Dan Ariely Shows Us How We're Predictably Irrational
We think we make logical decisions when purchasing products, choosing a mate or deciding whether or not to cheat. Dan Ariely has some experiments that will make you question just how rational you are.
Ariely makes no bones about turning long-held beliefs on their head. For example, the Law of Supply and Demand, is a principle as important to economics as Newtonian physics. But, it turns out that we are heavily influenced by "anchors," or prices that arbitrarily influence how much we would pay for an item. Ariely tells us about an experiment he conducts in which the last two numbers of the test subjects' Social Security Number -- a truly arbitrary number -- establish the value of items when bidding in an auction.
Brian questions Dan about the value of "free" in influencing behavior. Dan demonstrates that "free" is the Kryptonite that cripples our decision-making no matter how rational we think we are. It turns out that the difference between $.01 and $.02 is small, but the difference between $.01 and free is huge to us.
This discussion of "free" leads us to talk about the "freemium" models that many Web 2.0 entrepreneurs are using to grow their online audience. Ariely recommends discounted trials instead of these free + premium service levels. Once free is introduced, he argues, that's its perceived value.
Ariely discusses his experiments on how we value what we own over what we don't, demonstrates that our level of satisfaction with a purchase is directly tied to our expectations, and uncovers how an expensive brand of aspirin will make us feel better than the same aspirin at a lower price.
There are no sacred cows in Ariely's presentation. He takes on our tendency to cheat when money is involved and the way we our decisions change when we're sexually aroused.
If your curiosity is aroused, expect to be satisfied by the audio of this interview, especially since the price is right: free.
I prepared this presentation so that business owners will look differently at their Web site. There are a few unfortunate thoughts lurk in the depths of our minds when we imagine a Web site to support our business. Here are some of them:
"Building a Web site is more like printing a brochure than developing a software application."
"My Web site is independent of the advertising I'm doing."
"Web developers know how to build Web sites that will help me land more business."
"The look and feel is the most important aspect of my Web site."
"People want to know about my company."
"People want to drill down until they find the information they are looking for."
"Everyone who comes to my site is relaxed and has lots of time to spend."
My presentation offers six ways of looking at your Web site that will make you better at commissioning your Web site's construction.
I hope it will save you the months of lost sales and thousands of mis-spent dollars.
Last month's Bootstrap Web presentation entitled "
