Startups and innovation are synonymous with each other. It is crucial for startups to come up with unique and innovative ideas all the time to survive in the competitive market. However, not every idea yields good results. Due to this reason, startups must test them out before validation.  

There are many reasons why experiments fail. One of the common reasons is inaccurate experiment designs. Inaccuracy leads to prejudice – affecting the entire process of experimentation. However, having a good idea of consumer behavior can pave the way to a successful experiment design.  

In this article, we’ll help you get a better understanding of consumer behavior intelligence or behavioral economics.  

What Is Consumer Behavior Intelligence? 

Consumer behavior intelligence, also known as behavioral economics, is the study of human behavior with regard to money and value. It says that human behavior is irrational, especially when it comes to money. That is why leveraging behavioral economics in designing experiments is important. 

Carrying out experiments in alignment with your behavioral economics is an excellent growth hack. It can help in improving your uptake, revenue, retention and trial rates. Now, let’s break down the concept of consumer behavior intelligence into three parts and see how they can help with experimentation.   

The Allure for Free

You may think that charging a small fee for some services doesn’t make any difference in customer growth. However, that’s not always true.  

Let’s take the example of an experiment conducted with Hershey’s Kisses and Lindt. In the experiment, the price of Hershey’s Kisses was fixed at 1 cent while it was fixed at 15 cents for Lindt. When customers were asked to choose, more people chose Lindt even though it was costlier than Hershey’s.  

Later, another experiment was conducted for the same group of people but the choices were a bit different. The price of Lindt was reduced to 14 cents while Hershey’s was completely free. This time, more people chose Hershey’s despite being a bar of regular chocolate. 

This experiment proves that humans are deeply attracted to free stuff and greatly differentiate between something that is free and nearly free. So, you must keep it in mind while designing your consumer behavior experiments. 

Priming 

An experiment was conducted at an airport, where people were asked to choose between fruit and yogurt. Nearly half of the people chose yogurt while the other half chose fruit. It was also found that someone on their way to the counter talked about yogurt to other people in the queue, which made people choose yogurt unconsciously. 

In the next experiment, the same person was asked to talk about fruit instead of yogurt. As expected, more people started choosing fruit. This, overall, is an excellent example of priming. From this, it is quite clear that the key to selling a product or service is by drawing the consumer’s attention to it.  

The Decoy Effect 

Let’s consider a dating app that commonly offers three matching profiles in the free version with an option to upgrade. This upgrade can either be a basic or a premium one.  

Suppose only 5% of users upgraded and the split for basic and premium is 5% and 1% respectively. In that case, you can introduce a decoy and change the ratio. The decoy effect is another great concept that can help you to design your consumer behavior experiments. 

Conclusion 

The study of behavioral economics can give you a fair idea of consumer behavior with regard to money and value. Therefore, startups must leverage it to design and carry out successful consumer behavior experiments.