Why designers should care about behavioral economics
Have you ever stopped to think that we, designers, influence how people make decisions?
We make decisions all the time: the clothes we wear, the movies we watch, the restaurants we go to, the amount of money we invest and so on. And more and more these decisions are made in front of screens.
Have you ever stopped to think about how the human brain makes decisions?
This is the first article in a series of reflections about how people make decisions — and what we, designers, could learn about that.
How many decisions do we make per day?
The scientific community estimates that we make around 35.000 decisions every day, that is, almost 2.000 decisions per hour or 1 decision every 2 seconds.
And every decision demands a cognitive effort that directly affects the quality of these decisions. This is called decision fatigue: the more decisions we make, the greater the cognitive effort.
This happens because our brain has limited capacity to process every variable and information in the decision-making process.
In his book Thinking Fast and Slow, Kahneman explains it simply:
“You have a limited budget of attention to allocate in your activities and, if you try to go beyond this budget, you fail.”
Our choices could be simpler or more complex and many of them are related to products or services that we design.
Let’s see some examples
Imagine you’re choosing a hotel for your vacation. These are some questions that you could ask yourself:
About the location: Is it near any tourist attractions? Is it near the subway? Am I going to take an Uber or Taxi? How much am I going to spend on transportation? Do I need transport to the airport? How much am I going to spend?
About cancelation: Do I need free cancelation? How long can it take before I cancel? Do I need to pay extra fees or taxes? What if something unexpected happens?
Food: Is breakfast at the hotel good? Is it included in the price? Will it be cheaper to have breakfast at the hotel than to buy it in the nearest bakery?
All of this counts at the moment of choosing the hotel to stay, including other attributes like room, price, bed, decoration, environment, rating, reviews, and so on.
All these variables are analyzed for each different hotel available to choose from. We compare several options to find the one that is best for ourselves, the one that makes us happy and that is not too expensive.
I’d like to share a real example: on my last trip to Istanbul, I was looking for a hotel with my boyfriend. We enjoy searching for hotel options in order to find the best ones in terms of the cost-benefit relation. To help us make this decision, we used an Excel spreadsheet like this one:
Personal analysis to choose a hotel to stay in Istanbul.
The difference between a good or a bad decision depends on the context and how easy it is for us to compare the options we have. We consider a lot of things before making a decision which is not as rational as we believe.
What does all this have to do with design?
As we have shown, a huge part of the decisions we make depends on a product or service that designers, researchers, UX writers, and product managers develop.
Besides helping users to complete a task, we also influence how people make decisions.
Let’s see another example: choosing a new dish on a delivery app. Is it simple?
When we talk about Human-Centered Design, we are talking about putting human needs, capabilities, behavior, and limitations first.
Designing is also about being a choice architect.
I’ll leave here a good old-fashioned reflection of our friend Don Norman:
“Why should we know about the human mind? Because things are designed to be used by people and without a deep understanding of people, design tends to be faulty, hard to use and understand”.
That’s why it’s important to know the brain’s functioning, our automatisms.
Behavior Economics and our decision-making process
Behavioral Economics is a relatively new discipline that studies the process behind people’s decisions, through experiments. The goal is to understand conscious and unconscious behavioral influences.
These studies of human behavior have reached fields such as economics, psychology, and neuroscience, through names like Herbert Simon, Daniel Kahneman, Amos Tversky, Richard Thaler, Francesca Gino, Dan Ariely among others.
We know we need to take care of our health and save money. But many times we end up not doing it.
The explanation for this is that we have limited rationality. Our brain creates emotional filters and shortcuts to optimize the mental effort of making decisions. It means that there are two ways of thinking: one is fast (system 01) and the other is slow (system 02).
Source: Thinking Fast and Slow — Daniel Kahneman
System 01 (fast) is responsible for making a series of decisions in our daily life to save energy and reduce our mental effort.
System 02 (slow) is rational and lazy. It implies a logical judgment of things, requires greater concentration, and has a high consumption of energy.
Do you want an example? If I ask you to sum 2+2, you can quickly give me the answer: 4. But, if you have to multiply 248x13, you will have to stop and think a bit more, and possibly get a pen and paper or a calculator to get the answer (3,224).
Now, let’s look at that theory in practice
As we continue talking about traveling, let’s imagine a person buying an air ticket, at the checkout step:
👉 Step 1: enter your data. Your name and document, that you know by heart. This is automatic and requires a very low effort: system 01 is activated.
👉 Step 2: select the payment method. Here you must check if there is a limit available on your credit card and if the payment will be in installments or cash. System 02 comes into action.
👉 Step 3: insert the payment data. It’s the moment to pick up your credit card and, very carefully, write number by number and check if it is correct. System 02 is fully active to analyze things rationally.
Some important data to take into consideration: our system 02 is lazy and wants to save resources. That’s why we can go through this process with more or less attention, having more or less possibilities of making mistakes.
Design + Behavioral Economics
We already know how important it is to understand human behavior in order to create products that generate more value for people’s lives and help them to perform their tasks more simply and efficiently.
Nowadays behavioral science and behavioral economics offer the best models for understanding the relationship between mind and behavior.
This helps us to understand why people say things that are different from what they actually do. Who has never experienced this in an interview with a user?
In a scenario of increasing complexity, whirlwinds of information become available to be processed, absorbed, and understood. Therefore, understanding human mental shortcuts is a key skill for designers.
To prove this, I bring an interesting fact: the NGO The Millennium Project made a list of 15 main challenges that we are going to face in the future. Decision making appears in the 5th position after sustainable development and climate change, clear water, population and resources, and democratization.
Harvard Business Review has also recently published a study that affirms companies will increasingly invest in behavioral designers to help people make better decisions.
It’s not about making something different than we already do. It’s about having more tools to do it better.
As designers, we already influence the way people make decisions. The big question is: are we aware of how we do this? Do we know how the context (interfaces and products) we design makes a choice for our users simpler, more complicated, or costly?
Consider this for the next design solutions you create.