3 Consumer Behavior Experiments to Inspire Your Startup Growth

3 Consumer Behavior Experiments to Inspire Your Startup Growth

3 Consumer Behavior Experiments to Inspire Your Startup Growth

Opinions expressed by Entrepreneur taxpayers own.

Startups are synonymous with innovation. In this fiercely competitive market, they must constantly come up with innovative ideas. However, not all ideas are good enough, so it becomes essential to test ideas beforehand to validate them. A well-known method of doing this is called A/B testing, or more accurately, experimentation.

Experiments, however, all too often fail due to inaccurate experimental design. We have all witnessed it. This leads to a prejudice against the experimentation process as a whole. We strongly advocate against this prejudice. Experimentation can be the key to a startup’s growth.

However, many things can go wrong with the design of experiments. The one we are going to particularly elucidate in this article is how understanding consumer behavior intelligence can lead to successful experiment design. This is something that is not commonly talked about, and I see that many in the industry do not pay attention to it.

Related: The 5 Key Elements of a Successful Experiment

Consumer behavioral intelligence, or behavioral economics, is the field in which scientists study human behavior in terms of money and value. Behavioral economics reveals that human decisions, especially in the context of money, can be quite irrational. Therefore, we can take advantage of behavioral economics in the design of our experiments.

If you’re looking to improve your revenue, acceptance, trial rates, or retention, then experimentation in alignment with behavioral economics may be a growth hack for you. It can be a very powerful concept in the design of your experiments. Given the vastness of behavioral economics, let’s look at three concepts and discuss how they can be used in experimentation.

1. The allure of free

It seems logical that charging an insignificantly small fee for a service should make no difference to customer growth. That is not the case.

Let’s explore this concept with a much talked about case study: Hershey’s Kisses vs. Lindt, the gourmet chocolate. An experiment was done where Hershey’s was priced at 1 cent and Lindt’s was priced at 15 cents. Consumers were asked to choose between them.

Significantly more people chose Lindt at a much higher cost than Hershey’s, which was almost free. Consumers justified their choice by saying that Lindt was a luxury chocolate.

Subsequently, the experiment was repeated with the same group of people. However, this time, the choice was a bit different. There was a 1-cent reduction in price for both cases. Which means Lindt went down to 14 cents and Hershey’s went free. To the surprise of the researchers, the results completely changed and significantly more people chose Hershey’s, even though Hershey’s was regular chocolate.

This experiment conclusively demonstrates that there is a deep appeal to “free” in the human mind, and we distinguish a lot between “free” and “almost free.” So here’s a tip: If you’re in an app business, know that in a user’s mind, “free” and “almost free” make a big difference. They are two distant options. Keep this in mind when designing your experiment as well.

Related: The Basics of Experimentation and Why It’s Key to Growing Your Startup

2. Priming

Another experiment was carried out at an airport. People at the airport were asked to pick up yogurt or fruit from a counter. Initially, almost half of them chose yogurt and the other half chose fruit.

For the next part, someone on the way to the counter talked to the people in line. What they found is that when this person told them about yogurt, people were choosing more yogurt. And when this person told them about the fruit, they picked more of the fruit. This is a great example of priming.

What we learn here is: The key is to draw the consumer’s attention to a product/service you want to sell. Your decision is likely to be influenced automatically. The way you get attention doesn’t even have to be direct.

The person who was talking to the people in the queue did not necessarily need to point to the product. What they say may simply revolve around the product. To sell the fruit, we don’t need to ask them to buy the fruit, we can simply ask them what fruit they like, and that does the magic.

3. The decoy effect

Let’s take the example of a dating app. The app offers three matching profiles on the free account and then has an option to upgrade. The update has two options. There is a basic upgrade and a premium upgrade. Let’s say there are 5% users who upgrade, and the split is 4% for basic and 1% for premium. Can we introduce a decoy in these options to change the ratio? Well, it is possible!

Suppose the application presents another update option. It is in line with the premium package and is called the standard price, but it is lower than the premium price. Let’s say the base upgrade has five features, the premium upgrade has five plus seven awesome features, priced at $999, and the standard upgrade has five plus one additional feature, priced at $899.

You would be surprised to know that just by presenting this lower alternative, the application will be able to change the ratio from 4%:1% to 1%:4%. The reason for this change is that before, users could not directly compare the basic with the premium. However, they have now found a comparison between the premium and standard packages. Five plus one is available for $899, instead of 5 plus 7 for $999. It’s an easy comparison, and the app could sway people toward the premium. This is another very useful concept that you can use to design your experiments.

Related: 4 ways to get the most out of A/B testing right away

Many behavioral economics studies give us a clear picture of consumer behavior in terms of money and value. Startups can take advantage of these studies to design and run successful experiments. Earlier we discussed three simple, yet very powerful concepts of behavioral economics, and their implementation could help you run successful experiments yourself.

Leave a Reply

Your email address will not be published.