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Know when to turn your chair: Using cognitive bias to build better Products

I’ll admit it, I’m a huge fan of talent shows and my favourite of the lot is The Voice. Another season has just begun in Australia and has brought with it a host of super talented singers from all different backgrounds and walks of life.

The beginning of each season is always the most interesting as they host the blind auditions. During the blind auditions all the judges sit with their backs to the singer as he or she performs so that they have no knowledge of who the singer is or what their physical attributes are. They are constrained to only focusing on what they can hear and make their decision as to whether to turn their chair around based purely on the performer’s vocal ability. Cleverly what this does is removes bias from the judges choice, enabling them to make better decisions with the singers they are auditioning. Making better decisions is an important skill for most people, but none more so than for product managers. In fact, good product management at its core is really about making sure you get the right decision right most of the time. So what are our subconscious biases and how can we use them to our advantage to make better decisions for our products?

A Tale of Two Brains

One of the biggest mistakes we can make when building product is assuming that our customers will make rational decisions. In fact, we as humans are irrational creatures and as proven by psychologists Daniel Kahneman and Amos Tversky in the 1970’s, we systematically make decisions that defy rational logic. The reason we do this is that we have two distinct areas of our brain that play a part in decision making – the prefrontal cortex and the amygdala. The prefrontal cortex is responsible for our executive function, which includes things like planning, decision making, problem-solving, self-control, and working towards long-term goals. In contrast the amygdala is responsible for emotion, specifically triggering emotional responses to external stimuli. The interesting thing is that although it would be great if our prefrontal cortex handled our decision making all of the time, it’s not always the case. In times of uncertainty and pressure the prefrontal cortex defaults decision making to the amygdala, our emotional part of the brain, in order to sacrifice accuracy in decision making for speed. What is helpful though is that the amygdala makes bad decisions in a predictable way. Researchers have discovered lots of cognitive biases which we use as shortcuts to make decisions every day, and by being aware of these biases we are able to use them to our advantage in building better products.

Dropping Anchor

Anchoring is a bias that relates to putting too much emphasis on a single piece of information (usually the first piece of information we receive) and relying heavily on it when making a decision. Building product is a complex process and there are many pieces of information that need to be understood, considered and evaluated against each other. Additionally, the first piece of information we receive may be incorrect or an outlier, so anchoring may cause us to incorrectly interpret our metrics and data and take our product down in the wrong direction.

 

How To Use It To Your Advantage: Customers will often set the expectation of how much they are willing to pay for your product based on the first price they see for it. Anchoring them to an initial higher price and then offering them to a discounted lower price will make them feel like they are getting a great deal on your product. This technique has long been used by retailers when they showcase markdowns with a “Then” and “Now” price.

Get Off The Bandwagon

Bandwagon Effect (also known as Groupthink) is a bias that leads us to act or think in a certain way based on the actions or thoughts of others in the group. This is why groups of smart people sometimes make very bad decisions. Diversity of thought and ideas is a key strength of product teams, and often leads teams to build on each other’s ideas and arrive at a solution that no single person could come up with on their own.

 

How To Use It To Your Advantage: You can use the Bandwagon Effect to drive customer behaviour around key decision points within your product. Social proofing your Calls To Action with positive reviews and quotes from other customers will reinforce the positive beliefs of your customers when they are making a decision about your product and lead to higher conversion rates.

Quit While You're Ahead

Sunk-Cost Fallacy is the tendency of people to irrationally continue with an activity that is not meeting their expectations because of the time and/or money they have already invested in it. It is one of the biggest cognitive biases that we should look out for when building products. It is very easy to rationalise continuing building out a unsuccessful product because of how much time and money we have already invested it, and that if we just release the next feature or improve the UI it will suddenly turn the tide in our favour. However, often when our assumptions about our product are continuously not being met the best decision we can make is to pivot or abandon the idea altogether and quit while we’re still relatively ahead.

 

How To Use It To Your Advantage: Using a freemium model to give your customers something for nothing and getting them using your product can pay big dividends down the track. The more customers invest their time, data or money in your product the harder it is for them to walk away. Think about how much harder it is to walk away from Facebook, Spotify, or LinkedIn after you’ve invested in building up your profile, playlist or network there. Similarly, it’s why shifting over from an Apple ecosystem to a Google or Microsoft ecosystem is so difficult. Getting your customers to build and create something within your product will make it much more difficult for them to leave and consequentially much easier for you retain them for repeat business.

Escape the Echo Chamber

Confirmation bias sees us seek out information that confirms our point of view while disregarding information that disagrees with it. Confirmation Bias is seen every day in the echo chambers that fill our social media news feeds, and was a driving influence in the US decision to go in to Iraq to find the non-existent WMD’s. As a product manager, testing our assumptions as opposed to proving our assumptions right is paramount to building a successful product. The best product managers have a healthy level of scepticism about the features they release until proven otherwise, while poorer product managers believe their features are automatically assured of success. Whether it’s ensuring that we ask non-leading questions when conducting customer research or being clear in the quantifiable measures of success for a newly released feature before we release it, staying objective and checking our confirmation bias at the door is essential to building great products.

 

How To Use It To Your Advantage: One of the best ways you can take advantage of confirmation bias is using it in customer retention to create repeat customers. When a customer first makes a purchase, they often seek to rationalise that purchase, particularly if there was lots of choice or it was a more expensive purchase. When they are in that justification mindset confirmation bias can be your best friend as it is easier to instil a lasting impression of the value you provide. And it’s the simple things in your post-sales customer journey that will create this impact; having multiple channels to access customer support, providing quick and accurate support to resolve any issues, offering rewards or discounts for future purchases, and thanking them and checking in with them to make sure they are happy with their purchase.

Be Aware, Be Very Aware

There are dozens of different cognitive biases that are hardwired in to our brain, affecting our decisions on a daily basis. It may seem unavoidable that at some point they will influence our product decisions, and you are probably right. But it’s not avoidance we should be focusing on, it’s awareness. Unlike the team of judges on The Voice, we can’t always turn our back on the decisions in front of us – usually we need to face them head on. This is why building products is both an extremely difficult and extremely exciting gig. Knowledge is power and being aware of the decision we are making and the factors that may be contributing to that decision is half the battle. Being aware of the cognitive biases controlling our decisions puts the control back in our hands and the power to know when to turn that chair around.

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Josh Wermut

Josh Wermut

Josh is an experienced product and innovation professional having worked with clients across the Technology, Retail, Energy, Finance and Health sectors. With over 10 years experience, he has used design thinking and lean startup principles to build disruptive products and embed innovation across both small and large enterprise. By helping clients follow an evidence based approach focused on the end customer, he is able to lead transformation across the business that uncovers new opportunities to disrupt their industry. Josh is also passionate about the ability of business to be a force for social good in order to change peoples lives for the better and is a firm believer in the power of finance and technology to enable large-scale social impact and economic empowerment. In his spare time Josh is a keen runner and sportsman, and lover of all things to do with the outdoors, ocean, and coffee. Josh holds a MA (International Trade and International Relations) and a BSc (Psychology) from the University of New South Wales.

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