How Behavioral Economics Influence Consumer Decisions Effectively with Kristen Berman

Kristen Berman co-founded Irrational Labs, a behavioral product design company, with Dan Ariely in 2013. Irrational Labs helps companies and nonprofits understand and leverage behavioral economics to increase the health, wealth and happiness of their users. In this episode, Kristen explores the intricacies of pricing strategies, emphasizing the importance of understanding behavioral economics to influence consumer decisions effectively. She discusses how techniques like the decoy effect, anchoring, and the power of price endings (like 99 cents) can drive customer behavior. Additionally, she highlights the challenges of pricing revolutionary products due to the lack of reference points and the creative approaches needed to establish them in the market.   Why you have to check out today’s podcast: Deep dive into pricing strategies like the Good-Better-Best model, the Decoy Effect, and the psychology behind price ending to help you understand how to make pricing decisions that drive customer behaviors and increase sales. Find out valuable perspectives on how human psychology influences purchasing decisions which is essential for anyone looking to optimize their pricing or marketing strategies. Discover practical advice and real-world examples to see how you can apply these concepts to your own business.   "It's all relative. So, what are customers using as a reference point? If it's off your product site, then you need to help them create a new reference point within your product site." - Kristen Berman   Topics Covered: 01:14 - Sharing how she transitioned into behavioral economics from her role as a product manager at Intuit 03:42 - How behavioral science tie to pricing and product 06:10 - An example of how behavioral economics influence product decisions 08:50 - Explaining the concept of the "paradox of choice" 11:35 - Turning the path of least resistance into the preferred choice 14:30 - Simplifying decision-making for customers with the concept of "good, better, best" product offerings 16:42 - Explaining the decoy effect and how it influences consumer decision-making 19:09 - The reason behind the presentation of pricing options in the context of behavioral economics 22:43 - The concept of framing in sales in the context of product features and the importance of trials in subscription-based models 25:25 - How people often rely on heuristics, or mental shortcuts, when making decisions about prices 28:56 - Kristen's best pricing advice 29:28 - Various sources of reference points 31:19 - The challenge of pricing revolutionary products due to the lack of existing reference points   Key Takeaways: "People don't come in with an understanding of the exact thing that they want to purchase at the exact moment. And so, our job is to help them understand value, and choice helps people understand value." - Kristen Berman "We're using the heuristics on how big the number is to make a lot of fairness decisions." - Kristen Berman "We are relative creatures. We have reference points and we use our reference points to understand value. And so, it's not just the price, it's the reference point that we're using." - Kristen Berman   People/Resources Mentioned: Intuit: https://quickbooks.intuit.com/ TikTok: https://www.tiktok.com Airbnb: https://www.airbnb.com Dan Ariely: https://danariely.com/all-about-dan/ One Medical: https://www.onemedical.com Steve Jobs: https://en.wikipedia.org/wiki/Steve_Jobs Apple: https://www.apple.com/ YouTube: https://www.youtube.com Netflix: https://www.netflix.com/ Study: https://play.google.com/store/apps/details?id=com.thesoundagency.study&hl=en_ZA&pli=1Shopify: https://www.shopify.com/ph   Connect with Kristen Berman: LinkedIn: https://www.linkedin.com/in/kristenberman/   Connect with Mark Stiving: LinkedIn: https://www.linkedin.com/in/stiving/ Email: [email protected]