Thursday, March 6, 2008

I think It Works Better, Therefore It Works Better

There is a letter in the Journal of the American Medial Association written by Dan Ariely. It covers a study of how people perceive the value of medicine based on price. The results are amazing. All subjects were given placebos. The only difference was that some were told that the price for each dose was $2.50, while others were told that it was medicine "marked down" to ten cents. Then the people were given small electric shocks. Even though all the pills were sugar pills, 24% of the patients thinking they were taking the more expensive drug said they experienced a reduction in pain.

We all know perceptions are strong, but to impact the actual experience of pain is an incredible example of just how powerful they can be. I've experienced this having small children. Last year there were a lot of stories on how cough medicine does nothing for young children. Prior to the stories, I remember how many times I bought the most expensive cough remedies I could find when they were sick. Even though I now know they don't help, at the time I had the perception that the kids coughed less and I felt better immediately after giving it to them.

Dan Ariely is also the author of Predictably Irrational. It explores how powerful our perceptions are when it comes to making decisions, and how that causes us to act irrationally while we think we are being quite rational.

I've seen this in the financial industry. Chief Dealers on trading floors work hard to make sure their traders don't ‘chase their losses,' meaning when they start to lose money don't trading keep on the same path. Clearly these traders are taking ownership of the bank's money they lost on bad trades and want it back. Chief Dealers know better, but imparting that is difficult because it goes against the irrational instincts of the trader.

This is really interesting stuff and can have an impact on designing user experiences. It's not often that we embrace that our customers are irrational. We tend to think logically when putting forms together and how people will interact with them. This puts the spotlight on a new dimension we should consider more when designing. This is of course a major component of marketing, but I think there is something more here than just the slime-factor associated with leveraging people's irrational thoughts.

Here is a link to Dan's website with excerpts from his book you can download or listen to:
http://www.predictablyirrational.com/?page_id=6

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