Monday, January 26, 2009

What web designers can learn from behavioral economists

One of the less celebrated appointments of the Obama administration was the selection of legal scholar and behavioral economist Cass R. Sunstein to head up the Office of Information and Regulatory Affairs (the group that oversees our ever growing web of federal regulations).

Sunstein is eminently qualified for the position (early stint at the Justice Dept., law professor at Harvard and Chicago, etc). But to me what makes this appointment most exciting is his work in the area of behavioral economics (the study of why people are so irrational when making important decisions and the collective effect these bad decisions have on our economy and society).

Last year Sunstein co-authored a book called “Nudge, Improving Decisions about Health, Wealth, and Happiness.” Nudge addresses how organizations, including the government, can help people make better decisions whether related to living healthier, retirement planning, selecting a mortgage, etc.

Choice architecture
The big idea behind Nudge is the concept of choice architecture - the idea that by carefully designing the context in which people make choices designers can help them make better decisions. This is needed, apparently, because people are ill-equipped in many situations to make decisions that are in their best interests. There are many causes for this situation: lack of information, bad habits, impulsiveness, etc. Two examples of choice architecture in action, one arguably more intrusive than the other, include:
  • A “Yield” sign before a hair-pin curve on a dangerous mountain road
  • New York City’s ban on artificial trans-fats in restaurant served food
What does behavioral economics have to do with Web design? There are three trends that I predict will require Web designers to become better choice architects in the near future:
  • The increasing complexity of our society
  • The growing number of options offered to consumers
  • The growing influence of the Web on consumer decision making and purchase habits

Consumers are overwhelmed by the amount of information provided to them and the seemingly endless options available in the marketplace. In many situations most don’t have the expertise, experience or time to determine what’s right for them. At best the result is inertia; at worst the result is a bad, misinformed decision. This is especially distressing if the decision relates to something important such as a medical treatment, choosing a mutual fund or selecting a prescription drug plan.

As a result I believe consumers will eventually give some organizations (both public and private) greater permission to educate them about matters they are unfamiliar with and, in certain situations, to make outright decisions for them. This will be especially true in areas where a bad decision could have a significant negative impact on a person’s live.

This will no doubt have an impact on how consumer facing Web sites are architected and designed. To be effective choice architects, Web planners, information architects and designers will have to go beyond just understanding the demo-, psycho-, and techno-graphic profile of their target consumers. They will also have to consider, depending on the situation, a host of additional attributes about their intended users such as:

  • The kinds of biases they might have about a product or service and how that could either reinforce or weaken a choice
  • False assumptions they might have and how they might influence their decision making process
  • The impact of how a set of options is presented or ordered might have on a decision
  • Any habits or weaknesses that could lead to unhealthy, unsafe or fiscally irresponsible decisions
  • What, ultimately, is in their best interests
Some argue this is paternalistic but the reality is that people sometimes don’t know what they want let alone what they need. This is especially so when it comes to matters that are unfamiliar to them. As an analogy, when I seek the advice of a professional (doctor, accountant, lawyer) I expect them to guide me, and if needed make recommendations as to the right path by applying their knowledge and expertise to my unique situation.

To quote the authors of Nudge: “The human brain is amazing, but it evolved for specific purposes, such as avoiding predators and finding food. Those purposes do not include choosing good credit card plans, reducing harmful pollution, avoiding fatty foods, and planning for a decade or so from now. Fortunately, a few nudges can help a lot.”

An Extreme Example of Choice Architecture in Web Design?

Sunday, January 25, 2009

What can the Obama administration do to jump start digital innovation? Be a catalyst

There's no doubt the U.S. is one of the most creative and innovative cultures in the world. One needs to look no further than the role we played in creating and nurturing the growth of the Internet.

That said, it's amazing how we as a country have fallen behind the rest of the developed world on some of the basics. For example, our decline in broadband penetration, speed and price has been well documented. And we all know about the sorry state of our infrastructure.

Is the U.S. falling behind in digital innovation?

Another example is how far we are behind both Japan and some European countries in the integration of credit card technology in cellphones that allows consumers to pass through the checkout counter with nothing more than a swipe of of their device over an electronic reader.

The enabling technology exists and is in wide use in several countries. And, all the key U.S. stakeholders have an interest in making this happen:
  • Consumers get convenience
  • The credit card companies and wireless carriers get transaction fees
  • Merchants have the potential to get a greater share of U.S. consumers' collective wallet

With so much to be gained by so many you would think there would be momentum behind making this a reality. Think again. The fact is that because there are so many stakeholders, and because this is such a complex undertaking, the coordination needed to bring this to market is daunting.

Sometimes innovation needs a nudge
To me what's needed is some supra-like entity to intervene and provide the leadership needed to cut through the morass of regulations and technical standards that makes this such a vexing problem as there are just some things the proverbial invisible hand of the free market can't do. Who better to play this role than the federal government.

While rolling out this technology on a national scale won't come close to solving all of our economic problems, it certainly will have some positive impact as this will be a considerable undertaking. And the cost to the treasury, as far as I can tell, should be minimal.

Not a bad way for the feds to help stimulate the economy: no bailout funds, no deficit spending, just being a catalyst for a bunch of industry groups that haven't been able to crack the code on their own. Now that's the kind of activist government I can live with.

Saturday, January 24, 2009

So, marketers what's your empathy quotient?

We have all heard of emotional intelligence (EI) and the emotional intelligence quotient (EQ), but should we all be thinking about our empathy quotient? We will if business strategist and adjunct Stanford professor, Dev Patnaik, has his way.

Marketers and consultants have been preaching to their corporate clients for years about the benefits of making their organizations more customer-centric (indeed, many a multi-million dollar CRM project have been sold based on the promised benefits). But it's not always easy with all the internal politics, management layers and departmental silos that sap the energies of so many corporate managers.

An interesting new web site, blog and book by Patnaik makes a compelling case for a different, more intuitive approach to making companies more customer-centric (and prosperous) that is based on the innate human ability to empathize.

More empathy = more relevant products and services
While the idea of becoming more customer focused is not new, after a quick glance through a hard copy of Patnaik’s book (it’s not available in Kindle format - yet) it seems he may be on to something. He goes beyond making the well worn case that companies need to "align" with its customer's by actually showing how managers in several organizations have become more empathetic with their customers.

Patnaik shows how companies that embrace this approach have a deeper, more visceral appreciation for the needs, wants and expectations of their consumers. The ultimate payoff, of course, is that these organizations are able to bring services and products to market that delight their customers.

Many marketers have known this for years. For those that don’t yet get it this could be a useful tool. Now, if Patnaik could just get his book published in Kindle format I’d be delighted too.