Behavioral Economics: Core Concepts

Key Biases to Watch For

• Loss Aversion:

  • What it is: We hate losing more than we like winning.
  • Look for it: Customers refusing to give up a legacy product, even for a better one. Use free trials to leverage this (once they have it, they won’t want to lose it).

• Anchoring:

  • What it is: The first number we see sticks in our head.
  • Look for it: In negotiations, the first offer sets the tone. In pricing, show a higher original price before a discount.

• Framing:

  • What it is: Presentation matters more than facts alone.
  • Look for it: “90% user satisfaction” is more powerful than “10% of users were unsatisfied.”

• The Bandwagon Effect:

  • What it is: We tend to do things because many other people are doing them.
  • Look for it: Use testimonials and show how many customers you have. Social proof is powerful.

• Default Bias:

  • What it is: We stick with the pre-set option.
  • Look for it: The default settings in your software will be used by the vast majority of users. Choose them wisely.