Dan Ariely quote on Rationality
This quote on Rationality from Dan Ariely highlights how we can use human nature for our own benefit.
“Standard economics assumes that we are rational. But we are far less rational in our decision-making. Our irrational behaviours are systematic and predictable.”
Dan Ariely is the man behind one of the most bizarre, amusing and informative pricing experiments ever. Follow the link for full details but, in short:
The Economist offered its print plus web subscription for the same price as the print-only subscription. Surely, nobody in their right mind would take the print-only subscription?
Ariely contacted The Economist and the advert disappeared. That wasn’t quite the response he wanted. Ariely decided to do an experiment himself. He showed the advert to 100 MIT students and asked them which option they were likely to choose. The results confirmed that nobody was stupid enough to choose the print-only option.
- 16% chose the online subscription.
- 0% took print-only.
- 84% took print plus online.
Then he took away the stupid print-only subscription and repeated the experiment with another 100 MIT students. Suddenly, the least popular option became the most popular and the most popular option became the least popular:
- 68% took online.
- 32% took print plus online.
Instead of getting 84% of people choosing the most expensive (and presumably, most profitable) option, now they were only getting 32%. Commercially, this would have been a disaster but the lessons are clear:
- In the first experiment, the most expensive option had also seemed to be the best deal. It was right next to something that looked like a very bad deal – the print-only subscription.
- In the second experiment, it’s harder to tell which is the best deal so people gravitated towards the cheapest.
Think about that. Instead of just offering a set price, can you create a bundle that pushes people towards the more profitable option you want them to choose? At the same time as keeping things simple (I’d refer you back to the Steve Jobs quotation on simplicity)?