From toothpaste to tablets, an average person makes close to 35,000 conscious decisions in a day. Every facet of life is affected by a decision taken. Considering the impact of so many decisions, available choices must be structured to obtain the maximum benefit.
Businesses would want their customers to make decisions that would ultimately benefit both parties. However, it takes hard work to influence thousands of customers daily in a manner that also caters to each individual’s preferences. So, each company needs to figure out the best way to structure the complete buying process in order to make the choices easier for their customer. Choice Architecture is one of the best ways companies can influence customer decisions.
What is Choice architecture, and who created it?
Richard Thaler is an American economist and an economics professor at the University of Chicago – Booth School of Business. He specializes in Behavioral economics and won the Nobel Memorial Prize in Economic Sciences in 2017. He was lauded for identifying the consequences of limited rationality, social preferences, and lack of self-control and how these factors can impact consumers’ and businesses’ decision-making processes.
Cass Sunstein is an American legal scholar and a professor at Harvard. He is the Founder and Director of the Program on Behavioral Economics and Public Policy at Harvard Law School. He served as the White House Office of Information and Regulatory Affairs Administrator. He later served on the President’s Review Board on Intelligence and Communications Technologies and the Pentagon’s Defense Innovation Board.
The term Choice Architecture was coined by Richard Thaler and Cass Sunstein in their 2008 bestselling book – Nudge: Improving Decisions about Health, Wealth, and Happiness. Thaler and Sunstein have endorsed a well-thought design of choice architecture to improve the decision-making process of the end consumer. They claim that such an architecture would minimize the risk of biases and errors and help the consumer make the “correct” decision.
The book also popularized the concept of nudge theory. Thaler and Sunstein define a nudge as the following:
“A nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior predictably without forbidding any options or significantly changing their economic incentives. To count as a nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.”
The six principles of Choice Architecture
Thaler and Sunstein outline six principles for successfully implementing nudges using Choice Architecture. These are:
The right incentives have to be provided to the right people for them to make better decisions. These incentives have to go beyond monetary, material, and psychological incentives.
The choice architect has to understand how people can relate to the consequence of their decisions. The book refers to the principles of RECAP: Record, Evaluate, and Compare Alternative Prices. Customers should clearly understand what they are truly paying for, and all hidden fees should be exposed. The customer should have access to all required information before making a decision.
The default state is what happens when the customer decides to do nothing. Defaults are sticky and potent since we humans tend to procrastinate and stick to the automatic choice that’s made for us. Identifying the most beneficial “default” state is vital for all organizations when dealing with their customers.
Smart defaults for the Google Chrome browser
An easy way to improve decision-making is by providing feedback. The simple act of showing a simple loading screen while waiting for an app to complete an action is a good example.
Remarkably few humans can follow instructions to the letter. Expect people to make mistakes. Design your choice architecture to ensure disastrous outcomes,if any, are brought down to a negligible amount.
Structure complex choices
When faced with too many choices, people tend to break them down to simplify them. Good choice architecture is constructed to make such simplification more obvious and evident. Fewer choices will help people make better decisions.
Choice Architecture in popular culture
Multiple entities have used choice architecture extensively in their quest to alter consumer behavior.
The Mcdonald’s story
Mcdonald’s use of Choice Architecture to influence consumers’ purchase behavior is legendary. Here is a brief rundown of what they do and how they do it.
1. First option bias
The first thing customers would notice walking into their doors would be the photos of their delicious signature burgers and delectable new menu offerings. These items are the premium options available at the particular outlet. By placing these photos near the entrance, they nudge the user into ordering higher-value items since consumers tend to pick their first option when they are making a decision
2. Removing the friction of the price barrier
While the customer would be shown pictures of these items, their prices would not be made available to the customer. Only after reaching the counter would the customer know how much exactly their proposed meal would cost them. By not showing the prices initially, they are removing the friction of higher prices that may impact the purchasing decision.
3. Introducing an aura of health
To remove the customers’ guilt of indulging in fast food, Mcdonald’s constantly shows a photo of their salad bowl and a bottle of water on their screen. This makes the customers think their meal is a healthier choice and ensures they go through with their purchase
4. Triggering our evolutionary skills
Human evolution has ensured that our eyes are constantly tracking motion to be wary of predators. Mcdonald’s plays along with this by using subtle animations to move our focus from their lower-priced menu options to their higher-priced ones. This increases the average ticket value from each customer
5. Stimulating visuals
Mcdonald’s smartly plans the layout of their menu board. They allocate about 30% of the space to their newer and more expensive signature menu items compared to the 15% for their standard big mac and fries. This increases the consideration the customer gives to their new menu items.
- The Dutch government introduced a system of explicit consent in their organ donation systems. The citizens had a default choice to opt-in to organ donation, and they had the freedom to opt out. They noticed a drastic increase in organ donors since people procrastinated opting out and eventually joined the list, as intended.
- Hotels have reduced their plate sizes to sustain their margins. They found out their patron’s satisfaction remained the same, despite the reduction in food quantity.
- Metro stations have tried using paint to make their stairs look like piano keys. This encourages more people to use the stairs instead of the escalators. They have noticed up to 66% increase in stair usage with a simple act. This has been replicated in cities worldwide, including Stockholm, Milan, Istanbul & Melbourne.
- Funny or Die used an ingenious nudge to improve subscriptions to their newsletter. Customers could opt out of the subscription by clicking on a button that said – “NO THANKS. I CAN’T READ”. By forcing the consumer to click on such a mocking message, they reduced the number of opt-outs and increased the subscriber count for their newsletter. Now that’s a really creative way to influence a decision !!
How should Product managers implement Choice Architecture?
Product Managers can leverage the principles of Choice Architecture to influence customers’ decision-making. Choice Architecture can directly affect the adoption and conversion of their users by leveraging the principles of choice architecture in their buyer journey
How to plan?
Before modifying their products, the Product Manager must form a proper hypothesis on user behavior. This will give a clear picture of the landscape of user behavior and allow them to prioritize what needs to be acted upon first.
Step 1: Identify the user behaviors that need to be changed
The product manager should pour through their user behavior data to identify the patterns. Compare these patterns with the list of primary goals and identify the area where their metrics are lagging. Understand where the user is getting stuck/making a suboptimal choice. This will help shortlist the list of attributes that needs to be influenced.
Step 2: Make modifications
The Product Manager can make desired changes in the user journey by using Nudges to get the user to make the desired choices. By using A/B testing, this process can be incrementally optimized until the selected user metric significantly improves.
Step 3: Validate the user results
After the initial test results, Product Managers must test them with multiple cohorts to ensure the same effect is obtained. Once the hypothesis is validated, the Product manager can implement these changes to affect the default behavior of any new user.
Implementing Choice Architecture in the Digital Products
- Structured Product Guidance
- Make product information readily available
- Get positive feedback from users in their moment of joy
1. Structured Product Guidance
The Product Manager can set up onboarding flows for the product and for each specific feature/module. This will allow the user to follow the ideal path – one that will lead to maximum monetization within the app.
Product Managers can use structured onboarding journeys to build a great onboarding experience. This will allow them to activate users faster by displaying value at the right time. You can intervene to grab a user’s attention and ensure proper habit loops are formed with key features adopted at the earliest.
2. Make product information readily available
An intuitive and easy-to-understand product experience will significantly improve the users’ stickiness and product usage rates. One of the best ways to do this would be to ensure that the relevant product information is readily available to users at the time of their need.
Product managers can build Nudges within a few minutes to ensure the correct information pops up to the user when required. These could be in the form of a tooltip and a spotlight which highlights key features of and educates the app’s users about the product – these are just some of the best ways to provide a great product experience.
3. Get positive feedback from users in their moment of joy
Positive social feedback from your users is the best acquisition channel for any software. But getting feedback from your users at the right time is arduous for any Product Manager worldwide.
You can nudge users into leaving feedback right at the moment of joy. This will increase the chances of the feedback being positive, thus improving the social standing of your app in any play store or review platform.
In a nutshell
Thaler and Sunstein’s Choice Architecture proposal is one of Behavioral Economics’s foundational principles. Organizations across the world have adopted Choice Architecture to nudge their customers to make better decisions. By considering all the options available to customers and allowing them more freedom in the decision-making process, organizations can reap huge benefits and keep their customers satisfied.