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What is behavioral economics?
Before behavioral economics, we have classical economics. This is defined by two human premises: the first is optimization. Man is a rational being, so he will always make the best choices within his means. The second is equilibrium. In environments of economic freedom, prices fluctuate freely to balance the law of supply and demand.
Optimization + Balance = Economy
However, contemporary economists such as Richard Thaler (winner of the Nobel Prize in Economics), argues that this model of rational man (which he calls Econ) doesn't match reality and how people actually make decisions. Economics works with humans who make mistakes and don't always make the best decisions, especially with the increase in information and complex problems dealt with on a daily basis in the modern world.
In the early days of his career, Richard Thaler became famous for keeping a notebook of human behaviors that don't match the premises of the Econ man and his rationality. An Econ, realizing within the first fifteen minutes that the film he is watching will be awful, would not stay in the cinema for the remaining three hours simply because he has already paid for the ticket. The price paid in the past is irrelevant and the opportunity cost of staying in the theater is greater than going out and spending the remaining hours on something that really pleases you. However, as we see in the real world, behavior contrary to this is quite common.
The idea of putting human irrationalities into practice gave rise to behavioral economics: "It's not another discipline: it's still economics, but it's economics made with strong contributions from good psychology and other social sciences" (Misbehaving: The construction of behavioral economics).
The concept of justice
A very interesting concept in behavioral economics is the "sense of justice". In classical economics, the concept of fairness is irrelevant to price regulation. However, according to Daniel Kahneman, Jack L. Knetsch and Richard Thaler, this element is important for understanding how consumers perceive value and make purchasing decisions, as well as guiding how companies should act in atypical situations such as COVID-19 and the volatility of the price of alcohol gel. In order to buy something, the consumer must consider that transaction to be fair. In the article "Fairness and Assumptions of Economics" the following research is an example:
"You're lying on a beach on a sunny day. All you have to drink is cold water. For the last hour you've been thinking about how you'd like a cold bottle of your favorite brand of beer. A colleague gets up to make a phone call and offers to bring you a beer from the nearest place (a luxury hotel or a bar). He says the beer must be expensive and asks how much you're willing to pay. He then says he'll buy it if the price is equal to or less than the amount you've set, but if it costs more he'll give up. You trust your friend and there's no chance of asking for a discount (with the bartender or the bar owner). Which price will you choose?
"Paying too much for a drink in a luxurious establishment is acceptable, but paying too much for the same drink in a bar is a waste."
The average response for the luxury hotel was 2.65 dollars, while for the bar it was 1.50. People therefore refuse to pay the same amount for the same product, even if technically that amount is within what they could rationally afford. The same product creates different demands under the same conditions (which is not very rational).
Retail design applications
Despite sounding obvious, such economic evidence presents new arguments that defend beliefs that already exist in the world. branding such as the fact that consumers don't just buy out of rational needs, but are influenced by issues such as emotional, social, appearance, customs and so on.
Another point, therefore, is the need to invest not just in the product, but in the whole atmosphere around it. O retail design is extremely valuable for companies that want to generate value and obtain higher margins, making the consumer see the price as fair, even if it is more expensive than their competitors.
In short, value is very much related to consumer expectations. In the case of beer, it can be seen that where this product is bought is extremely important, even if those who are going to drink it won't be frequenting the space and will accept paying more in the more luxurious environment.
With this in mind, Enredo incorporates retail into its branding, which facilitates the perception of the value of our partners' products and services in the eyes of their customers, and also creates a unique, sensory, striking experience that builds loyalty and makes them fans.
Nudge and Sludge in the consumer experience
Another important concept from Richard Thaler is the Nudge, published in his book Nudge: How to Make Better Decisions About Health, Money and Happiness. Taking as a premise that people are human and make mistakes, the nudge is the attempt to "influence choices in a way that improves the lives of those who choose, according to their own judgment". O nudge is therefore used to create public policies that help people make the best decisions.
There is the classic case of organ donation. In countries like Spain that use the opt-out, in which the citizen is automatically a donor, and if they want to leave they have to talk to a public body, the number of donors is much higher than in countries where the system exists. opt-in (even if the number of people interested in donating is similar), where if you want to donate you have to fill in a form or something similar first. The inconvenience and bureaucracy make people give up on making the best decisions.
The sludge is the unethical practice of making it difficult for people to make the best decisions. They seek to influence behavior to benefit others to the detriment of the individual. An example of this is when governments make it difficult to access social benefits through a huge bureaucracy, leading the user to give up.
Mentioned above, the sludge can also be observed in the construction of subscription services and email-marketing applications where the consumer's journey to unsubscribe is complicated, confusing and annoying, which generates a bad reputation for the brand and long-term aversion.
Nudge and human-centered design
Innovative and transformative design must take a similar stance to nudge of behavioral economics. Richard Thaler was even inspired by design theories, such as those in Don Norman's classic book, "Everyday Design". The architecture of the consumer journey must have a more humanThe best way to make the best decisions is to think about your needs.
In this sense, the Nubank which automatically sets your money to yield the CDI (opt-out), instead of making the process more difficult and generating more steps for the customer, is a good practice. In addition, there is the automatic filling in of data such as address on e-commerce sites, a strategy that makes life easier for the consumer and increases the chance of a purchase.
From ego to empathy
As a young designer you may have heard this phrase a lot. But what does it mean? As someone who is pretty empathetic and self-critical, I never felt like it applied to me. But in retrospect, I think that's because most people use "ego" to describe inflated self-importance, when it's really just a word that describes how we understand our personal identity.
The distinction is important because letting go of your ego can be a nuanced practice in empathy. It's not just advice for arrogant jerks, it's essential for anyone working professionally. As a designer, my thoughts, tastes and keystrokes obviously are part of the equation, but it took some time to figure out that I could not create work in a silo as a reflection of my "aesthetic."
To some of you this might sound like a bummer, but when you take on a client's challenges and their point of view, you will have to think differently. You will find new approaches and you will grow. But more on that later.
"As a young designer you may have heard this phrase a lot. But what does it mean? As someone who is pretty empathetic and self-critical, I never felt like it applied to me."
Ernst Neufert in "The art of architectural design".
OK, but what does this have to do with my brand?
As a young designer you may have heard this phrase a lot. But what does it mean? As someone who is pretty empathetic and self-critical, I never felt like it applied to me. But in retrospect, I think that's because most people use "ego" to describe inflated self-importance, when it's really just a word that describes how we understand our personal identity.
As a young designer you may have heard this phrase a lot. But what does it mean? As someone who is pretty empathetic and self-critical, I never felt like it applied to me. But in retrospect, I think that's because most people use "ego" to describe inflated self-importance, when it's really just a word that describes how we understand our personal identity.
From ego to empathy
As a young designer you may have heard this phrase a lot. But what does it mean? As someone who is pretty empathetic and self-critical, I never felt like it applied to me. But in retrospect, I think that's because most people use "ego" to describe inflated self-importance, when it's really just a word that describes how we understand our personal identity.
The distinction is important because letting go of your ego can be a nuanced practice in empathy. It's not just advice for arrogant jerks, it's essential for anyone working professionally. As a designer, my thoughts, tastes and keystrokes obviously are part of the equation, but it took some time to figure out that I could not create work in a silo as a reflection of my "aesthetic."
Famous last words
As a young designer you may have heard this phrase a lot. But what does it mean? As someone who is pretty empathetic and self-critical, I never felt like it applied to me. But in retrospect, I think that's because most people use "ego" to describe inflated self-importance, when it's really just a word that describes how we understand our personal identity.
Hope this answers some of your questions, Dmitro.
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