milkshake Marketing Marketing, Milkshakes and Understanding Your Customers Episode 20. Behavioral Economics Foundations: Defaults Episode 17. Unlocking the Power of Numbers Return of the weekly salon visit Episode 8. What is Value? Jen Mueller Debbie Page Episode 19. Behavioral Economics Foundations: Herding

Habits are much more powerful than most of us realize. This behavioral economics podcast is about habits and habitual buying. It is another one of my behavioral economics foundations podcasts. When a lot of us think of habits, we focus on bad habits, but we actually have more good habits than bad. Our subconscious does about 99% of the brain’s processing and this applies to habits and buying habits. I am going to break this down for you to make sure it is super applicable for your business – including the different strategies you should use if you are the market leader versus someone trying to break in. They are very different! I also talk about how businesses make the mistake of focusing on what’s new instead of the habitual buying habits, and how you can use buying habits to improve your business and marketing. CLICK THE IMAGE FOR YOUR FREE DOWNLOAD! Show Notes [09:00] The subconscious brain does about 99% of the brain’s processing. [09:41] If 99% of decisions are made using these automatic rules, based on the way things have been done in the past and what has worked…clearly a lot of the buying decisions you (and your customers) make must be done automatically. [11:01] Even with infrequent purchases, the place you go and look is based on habit. [11:50] An association in the brain that triggered an action (or a desire to take an action). That is essentially all a habit is. [12:17] The human brain essentially works on many, many associations. [13:29] Your brain sorts through tons of information and concepts – all the things it is NOT looking for until it finds what it is looking for. [14:49] In reality, 95% of all buying decisions are HABITUAL. Far too many companies and brands are focusing on the 5% - the “new” and “different” and “getting people to consciously make a decision and change” than working on being in the 95% of habitual purchases. [16:33] What is a habit? The official definition is “a settled or regular tendency or practice, especially one that is hard to give up” [18:23] Maltz, a plastic surgeon in the 1950s noticed it took about 21 days for his patients to get used to their new noses. [18:48] His book Psycho-Cybernetics said, “These, and many other commonly observed phenomena tend to show that it requires a minimum of about 21 days for an old mental image to dissolve and a new one to jell.” [19:15] NOTE: He said a minimum of about 21 days. [20:28] Our brains have a habit of using the 21 days as a reference even though there's a mountain of evidence against it. [20:54] We have been attacking habits wrong. [21:55] A 2009 study from The European Journal of Social Psychology found the average number of days it took to form a habit (in their case it was eating fruit at lunch or running 15 minutes a day) was 66. [22:17] This is where framing can kill you. You hear an average and think great that's the number. [22:40] There are more questions that you need to ask. Such as what was the range of days when coming up with that average. The range for this study was 18 to 254 days. [24:57] Essentially, all habits are made up of four phases: Cue, Craving, Response, and Reward. [25:41] The human brain is driven by rewards. [26:24] A cue is a signal to the brain that there is a reward around. And that instantly leads to a craving. [26:50] Cravings can be hard to ignore. It can quickly become all your conscious brain can focus on. [27:03] When you give in to the craving and the brain gets the reward, you have a double whammy because you have just reinforced the original cue to make it even more powerful the next time. [27:42] The thing we have done WRONG in addressing habits in the past is to try and change the response. [27:59] If you want to change a habit or start a new one, the CUE and REWARD phases are where it’s at. [28:44] To help stop doing something you need to find the cues that encourage you to do it. [29:27] Cues have been found to fall into one of five categories: Location, Time, Emotional State, Other People, and An Immediately Preceding Action. [29:53] List the ques of each category by asking yourself questions. [31:00] We actually aren't craving the thing we think we are craving but the reward that it provides. [32:16] Ask what the reward is that your brain is seeking. [36:22] “No, I can’t drink soda…” Or, the very subtle difference of, “No, I don’t drink soda.” [37:38] “I can’t” is not your choice. It is instead a restriction. “I don’t” is empowering. This was your choice. It affirms the choice you made and makes you feel determined, full of willpower. [40:09] By turning off notifications and eliminating the cue, I can work longer and be more productive. [42:19] You don't want to mess with people who habitually buy your product. You can create cues with product placement. [44:04] It's possible to lose a habitual buyer by offering them more choices and triggering them to think about other brands. [45:47] Brand leaders shouldn't do too much to rock the boat. [46:36] Jones soda has a large cult following by being unique. They also interjected themselves during a cue like at a sports game. When you aren't the market leader you have to try harder and put in some hustle to break the buying cycle. [48:40] It's important to consider your customers habits when building out your strategies. [49:20] Next week is about the Power of Habit and how you can use it to your advantage in your business. 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 1. Unlocking the Secrets of the Brain Episode 15: Behavioral Economics Foundations: Availability Three Purchase States How Long Does it Actually Take to Form a New Habit? (Backed by Science) Psycho-Cybernetics, A New Way to Get More Living Out of Life How Are Habits Formed: Modelling Habit Formation in the Real World Episode 16. Behavioral Economics Foundations: Framing How Long Does it Really Take to Break a Habit? The Power of Habit: Why We Do What We Do in Life and Business Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones 5 Ways To Change A Habit Episode 19. Behavioral Economics Foundations: Herding The Amazing Power of 'I Don't' vs. 'I Can't' Episode 20. Behavioral Economics Foundations: Defaults Listen and Subscribe on YouTube

This behavioral economics foundations podcast episode is about defaults.Today’s episode on defaults is going to absolutely blow your mind. You may think you know how defaults work, but you will not believe how they impact you, your business, and really everything. It’s amazing. You probably don’t realize it, but defaults are everywhere. Basically, every choice has a default. Think of the default as what happens if you do nothing – or if your customer does nothing. More often than not, when presented with a series of options people will go with the default. Listen in to learn how critical it is to consider the default option, complexities of choice architecture, and more. Show Notes [16:44] You probably think you already know all you need to know about defaults, but I'm going to blow your mind today. [17:26] Every choice has a default. Doing nothing is a default. People often go with the default, and this is connected to status quo bias. [18:32] People are more likely to keep things the way they are – maintaining the status quo and not take an action to change things. [18:56] In business when you are presenting options it is CRITICAL that you consider what is the default and what will be more likely to be chosen. [19:09] This is getting into Choice Architecture, which will be the focus of a series of episodes as it is very complex – I had a whole class dedicated to the topic of Choice Architecture in my master’s program. [19:37] Defaults are the way our brains really showcase just how lazy they are. This is where all the “should’s” of the world come to die. [20:41] An example of default retirement savings. Options 1 and 2 leave defaults that are consistent with past behavior instead of considering the future. [23:29] Option 3 is have people commit when they are in a cold state to commit some of their future earnings to retirement. This is an easy commitment for the brain to make because of time discounting. People are also less likely to opt out than they would be to opt in. [24:27] 78% of people opted to use this program when it was offered to them. [25:33] This is a really creative solution that could be applied in many other areas to help people to have better lives. [26:04] Too many programs and approaches are trying to get people to change their natural tendencies. [26:26] When push comes to shove the subconscious is the one making the decisions. [26:53] You can’t tell your subconscious to not be subject to defaults and status quo bias. [27:37] An example of defaults and how they impact you. This one comes from Kahneman’s Thinking, Fast and Slow. [28:35] If you make a bet and come up wrong, but everyone else did too, you are much less likely to be ridiculed than if you went against the herd and made a losing bet no one else made? [31:15] If people make a choice and step away from the status quo (the doing nothing) and lose…they feel increased regret. [32:02] In your business, is it the default for your customers to do business with you? Or are you asking them to change their behavior to buy? [32:40] Consider subscription services to anything in the world. The act of turning off the auto-renewal or canceling the subscription would require taking an action. [34:37] Setting up automatic payments for mortgages, insurance and auto loans are defaults that benefit everyone. [35:20] Make it easy for people to opt out if they want to. [36:02] Most people will not put in the effort to cancel, but you want to make it so they don’t WANT to cancel. [36:17] What sort of service can you provide that includes a regular, automatic payment to you as the default? Is there a way to make buying from you the default? [37:58] Most people use the default settings on their computers. It's better to be able to go with the recommendations of the people who built the thing. They know how it works best and if anything doesn’t suit your style you can always change it, right? [42:18] A badly placed default can make people want to get out of everything and completely change their habits. [43:01] The ethics of choice and defaults. There is a lot of debate in behavioral economics about the right way to use defaults and choice architecture. [43:12] Is it our responsibility to help people with a well-placed default? [43:45] You want to make it so people still have a choice. Make sure people aren't harmed if they go with the default and give them the option to choose something else. [44:31] Add in some sensible defaults if you have a complicated product or service. Most people will choose a pre-selected option. [45:00] What is presented first is also more likely to be chosen. [45:19] People now need to make a choice to opt into overdraft protection. This goes against the status quo bias and most people won't do it even though it is in their best interest. [46:18] How do you choose what is best for most people? [46:57] 95% of people support organ donation but only 43% are signed up as donors. You have to opt-in to be a donor and that is why there is such a small sign up percentage. [47:27] Some states are thinking about switching to presumed consent. This would mean you would have to opt out. [48:31] For your business, remember that you have many defaults impacting your customers and how they interact with you. [50:51] When you look at your business, how can you use defaults to benefit your company and your customers? [52:22] Next week on episode 21 we are going to talk about one of the concepts I hinted at in this episode – habitual buying. 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: Britt Joiner on Instagram @interacter on Twitter Episode 1. Unlocking the Secrets of the Brain @edxonline on Twitter Episode 2. The Top 5 Wording Mistakes Businesses Make Memories Worth Telling Alice Kuder Real Estate Caffeinated Communications Studio First Class Life Solutions Why this not that? Understanding Consumer Behavior - with Melina Palmer Five Star Professional Laura Brodniak Amber Peterson on Instagram Flour & Girl on Instagram Episode 19. Behavioral Economics Foundations: Herding Episode 7. Change Management (It’s Still Not About The Cookie) Anomalies The Endowment Effect, Loss Aversion, and Status Quo Bias Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving Episode 9. Behavioral Economics Foundations: Loss Aversion Thinking, Fast and Slow Episode 11. Behavioral Economics Foundations: Anchoring and Adjustment Organ Donation Statistics To Solve Organ Shortage, States Consider ‘opt-out’ Organ Donation Laws

Herding is the topic of today’s behavioral economics podcast foundations episode. This concept is similar to the way animals herd and for many of the same reasons. For safety, being in the center of the herd offers protection from predators. There is also an assumption that if everyone is running in the same direction they must know where they are going. My husband and I just got back from a trip to London, where I observed examples of herding, the subconscious versus conscious brain, and how a nudge can remind us to do what we need to. (I will talk expand on nudges in my upcoming foundations of choice architecture series). During this episode I will give examples of how to use herding to your advantage in business, and how herding can go terribly wrong.   Show Notes: [06:23] Crossing the street in London is an example of the subconscious brain versus the conscious. Cars come from you on the right. London gives tourists a nudge by painting “look right” and “look left” at the intersections. [08:10] In behavioral economics we expect people to make errors, there's just too much going on for the brain at one time. A little nudge can help us when we anticipate an error. [18:19] Humans herd in the same way as other species – including wasps and schools of guppies – for much of the same reasons. [18:43] It's beneficial to be as close to the center of the herd as you can. [19:30] running the same way as everyone else is another concept of herding. A great example of this is watching groups of people cross the street at a busy intersection. [22:01] One of the reasons our species has adopted herding is because it helps us learn by observation. [23:26] The childhood discomfort of not doing what everyone else is doing is fueled by our basic instinct of herding. [24:29] In addition to safety, herding is a key way that we learn. Learning by observation is critical to our survival and growth. [25:48] Choosing a full restaurant as opposed to one that is completely empty is an example of herding. [26:55] Seeding a tip jar with money is another example of herding. [27:35] Museums in London had giant jars of cash encouraging people to donate. [29:09] Herding mentality is more likely to come out when people feel vulnerable or unsure of themselves. [30:58] Herding behavior can come into play with finances and when your reputation is on the line. [33:02] Studies have shown that up to 75% of participants will give an answer they KNOW IS WRONG to go with the group. [33:27] It takes strong will and conscious focus to be willing to go against the group and it is even more difficult when those people are like you. [34:45] Herding is one reason that things go viral. [35:57] In finances, people being afraid to go against the cumulative advice of the herd is one reason why markets crash and bubbles burst. [37:46] Crypto is absolutely impacted by the herd mentality – we see people make millions and feel more optimistic we can have that same fate if we act fast! This is also incorporating the concept of availability. [39:08] Don't let herd mentality force you into making a bad decision. Turn on your conscious brain when you feel the anxiety building. [39:44] An example how you could use herding and the power of numbers to get hotel guests to reuse their towels. [41:52] People like to be part of the group. This is increased when the people are comparable and more similar to you. [42:54] Any time you can provide reassurance through numbers, it will increase the chances of people buying. [43:39] Herding and the ice bucket challenge. People participated because it was less painful to do it than to be ridiculed for not doing so. [45:20] Being in a group makes us feel safe and happy because of this release of oxytocin. [45:57] Helping leaders build a following. Recognize the power of existing affinities. Encourage the formation of new affinities. Fight the herd instinct in yourself. [48:55] Derek Severs How to Start a Movement is one of my favorite Ted Talks. [51:38] Social media is rife with herd mentality. Most people do not want to stand out by leaving a comment. [53:53] The feeling of getting comments and shares on social media can release oxytocin. [54:37] You can use herd mentality as an advantage in business by being generous with your social likes and shares - an example of a challenge I am currently participating in.   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: Dramatic Incompetence and the True Story of an NFL Tie The Making of Harry Potter Harry Potter and the Cursed Child Episode 1. Unlocking the Secrets of the Brain Nudge: Improving Decisions About Health, Wealth, and Happiness Debbie Page Business Bros Podcast Human Herding: How People are Like Guppies The Unwisdom of Crowds Herding, social influence and economic decision-making: socio-psychological and neuroscientific analyses Herd behavior in consumers' adoption of online reviews Which restaurant should I choose? Herd behavior in the restaurant industry Episode 17. Unlocking the Power of Numbers Watch These Awkward Elevator Rides From an Old Episode of Candid Camera Herding Behavior in Social Media Networks in China Herd Instinct Warren Buffett explains one thing people still don't understand about bitcoin Herding behavior in cryptocurrency markets Episode 15: Behavioral Economics Foundations: Availability Science Of Persuasion Episode 16. Behavioral Economics Foundations: Framing Oxytocin The Brain and the Herd Mentality How to Start a Movement Derek Sivers Debbie Page Instagram Debbie Page FacebookLynn Reifert InstagramLynn Reifert Facebook Six-Word Lessons to Take the Fear out of Mortgages Debby Mycroft InstagramDebby Mycroft Facebook Nicole Bandes Instagram Nicole Bandes Facebook Jennifer Findlay InstagramJennifer Findlay Facebook

Our brains can be primed to lean toward a thought or word or number. Today’s behavioral economics podcast is another foundations episode, and it is all about priming. I share examples of how easy it is to trick the brain into thinking and answering something wrong with just a little priming. When primed, your subconscious remembers it recently heard a number, or a statistic or something and that influences the next assumptions it makes – even if they are not even remotely related. I share examples of priming, research and studies related to priming, and examples of how you can use this concept to grow your business and profits. CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes [09:28] I share a rhyme and a question that shows an example of priming. Rhyming can be one way to prime the brain. [11:11] Our brains will hear a number and then adjust up or down from there. This is another example of priming. Especially, when done intentionally like the examples I gave in Episode 11. [11:34] Our brains are lazy and incredibly busy, so they take shortcuts all the time. [11:48] Our subconscious brains need to make snap decisions. When primed, our brain will make assumptions based on the previous word or number that it has heard. [12:18] I was giving a presentation to a group of female entrepreneurs (something I do a lot!). I asked everyone to think of the last 2 digits of their social security number. Then assign a value to the necklace I was wearing. Those with lower number socials assigned lower values, and higher numbers assigned higher values. This is the power of priming, the root of anchoring and adjustment. [14:10] A priming example, where sales of Snicker bars were increased just by using the number 18. [14:39] Limiting the number of cans of soup that someone can buy actually primes them to buy more. [14:57] Priming can also be done with words. A priming example where students primed with words about elderly people actually took longer to walk to the elevator. [17:30] They also did a study with rude and polite words. People primed with the rude words were much more impatient and likely to interrupt. [19:17] A stereotyping example of priming. Priming people with words from a certain stereotype can actually affect the results on a math test. [21:19] Prime yourself for success. If you doubt visualization, think how easily the brain can be primed. [21:55] The power of visualization. There is a reason why Olympians train their brains as well as their bodies. [22:48] Mental training may be even more important than physical training. [22:59] The steps the visualization. [23:01] 1. Know what you want. Ask yourself what you would like to see if nothing was holding you back? [23:15] 2. Describe your vision in detail. [23:28] 3. Start visualizing and create the emotions. [23:41] 4. Take daily actions. [23:58] 5. Have grit and persevere. [24:27] Priming with physical objects. Participants in a study were asked to hold a cup of either hot or cold coffee. People who held the iced coffee actually rated the person in the story as being much “colder” than the hot coffee participants rated them. [26:03] Participants in another study were more likely to clean up crumbs after a snack when there is a faint hint of cleaning products in the air. [27:09] Several studies have been done where certain objects or smells will affect people's behavior. [27:48] The takeaway from all of these studies is that everything we do and say matters. Whatever was said or done right before we do or say something also matters. [28:34] You can't control everything, but it is worth looking into the things that you can control. [29:25] Remember, what comes first matters much more than the price itself. [30:25] With these priming examples, small things and a few simple words can make a huge difference. [30:54] If you find people are always rude when they talk with you. Or treat you like you are cold and distant. It could be a bad prime. [31:25] A study where participants were shown a flash of a logo for an imperceptible 30 milliseconds. Participants shown the Apple logo were more creative than participants shown the IBM logo. [32:15] Participants shown a Disney logo were much more honest than participants who saw the logo for E! [32:23] Have you ever heard people say you become like the people you spend the most time with? Or that you should dress for the job you want? Or that you should “fake it till you make it”? [32:36] It seems there really is some truth to that. You are priming your brain to take on the traits of those outside influences. [32:55] Prime your brain in a way that you want to be approaching your day in your life and business. [33:14] Notice how quickly a brand is noticed. Ask what the traits of your brand are? [34:21] These things may not register on a conscious level, but they have an impact, even if people don't realize it. [35:03] Marketing and advertising takes dedication and focus; consistent presence and messaging to break through the clutter. [36:51] Book your strategy session for a free consultation call now. [37:52] On episode 19, I am going to dig into the foundations of herding – so get ready for some more amazing studies. 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 4 Questions or Answers Business Bros Podcast Tax Tribe Podcast The 10 Behavioral Economics Concepts You Need To Know and How to Apply Them Episode 11 Behavioral Economics Foundations: Anchoring and Adjustment An Anchoring and Adjustment Model of Purchase Quantity Decisions Automaticity of Social Behavior: Direct Effects of Trait Construct and Stereotype Activation on Action Stereotype Susceptibility: Identity Salience and Shifts in Quantitative Performance “Math is Hard!” the Effect of Gender Priming on Women’s Attitudes New To Visualization? Here Are 5 Steps To Get You Started Here's The Trick Olympic Athletes Use To Achieve Their Goals Who’s Minding the Mind? Material priming: The influence of mundane physical objects on situational construal and competitive behavioral choice Apple's Logo Makes You More Creative Than IBM's

I take framing one step further and talk about the power of numbers in today’s episode. This behavioral economics podcast will be a break from our foundation episodes. I get in to some of my most frequently asked questions (including ending prices in 99 or 97). I also talk about pricing strategies like using random or “interesting” numbers. I share research, examples, and how you can apply framing using numbers in your business.   Before I dig in, I want to thank Justin from 52 Card Media, Jesse from Cinematic Syndicate, and Jennifer of Jennifer Findlay Portraits for making the website look so awesome. I have also transitioned to a new YouTube Channel and all the full episodes of this podcast are on it. Feel free to subscribe and share it with your friends.   Show Notes [09:17] Last week was all about the concept of framing. Today, we take that concept one step further by unlocking the power of numbers in your business. [09:45] The way you say something is often more important than what you're actually saying. This ties back to loss aversion (which was the focus of episode 9) - remember framing something as a loss makes people twice as likely to take action than when it is framed as a gain. [11:21] I talked a little bit about pricing and Episode 5. All of the things leading up to the price matter more than the number itself.[12:16] Is it really better to end something in 99 than rounding up to the nearest dollar? Should my prices end in 99 or 97? Should I have a random, but interesting number like 456.78?[12:55] It's (generally) better to round down in the 99 versus one dollar question. This works because you're bringing down the first whole digit number. 599 looks better than 600. [14:24] Consistency is key. If you list your prices and have them one on top of the next, and they say, 399, 499, 999 and 2500 it is just weird. [16:27] The great debate of 99 versus 97 (or even 95). Any of them are typically better than the rounded 0 because of the first digit difference. [18:21] The LAST question on pricing is about using totally random and sometimes “interesting” numbers. This would mean instead of pricing something for $4,600 or 4,599 you would price it at $4,567.89 (so when you look at it the number reads 456789.) [19:09] Making someone stop and say “what?” can be good if you're trying to disrupt the buying cycle. [20:50] Journal of Consumer Research study called “This Number Just Feels Right” states that luxury pricing or other things bought on emotion (like a bottle of champagne) sold better when it was priced at $40.00 instead of $39.72 or $40.28. [22:01] In another study on the pricing of a camera, participants favored the rounded prices (leisure/luxury/emotional purchase) and the non-rounded prices when they thought it was for a class project (function or looking for a deal). [22:32] Bringing it back to FRAMING: the mindset that someone is in when they are going to buy from you matters. [23:26] Confidence helps you sell and encourages people to buy. [24:08] Statistics and numbers can be very persuasive when presented properly. They can also be negatively persuasive when presented wrong. [25:16] Numbers help your brain value things and make comparisons. Which helps it to make a decision without flagging your conscious brain. [26:22] Look for numbers in your business. People like to be part of the group and that is a big reason why framing in numbers matters. [27:51] We make assumptions based on the numbers we see. [28:49] Statistics like this work because people want to be like everyone else. [29:39] To know what works best, you need to try different types of numbers. [30:18] Four out of five has a better context in the brain than 78%. [32:24] “Most” sounds better than 50%. You can also try to flip the framing the other way. [33:42] Find a number in your business and look at all the different ways to present it. Let me know what works best for you. [40:30] Episode 18, is back to behavioral economics foundations – when we will talk about priming. You won’t want to miss it! BE thoughtful. 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: 52 Card Media Cinematic Syndicate Jennifer Findlay Portraits Katie Goulet Website Design on Instagram Sagar Jadhav on Instagram Episode 4 Questions or Answers Episode 9 Behavioral Economics Foundations: Loss Aversion Episode 5 The Truth About Pricing The Psychological Difference Between $12.00 and $11.67 The Buying Brain: Secrets for Selling to the Subconscious Mind This Number Just Feels Right Episode 16 Behavioral Economics Foundations: Framing Episode 8 What is Value? Episode 13 Adjusting Your Mindset Episode 12 Behavioral Economics Foundations: Relativity Find Me Gluten Free Biz Chix Episode 10 On Air Strategy Planning Session with Mariel Court CoastHills Credit Union

Framing is one of my favorite behavioral economics podcast topics. In the past few weeks, I have covered foundational topics like loss aversion, anchoring & adjustment, relativity, scarcity, and availability. Today, I talk about one of my favorite concepts which is framing. Before digging in, I’d like to give a shout out to Lara Currie who left a stellar Apple podcast review and invited me to be on her podcast Difficult Happens. Our subconscious brain evaluates everything very quickly and uses assumptions to make decisions. If you think of this in the context of framing, this is the reason an inexpensive print will look expensive in a nice frame and cheap when taped to the wall. Framing also works hand-in-hand with the concept of loss of version. If you frame something as a loss someone is more likely to take action on it than if it were framed as a gain. In this episode, I dive into how our brains interpret framing and how these concepts can be applied to your business. CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes [12:21] An easy way to think about framing is thinking about how a beautiful frame impacts a picture compared to no frame at all, or a cheap looking frame. [13:53] Think about a poster on your wall stuck up with tape as compared to a nice print in a beautiful frame. [14:44] Why does the frame matter? It's because our brain processes everything very quickly and uses assumptions to make decisions. A well-placed aesthetic means it must be a high quality piece. [16:24] Children's artwork put in a frame looks like amazing beautiful art. [16:52] To our brains, what we say is not as important as how we say it. [17:18] Our brains process nonverbal communication. All of this other stuff makes a huge difference. [17:40] The nail salon example from episode two was an example of being too literal. They had an outdated sign that sent a negative message to our subconscious brains. They were able to turn this negative into a positive just by changing the wording. [21:34] Framing is at the heart of the concept of loss aversion, which was the focus of episode 9. [21:48] Framing something as a loss is more likely to get someone to take an action than framing it as a gain. [21:59] The motivation of a loss is twice as powerful as the motivation of a gain. This is also called Prospect Theory. [22:58] Examples of framing coming into play. A food labeled as 90% fat free is more attractive than one labeled as 10% fat. [23:22] This is actually saying the same thing, but the way it is framed or what we hear makes one option sound better than the other. [24:09] Last week, I talked about the US open. Saying “Serena lost” has a different connotation than saying “Osaka won.” [24:52] The frame of our story and our experiences shapes the world that we live in. Framing is about what we say and who we say it to. [25:47] When talking to clients, I focus on “considering the ripples.” [27:36] Tversky did a test on his colleagues at Harvard medical school, having them read statistics about two treatment options for lung cancer – surgery or radiation. [28:35] People choose options that are framed in a positive light. [29:26] One other fantastic example of framing from Tversky and Kahneman is called the “Asian disease problem.” [31:42] The principal in this story is called OPTIMISM BIAS, and it will be a topic of a future podcast. [32:22] The three different categories of framing: Risky choice, attribute framing, and goal framing. [34:18] . Have you ever heard commercials for Chevron with Techron? We assume that Techron is something valuable, but it's actually a name that Chevron made up. [35:33] Think back to episode 11 on Anchoring and Adjustment, when I asked you if there are more or less than 10,000 emperor penguins in Antarctica. The same way your subconscious assumes I must know something about populations, your brain assumes brands must know something more about gas. [36:56] Ford calls itself "America's best-selling brand". That's actually an empty claim that sounds good. Yet, it means something to your brain. [38:06] An example about “AVG DAY CARE”. Is this a good name? [41:21] Next week I'm going to dig into the science of choosing the right numbers and how to use statistics in your messaging. [41:48] If your toothpaste is recommended by 4 out of 5 dentists, does that mean 1 in 5 dentists don't recommend that toothpaste? [42:56] Some of the most misleading terms in real estate and what they mean. Cozy mean small. Charming means old. Convenient location means loud. Etc. [44:25] This is also getting into the concept of PRIMING – which is going to be the topic of episode 18. [44:41] The way you explain something sets an expectation and can impact the way someone feels about the whole experience. [46:05] All the adjectives included into a description could be considered the frame. [49:08] When I worked at the credit union our biggest competitor claimed they were “a member owned, not for profit credit union” even though, that is basically the definition of a credit union. [55:26] Next week, episode 17, is taking framing a step further, into the best ways to display numbers, when you should use each one, and more. 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 9 Behavioral Economics Foundations: Loss Aversion Episode 11 Behavioral Economics Foundations: Anchoring and Adjustment Episode 12 Behavioral Economics Foundations: Relativity Episode 14 Behavioral Economics Foundations: Scarcity Episode 15 Behavioral Economics Foundations: Availability Difficult Happens Episode 29 Why your subconscious is the Real Boss with Melina Palmer Cinematic Syndicate 52 Card Media Jennifer Findlay Portraits The 10 Behavioral Economics Concepts You Need To Know (And How To Apply Them) Episode 8 What is Value? Episode 2 The Top 5 Wording Mistakes Businesses Make Prospect Theory: An Analysis of Decision under Risk Thinking Fast and Slow Episode 7 Change Management (It’s Still Not About The Cookie) All Frames Are Not Created Equal: A Typology and Critical Analysis of Framing Effects 10 Tips Gas Stations Don't Want You to Know America’s best-selling car brand is not American ‘Cozy’ or Tiny? How to Decode Real Estate Ads