Insights of behavioral economics that can be applied in eCommerce :
What is behavioral economics? It is a term that is becoming more and more familiar on a global level in eCommerce. Combining psychology and business, behavioral economics looks at decision making processes from an economic perspective in both individuals and institutions. Why people make the decisions they do based on cognitive, contextual, social and emotional factors. Behavioral economics is not only concerned with the “why” it also looks at the inner workings of how these have an effect on the economic environment.
The first Insight that is addressed explains default behavior and how this can be used to enhance online engagement. Take a look at this example found in an online lecture on Behavioral economics, from the University of Toronto by Dilip Soman, found on edX online Courses. He explains the organ donation rates between different countries. How is this related? Read on, It’s astounding.
Organ donation rates in Canada are 2.5% and in Austria 99%, thats a huge difference. Why? We look at the processes of engagement that donors have to go through. Have a look at the two processes below :
As Dilip explains in the lecture, the difference is in their default assumption and this has a direct effect on decision making. Humans are lazy, two ways of looking at this : if you need a particular outcome, check your process of engagement, what processes are in place that inhibit or enhance the outcome. Are you steering consumers on your site the right way, and is it a smooth drive or a bumpy ride? Consider the potential obstructions that consumers will need to overcome in order to land at the desired destination on your page. This default technique is not necessarily restricted to steering consumers, think of the possibilities of applying it in your online marketing strategy. Also consider that defaults signify “sameness” and grouping, the “everyone else is doing it” effect is strong in decision making.
Decision making is not as easy to trace as we would like it to be, as individuals we are all unique in the reasoning behind decision making. However we are all human, and humans are creatures of habit, therefore we create patterns of behaviour, consciously or subconsciously, according to our own personal frame of reference as well as external environment. This is what we can observe and take forward into the online business world.
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