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The Business of Social Games and Casino

How to succeed in the mobile game space by Lloyd Melnick

Tag: Consumer behavior

Design + Behavioral Economics = Apple

Design + Behavioral Economics = Apple

I recently read a great book on Jony Ive (Jony Ive: The Genius Behind Apple’s Greatest Products by Leander Kahney), the designer who created most of Apple’s products, that provided insights into the keys to Apple’s success. What was particularly interesting is how much of his design philosophy was consistent with the behavioral economics and consumer behavior insights that I wrote about earlier this year after reading Rory Sutherland’s Alchemy.

Kahney’s book also showed that what many, including myself, considered good luck or timing by Apple were the result of decisions driven by Ive’s design philosophy. The iPod was not simply an MP3 player at the right time, the iPhone was not just another mobile phone that hit a nerve with customers and the iMac was not simply a pretty PC. These were all products driven by a fundamental design philosophy backed by consumer behavior principles.

iMac

While most people acknowledge Apple’s strengths, its success (one of the five largest companies in the world, valued at over $1 trillion) highlights how leveraging these principles builds value. It is impossible to replicate what Jobs and Ive did – just as an American football team cannot simply replicate what Belichek and Brady did – there are underlying principles that can help any company. These concepts are also extendable to other industries, including digital ones like iGaming and the video game sector.

Simple is better

One of the key takeaways from Alchemy was that “Less is More”, a product with less functionality is more likely to change fundamentally behavior. This belief is also at the center of Ive’s design philosophy. Kahney writes about Ive, “the process of simplification is design 101, a mind-set that every design student is taught in school. But not every student adopts it, and it’s rarely applied with the ruthless discipline practiced by Jony…. The shy boy from Chingford is happiest when the user doesn’t notice his work at all.” Ive’s philosophy is also consistent with Job’s mantra: ‘Simplicity is the ultimate sophistication.’

This philosophy drove how Ive approached design. Not only did he aim for simple design, it was the centerpiece of how Apple built products. First, Ive did not focus on making his products pretty or cool; instead the focus was on simplicity. As Ive once said, “we are not interested in design statements. We do everything we can to simplify design.”

With Ive, simplicity was not limited to how a product looked. According to Kahney, “as part of his characteristic drive to reduce and simplify, Jony wanted to reduce the number of parts and therefore the number of part-to-part joints. Previously, when IDg [Apple’s internal design group] had done a similar dismantling of an original iPhone, the team counted nearly thirty interfaces where parts meet. After the iPhone underwent a unibody makeover, the number of interfaces shrank to just five.” Apple repeated this design principle over multiple products, from laptops (starting with the MacBook Air to phones to desktop computers). In all these cases, simplicity was much more than skin deep.

The story of the iPod is a great example of how an unwavering focus on simplicity led to incredible commercial success. Before reading Kahney’s book, I thought the iPod was a combination of good timing (music going digital), a beautiful looking design and integrated software (iTunes). The reality was that the iPod was a transformational product because of Ive’s and Job’s unwavering focus on simplicity.

The iPod was a result of Jony’s simplification philosophy. Kahney writes that “it could have been just another complex MP3 player, but instead he turned it into the iconic gadget that set the design cues for later mobile devices.”

original ipod

What made the iPod successful was not cool new features but what it did not have. At the time, most electronic devices had removable batteries, meaning they needed a battery door, plus an internal wall to seal the device’s guts from the user when the battery door is opened. Jony dispensed with both, creating a tighter, smaller gadget. Ive also eliminated the on-off button, which infuriated many users (and reviewers). Instead he had the idea of pressing any button to turn the device on, and then to have it turn itself off after a period of inactivity, a stroke of minimalist genius.

On the software side, Apple acquired a third-party MP3 jukebox program for the Mac, SoundJam MP, from a small company, Casady & Greene. Apple then hired Casady & Greene’s top programmer, Jeff Robbin. Robbin’s team moved to Apple’s HQ and set about retooling SoundJam, stripping out many features to make it accessible to first-time users. Under the direction of Jobs, Robbin spent several months simplifying the program, which eventually turned into iTunes. The key to iTunes was what Robins removed from the program after it was acquired by Apple, not what features were added.

itunes

The iPod example not only shows the power of simplicity but also how hard it is. Getting rid of the on-off button took much more effort and time than simply redesigning or moving the button. Simplifying iTunes required the dedicated effort from one of the best developers in the world. What led to success, however, was Apple’s willingness to devote extraordinary resources to eliminating features and complexity rather than the natural tendency to put those resources into building more.

Play to people’s habits

A second takeaway, again consistent with Alchemy, is the importance of building something for how people behave, not just what they need. As Sutherland pointed out, not only is the logical and rational path not necessarily optimal, it is also not the one our customers might be pursuing. Before Apple, one of Ive’s biggest successes was designing the TX2 pen for a Japanese company. Jony’s innovation was to put something on a pen that was purely there to fiddle with. The pen’s design was not just about shape, but also there was an emotional side to it. The pen immediately became the owner’s prize possession, something people always wanted to play with. As Kahney writes, this “‘fiddle-factor’ notion may have seemed trivial to some, but the incorporation of the ball and clip transformed the pen into something special.”

tx2

Ive’s unusual pen anticipated built the kind of allegiance that later Ive-designed products at Apple would inspire. The handle on the iMac shows Ive’s understanding of non-traditional consumer behavior. It is not for carrying the iMac around, but to build a bond with the consumer by encouraging them to touch it. Kahney says, “it was an important but almost intangible innovation that would change the way people interacted with computers.”

imac

Be bold

Another lesson in Apple’s success is to be bold. While people often feel it is less risky to iterate on proven design, the opposite is true. I once wrote it is less risky to pursue a Blue Ocean strategy than a Red Ocean one, as the latter places you in the middle of intense competition. In Alchemy, Sutherland also points out Logic does not necessarily lead to great, in many ways it drives you to average. The same is true of design, everyone is looking at making incremental improvements and your “new” design is likely to look like 20 of your competitors.

Ive and Jobs philosophy of simplification led to a need to make bold breaks from the past. The iMac was the first legacy-free computer. Apple ditched ADB, SCSI and serial ports, and included only Ethernet, infrared and USB. Apple also abandoned the floppy drive. These choices, particularly abandoning the floppy, generated intense criticism but were consistent with Ive’s and Job’s philosophy. If they were afraid of criticism, however, the iMac would not have disrupted the space.

Just as simplicity is not easy, neither is going legacy free when Apple designed the iPhone. Rather than improving on a Nokia or Motorola design, Ive and Jobs started from scratch. Kahney writes, “Apple attorney Harold McElhinny would describe the immense amount of work the project required. ‘It required an entirely new hardware system … It required an entirely new user interface and that interface had to become completely intuitive.’ He also said Apple took a huge leap of faith moving into a new product category. ‘Think about the risk. They were a successful computer company. They were a successful music company. And they were about to enter a field that was dominated by giants … Apple had absolutely no name in the [phone] field. No credibility….The arrival of the iPhone at Macworld was the culmination of more than two and half years of intense hardship, learning and dedication to bring it to market. As one Apple executive summed it up, ‘Everything was a struggle. Every. Single. Thing was a struggle for the entire two-and-a-half years.’”

Part of not just iterating involves focusing on the new experience, not other elements of the product. With the iPhone, Ivy and his team designed the phone without ever seeing the operating system. They initially worked with a blank screen and later, a picture of the interface with cryptic mock icons. Likewise, the software engineers never got to see the prototype hardware.

Start with the user

When applying behavioral economics, you learn that market research is often as unreliable as other data. As well as not always acting rationally, people often do not know what they prefer. Ive’s approach was consistent, as Kahney writes, “’we don’t do focus groups–that is the job of the designer,’ said Jony. ‘It’s unfair to ask people who don’t have a sense of the opportunities of tomorrow from the context of today to design.’….Jony was interested in getting things right and fit for a purpose. He was completely interested in humanizing technology.”

The iMac is a great example of this principle in practice. The machine did not revolve around chip speed or market share but Jony built it by focusing on how do people want to feel about it and what part of our minds should it occupy.

At Apple, designers focused on imagining objects that did not exist and bring them to life. Part of what they had to envision was defining the experience that a customer has when they touch and feel an Apple product, from the materials to the textures to the colors.

For Ive, the first step in creating a product was developing the design story. He did not feel he was building a product but instead was building the user’s perceptions and meaning of the product. According to Jon Fortt of the San Jose Mercury News, “Apple’s focus on the needs of the consumer made the iMac a hit. ‘What made the original iMac cool was not its color or shape. It was Apple’s demonstrated willingness to open the possibilities of Internet computing to an audience that had been ignored by the brainiacs who design PCs.’”

The focus was not on legacy but on the customer and how the user would feel about the device. Ivy once said, ‘when we are at these early stages in design, when we’re trying to establish some of the primary goals–often we’ll talk about the story for the product–we’re talking about perception. We’re talking about how you feel about the product, not in a physical sense, but in a perceptual sense.’

Attention to detail

Another key to Apple’s success is the attention to detail that Ive gave to design. His colleagues said, “whatever he did was never quite enough; he was always looking to improve the design….The level of finish was what was always amazing about his work relative to others. Others were and are capable of the conceptual thought and creativity but very few capable of that level of finish….The differences from one [of Ive’s] model to the next were subtle, but the step-by-step evolution betrayed Jony’s drive to thoroughly explore his ideas and get it right. Building scores of models and prototypes would become another trademark in his career at Apple.”

While many designers would focus on the visuals, Ive worried just as much about the guts of his designs. When people disassembled models he created, they found the inside of the models included the components. Ive had even worked out the thickness of the parts and how they would be manufactured in an injection moulder. Thus, when his designs moved to production, Apple could fulfill the vision without having to modify them to work.

The importance of attention to detail is reflected in how Jobs and Ive responded to impending bankruptcy. As Kahney quotes an Apple employee at the time, “you would have thought that, when what stands between you and bankruptcy is some money, your focus would be on making some money, but that was not [Steve Jobs’s] preoccupation. His observation was that the products weren’t good enough and his resolve was, ‘We need to make better products.’” The focus on making the perfect product is what Apple rode from near bankruptcy to near world domination.

Needs to encompass everything

Related to the focus on attention to detail was a focus on design encompassing everything, not simply the visual. I was amazed that Ive’s high-powered design team (and Jobs) would put the same effort in a product’s packaging as the actual product. Kahney writes, “boxes may seem trivial, but Jony’s team felt that unpacking a product greatly influenced the all-important first impressions. ‘Steve and I spend a lot of time on the packaging,’ Jony said then. ‘I love the process of unpacking something. You design a ritual of unpacking to make the product feel special. Packaging can be theater, it can create a story.’”

The iPod was Apple’s first product where Ive applied his design genius to packaging. The result was an elaborate box that cradled the iPod like a piece of jewelry. This packaging was an integral part of the iPod’s success and Apple’s transformation.

packaging

Ive and his design team also focused on the insides of a product, normally the responsibility of engineers. When designing the iMac, the original solutions the team came up with pushed the boundaries of traditional manufacturing.

Ive also almost singlehandedly redefined how high-end laptops are manufactured. Kahney explains, “Jony was proud of the PowerBook’s construction, and dismantled one for his 2003 Designer of the Year exhibition at the Design Museum. ‘We took [it] to pieces so you can see our preoccupation with a part of the product that you’ll never see,’ Jony said. ‘I think–I hope–there’s an inherent beauty in the internal architecture of the product and the way we’re fabricating the product: laser-welding different gauges of aluminum together and so on….Jony went on to explain the manufacture of the MacBook Air, Apple’s new razor-thin laptop. Instead of taking multiple sheets of metal and layering them, the new process began with a thick block of metal and, in a reversal of the old process, produced a frame by removing material rather than by adding it. Multiple parts were replaced by just one–hence the name unibody.”

Lessons for iGaming and video game companies

Slide1

When I started reading Jony Ive: The Genius Behind Apple’s Greatest Products by Leander Kahney, I thought it would be an interesting book with a few tidbits I could apply in the casino space. Instead, almost everything that made Ive, Jobs and Apple great can help both iGaming and social casino companies:

  1. Simple is better. Most gaming companies focus on adding features and content to grow, while the opposite may generate more success. Look at what you can take out to give the player a better, more directed, experience.
  2. Play to people’s habits. People do not always act logically. Rather than assuming they will, look at how they actually behave and test different (sometimes illogical) approaches.
  3. Be bold. Rather than trying to do what everyone else is doing a little bit better (which they are all trying to do), try a new and unique approach.
  4. Start with the user. Design your product by understanding how your customer will enjoy and use it.
  5. Attention to detail. Do not settle for good enough, make sure every element, even the smallest, are as great as you can build.
  6. Encompass everything. Focus on everything, not just the look but the underlying architecture, customer service and all the parts of your product.

If we learn from Ive and Jobs, we can create new and better products despite how competitive the casino space is.

Key takeaways

  • Steve Jobs, and his design guru, Jony Ive, turned Apple into one of the world’s most valuable companies because of an unwavering commitment to design.
  • Their design philosophy focused on simplicity, the greatest Apple products came from eliminating features and complexity while stream-lining performance.
  • Other keys to Apple’s design success are a focus on how the customer will experience the product, not asking customers but understanding customers, making bold decisions rather than evolutionary ones, a focus on detail and including all elements of the product in the design process.

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Author Lloyd MelnickPosted on April 22, 2020April 6, 2020Categories General Social Games Business, General Tech Business, Lloyd's favorite posts, Social CasinoTags Apple, Consumer behavior, jony ive, Product design, simplicity2 Comments on Design + Behavioral Economics = Apple

Alchemy: When psychology outmaneuvers rationality

Alchemy:  When psychology outmaneuvers rationality

I am a huge fan of behavioral economics — Dan Ariely is my favorite author — and find it very useful in helping with business issues. Behavioral economics blends ideas from psychology and economics, and it can provide valuable insight that individuals are sometimes not behaving in their own best interests. Behavioral economics provides a framework to understand when and how people make errors. Systematic errors or biases recur predictably in particular circumstances. A colleague recently recommended a book, Alchemy by Ogilvy Vice Chairman and marketing guru Rory Sutherland, that provides many real life applications and insights leveraging behavioral economics.

Alchemy

To use Sutherland’s words, “ there is an ostensible, rational, self-declared reason why we do things, and there is also a cryptic or hidden purpose. Learning how to disentangle the literal from the lateral meaning is essential to solving cryptic crosswords, and it is also essential to understanding human behavior.”

Logic can prompt you to miss great opportunities

Sutherland’s first recommendation is that the first or obvious “logical” answer may not be right or optimal. He explains that the opposite of a good idea can also be a good idea. Even if one course of action makes sense, there may be a better approach.

Logic does not necessarily lead to great, in many ways it drives you to average. If you are being logical, you can assume your competitors are also following a logical course of thinking. By following a logical path, you will end up in a red ocean at a level comparable to your competitors.

Logic can prevent you from creating great. If Steve Jobs and Jony Ive had pursued logic when designing a PC or phone for Apple, at best they would have built a better Dell or Nokia, instead of the most valuable company in the world. As Sutherland writes, “the problem with logic is that it kills off magic.” To quote Jobs, “stay hungry, stay foolish.” If great ideas initially made sense, somebody else would have already discovered them.

Another problem with logic that Sutherlands points out is that it is often used to justify bad decisions. People will use logic to either justify a bad course of action or provide protection from bad decisions, rather than seeking the best decision. Good debaters are great at using logic to justify any position rather than finding the best course of action. Sutherland writes, “business people and politicians do not quite understand this and tend to evaluate decisions by the rigor of the process that produces them, rather than by the rigor with which you evaluate their consequences….To them, the use of reason ‘looks scientific’, even if it is being used in the wrong place.”

This misuse of logic often prompts people to proceed with apparently reasonable things quickly while treating counterintuitive ideas with suspicion. It is easy to defend the reasonable thing if it fails, but people run more risk if they try the counterintuitive idea and it fails. The latter, however, provides the opportunity to separate your business from the competition.

Sutherland offers several examples of counter-intuitive ideas that generated billion dollar businesses. One would be to imagine you are in the boardroom trying to come up with a strategy to compete with Coca-Cola. The conventional answer would be to create a drink that tastes better or is less expensive. What if someone, however, suggested, a worse tasting drink packaged in a smaller container at the same or higher price. The latter is what Red Bull did and created a brand that Forbes estimates is worth almost $10 billion.

Sutherland’s point is that conventional logic is hopeless in marketing, you end up in the same place as your competitors. Even if we cannot explain eloquently why something will work (like a bad tasting expensive soft drink), we should not be blind to the fact that it does.

People are not rational

Not only is the logical and rational path not necessarily optimal, it is also not the one our customers might be pursuing. Another example that Sutherland explains is a marketing test he ran. He showed two advertisements, one a contest where a player could win free energy for a year (worth about $1,500) and another where you could win a cute penguin nightlight (worth about $20). If people react rationally, you would expect an order of magnitude more entries into the contest giving away the energy. Almost the inverse happened, 67,000 people entered to win the energy and 360,000 entered to win the cute animal nightlight. The takeaway here is not only do people not always act logically but also that cute animals are a very effective marketing technique (and you cannot use logic to determine what will be a powerful marketing message).

There are many other examples of how people do not always behave in a way that would be considered rational. The best selling wine at restaurants is usually the second least expensive. That is not because restaurants put their best value there, they will often put a less expensive bottle cost wise in that position. P assume, however, the least expensive wine is lowest quality or are embarrassed to order it for fear of looking cheap, they are not making the wisest (or rational) decision. Restaurants have also found that by offering people still or sparkling bottled water, they increase sales because many people do not ask for tap water. These examples reinforce that consumer behavior is not simply based on people making rational decisions to optimize their happiness.

Data can be misleading

One area that Sutherland focuses on that is particularly dear to me is how data is often misused. Sutherland writes that “we constantly rewrite the past to form a narrative that cuts out the non-critical points–and which replaces luck and random experimentation with conscious intent…. It is important to remember that big data all comes from the same place–the past…. A single change in context can change human behavior significantly. For instance, all the behavioral data in 1993 would have predicted a great future for the fax machine.”

Not only can data be used to criticize a good decision or justify a bad one, it is possible to construct a plausible reason for any course of action, by cherry-picking the data you choose to include in your model and ignoring inconvenient facts. I have written before about confirmation bias, and more data makes it easier to find support for some spurious, self-serving narrative. Effectively, you can find more pieces to confirm whatever you are arguing. Sutherland argues, “the profusion of data in future will not settle arguments: it will make them worse.”

Related, Sutherland points out, “people who are not skilled at mathematics tend to view the output of second-rate mathematicians with an high level of credulity, and attach almost mystical significance to their findings. Bad maths is the palmistry of the twenty-first century. Yet bad maths can lead to collective insanity, and it is far easier to be massively wrong mathematically than most people realise–a single dud data point or false assumption can lead to results that are wrong by many orders of magnitude….To put it crudely, when you multiply bullshit with bullshit, you don’t get a bit more bullshit–you get bullshit squared.”

Market research is often as unreliable as other data. As well as not always acting rationally, people often do not know what they prefer. Sutherland writes, “the trouble with market research is that people don’t think what they feel, they don’t say what they think, and they don’t do what they say. People simply do not have introspective access to their motivations….It is perfectly possible that conventional market research has, over the past fifty years, killed more good ideas than it has spawned, by obsessing with a false idea of representativeness.”

Market research also can miss what is driving a person’s decision, such as avoiding disaster rather than getting the best outcome. Someone choosing Product A over Product B would say that they thought Product A is ‘better’, even if really they meant something quite different. They may unconsciously be deciding that they prefer Product A because the odds of its being disastrously bad are only 1 percent, whereas the risk with Product B might be 2.8 percent. This distinction matters a great deal, and it is borne out in many fields of decision science. People will pay a disproportionately high premium for the elimination of a small degree of uncertainty.

Once you understand the limitations of data, you can create great outcomes. Following conventional wisdom leads you do what your competitors are doings and metrics prompt you to design for average. Averages (and medians) encourage you to focus on the middle of a market, but innovation happens at the extremes. You are more likely to come up with a good idea focusing on one outlier than on ten average players.

Perception over reality

The other issue with relying on historic data is that it assumes people’s decisions are logical, given they are often not rational that reliance can be a mistake. Sutherland aptly says, “in maths it is a rule that 2 + 2 = 4. In psychology, 2 + 2 can equal more or less than 4. It’s up to you.” At its heart, people do not value things, they value the meaning attached to these things. While the objects properties are determined by physics, what they mean is determined by psychology.

There are multiple examples of how perception forms our reality. Wine tastes better when poured from a heavier bottle or has a French label. Painkillers are more effective when people believe they are expensive. Almost everything becomes more desirable when people believe it is in scarce supply, and possessions become more enjoyable when they have a famous brand name attached.

A great example of the power of psychology is Uber’s success. Uber’s map does not reduce the waiting time for a taxi but simply makes waiting much less frustrating. Travis Kalanick, Uber’s founder, realized people are bothered more by the uncertainty of waiting than by the duration of a wait.

Another example are claims on products, as people often think packaging that implies a product is healthy or good for them (or an app), is less tasty. It does not matter what something tastes like in blind tastings, if you put low in fat or any other health indicators on the packaging, Sutherland shows that you will make the contents taste worse.

Another area where perception is more important to a customer’s satisfaction is price. Why do people love sales, rather than spending the time to find the everyday low price. Sutherland explains “a low price, unlike a discount, does not allow people any scope to write a more cheerful narrative about a purchase after the event–‘I saved £33’, rather than ‘I spent £45’.” Marketing can have a strong impact here, not only justifying a high price but also detoxifying a low one.

The importance of optimizing for perception creates many opportunities to improve your business. I have written several times about customer experience and service, and focusing on perception allows you to create a superior experience. Some ways you can impact the experience, based on Sutherland’s ideas:

  • Small acts of discretionary generosity, such as waiving a charge when a customer ordered a dish they did not like or a complimentary chocolate at the end of a meal are regarded by customers as reassuring indicators of trustworthiness; we correspondingly see the absence of such signals as being a cause for concern.
  • Offering more customer service touch points or opportunities for live contacts. One of the reasons why customer service is such a strong indicator of how we judge a company is because we are aware that it costs money and time to provide.
  • Provide collateral outside of email. Sutherland writes, “bits deliver information, but costliness carries meaning. We do not invite people to our weddings by sending out an email. We put the information (all of which would fit on an email–or even a text message) on a gilt embossed card, which costs a fortune….We notice and attach significance and meaning to those things that deviate from narrow, economic common sense, precisely because they deviate from it. The result of this is that the pursuit of narrow economic rationalism will produce a world rich in goods, but deficient in meaning.”

It is also important to stress that it is not immoral to build a product or service to appeal to customer’s perceptions rather than logic. The Greeks did it first. There is barely a straight line in the Parthenon, the floor curves upwards in the middle, the sides bow out and the columns swell in the middle. This shape is because it is not designed to be perfect, instead it is designed to look perfect to a human standing about a hundred yards away.

Effectively, we want to make people happier and feel better. This can be achieved by improving their perception of their situation. It’s similar to a doctor who can help cure a patient either by giving a placebo or actual medicine. If the placebo serves the same purpose, it is in the patient’s interest to get the placebo (as it potentially has less side effects). As Sutherland says, “we should be researching this rather than decrying it.”

Social context is critical

Another key insight in Alchemy is the importance of social context. Sutherland explains that the context in which someone experiences something is the key to how they perceive it. According to Sutherland, “our very perception of the world is affected by context, which is why the rational attempt to contrive universal, context-free laws for human behavior may be largely doomed.”

There are many examples of where context determines how something is perceived. A hospital might have brilliant doctors, but if the reception area has old magazines we are likely to complain. If you go to a restaurant, your perception will be driven less by the food, the real value lies in social connection, and status. If you see a movie star at the table across from you and a line of Bentleys outside, you will probably end up telling your friends about an incredible dining experience. Sutherland points out, “we make far more positive comments about a dish’s appeal and taste when it is garlanded with an evocative description: ‘A label directs a person’s attention towards a feature in a dish, and hence helps bring out certain flavors and textures.’ Never forget this: the nature of our attention affects the nature of our experience.”

Less is more

I have written before how making a product simpler and less functional is one of the key ways you can build a superior product – from Uber to Monzo
to hypercasual games– and Sutherland reinforces this hypothesis. With new products or games, you can always add, but while this makes the new offering more versatile, it also reduces the clarity of its affordance, making it less pleasurable to use and quite possibly more difficult to justify buying. Sutherland explains, “the jack-of-all-trades-heuristic, whereby we naturally assume that something that only does one thing is better than something that claims to do many things.”

Sutherland pointed to the success of the Sony Walkman. Sony, by removing the recording function from Walkmans, created a product that had less functionality, but a far greater potential to a change behavior. By reducing the possible applications of the device to a single use, it clarified how people could use the device. As Sutherland says, “it is surprisingly common for significant innovations to emerge from the removal of features rather than the addition.”

How to make it work

Given that logic or date or research cannot predict much behavior, you need to find an alternative to benefit from Sutherland’s findings. It comes down to testing different approaches and trying creative ideas. Sutherland suggests, “the only way you can discover what people really want (their ‘revealed preferences’, in economic parlance) is through seeing what they actually pay for under a variety of different conditions, in a variety of contexts. This requires trial and error–which requires competitive markets and marketing.”

In addition to testing, think creatively. Sutherland suggests we spend “20 per cent of conversational time … for the consideration of alternative explanations, acknowledging the possibility that the real ‘why’ differs from the official ‘why’, and that our evolved rationality is very different from the economic idea of rationality. If we could resist the urge to be logical just some of the time, and devote that time instead to the pursuit of alchemy, what might we discover? Quite a lot of lead, I suspect. But a surprising amount of gold.”

Key takeaways

  1. People often do not action logically so you should not base decisions on expecting your customers to act logically
  2. The key is someone’s perception, not the reality. While in math 2+2 = 4, in psychology it could equal 5 (or 6 or 3), so we need to anticipate how the context will drive the perception.
  3. The best way to create innovative solutions is by testing different options and thinking creatively.

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Author Lloyd MelnickPosted on March 17, 2020March 16, 2020Categories Analytics, behavioral economics, General Social Games Business, General Tech Business, Lloyd's favorite posts, Social Games MarketingTags behavioral economics, Consumer behavior, customer experience, marketing, Rory Sutherland1 Comment on Alchemy: When psychology outmaneuvers rationality

How to change bad habits, the neuroscience way

How to change bad habits, the neuroscience way

I have written repeatedly that people do not often behave rationally, and Tali Sharot’s book, An Influential Mind,helps show that much of this irrationality is hardwired into our brains. Sharot writes how our brains are “hard-wired”, which makes it challenging to break bad habits. Instead, by understanding how we our brain works, we can adjust both our own bad habits and help others.

influential mind

We are all hedonists

Not much of a surprise but people are wired to strive for pleasure. The corollary, and more important takeaway, is that this principle cannot be unlearned. It is a waste of time and resources to try to get people (or yourself) not to pursue pleasure. Instead, it is best to channel this pursuit in yourself and in others.

When motivating your employees or potential customers, it is much stronger if you do it by offering them “pleasure.” When offered a reward, the brain kicks into gear, and people experience quick and alert responses. If the potential result is something bad, the brain turns sluggish, and their responses suffer. Thus, the carrot is better than the stick in driving optimal behavior.

Control is important

Having control of one’s life is a very instinctual desire, it provides happiness. People are happier when they are in control. Sharot points out the same situation exists in the office. If you want happier employees, make sure they have input in making decisions that touch their daily work.

Studies have shown people are happier, and even live longer, if they have to participate and work for something rather than be served. Elderly people did better at a care home where they had to prepare their own meals. In the work environment, it is often superior to have the team that needs to create a product or develop software involved in crafting the product specifications, rather than just handing them the final spec and asking them to build it.

Humans are not flexible

One negative way of thinking that Sharot attacks is how once someone has made up their mind, they tend to ignore contrary information and forge ahead regardless. I have experience (all too frequently) how a colleague is sure they have the right strategy or process, does not listen to others, and then fails. This happens even when everyone else sees the negative outcome. It may have been launching a new product that will have no demand or analysing data incorrectly and making decisions based on that analysis, then when the product is launched or project is done, it turns out to be an abject failure. Upon retrospection, the question is asked how did this mistake happen.

Research has found this inflexible decision-making is programmed into the brain. In an experiment, brain activity of participants was measured during the decision-making process and brain activity dropped significantly upon receiving bad information (that is, information that was contradictory to their original decision). This shows that when people commit to a decision, there is a natural defense mechanism that helps them avoid learning it is a bad decision.

To combat this defense mechanism, Sharot shows it is better to focus on presenting new factual information rather than arguing against the preconception. If you are trying to convince somebody their mobile game project will fail, do not attack the concept or the demo but present new information. Talk about new games on the market or new options. Do not try to discredit the belief, as people become resistant and defensive, often getting stronger in original idea. Instead, provide different, positive information.

Moods are contagious

The moods of others around you helps determine your mood. Based on MRI scans during political speeches, researchers learned that listeners often feel connected to the rest of the audience. This learning shows why people at a rally often react the same at particular points of a speech. Other research showed that negative posts on FB lead to more negative posts, while the inverse is also true. Good and bad moods are contagious, people’s brains synchronize. Their brains are connected, so moods are contagious.

There are several implications of contagious moods:

  • In a workplace, it is critical to maintain the mood and morale of your team. If several people on the team (or company) turn negative, it is likely to infect the entire organization.
  • Negative social media sentiment about a product could not only turn a few people against it but create a negative overall perception.
  • On a personal level, one or two family members can put the entire family in a good or bad mood, especially if they bring experiences from work or school home with them.

Entertainment trumps information

Related to the pursuit of pleasure, people pay more attention to entertainment than they do important information. Politics provide a great validation of this concept, Trump has tens of million Twitter followers because his tweets are entertaining. More people view a video of Congresswoman Alexandria Ocasio-Cortez dancing on a roof than discussing healthcare.

Another great example is the safety warnings on airplanes. It is probably more important to know what to do if there is an emergency landing than if you can reach the next level on Clash, but which one do most people focus on?

The lesson when building a product or game is that most tutorials will fail, instead people need to learn while being entertained. It also impacts how you communicate, an email or pop up listing benefits or features is not as effective as a fun GIF.

There is also a workplace impact of preferring entertainment to information. Sharot discusses that it might be easier to resolve a workplace conflict with a fun, novel solution rather than a lecture on the right way to do things.

Understanding the brain helps motivate yourself and others

The better you understand how the brain is structured and people’s motivation, the better you can interact with your family, colleagues and customers. Some of the most robust methods encompass remembering that everyone is motivated by pleasure seeking and reward and that people like to feel in control.

Key takeaways

  1. Our brains are “hard-wired”, which makes it challenging to break bad habits. By understanding how we our brain works, we can adjust both our own habits while helping others be more productive.
  2. People’s brains are designed to seek pleasure. Related to the pursuit of pleasure, people pay more attention to entertainment than they do important information.
  3. Having control of one’s life is a very instinctual desire, it provides happiness.

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Author Lloyd MelnickPosted on May 28, 2019March 14, 2019Categories General Social Games Business, General Tech BusinessTags An Influential Mind, Consumer behavior, neuromarketing, PsychologyLeave a comment on How to change bad habits, the neuroscience way

Looking for consumer behavior expert

Anyone reading my blog knows my passion and respect for behavioral economics and consumer behavior, I consider these fields key to successful business. Putting my money where my mouth is, I am now recruiting a consumer behavior product manager to join my free to play team on the Isle of Man. This position will be critical as we continue to grow the free to play (social/mobile) gaming team at PokerStars and will have tremendous influence on our products.

For those not familiar with PokerStars, we are the largest real money poker company in the world, with over 70 percent market share. Last year, we generated over $1.1 billion in revenue and more importantly EBITDA (profits) of $524 million; a far cry from the struggles of most of my colleagues’ companies in the mobile and video game spaces. I lead the free to play team at PokerStars, which has seen tremendous growth in the last couple of years and has over 500,000 daily active players.

If you or a friend are interested in the consumer behavior position, send me a note at lloydm at pokerstars.com or apply directly to the job description. It will be a lot of fun. And for those who are not good at following HTML links, click below to get to the job description:

Job Description for Product Manager – Consumer Behaviour

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Author Lloyd MelnickPosted on April 23, 2017Categories General Social Games Business, General Tech BusinessTags behavioral economics, Consumer behavior, job description, product managerLeave a comment on Looking for consumer behavior expert

Get my book on LTV

The definitive book on customer lifetime value, Understanding the Predictable, is now available in both print and Kindle formats on Amazon.

Understanding the Predictable delves into the world of Customer Lifetime Value (LTV), a metric that shows how much each customer is worth to your business. By understanding this metric, you can predict how changes to your product will impact the value of each customer. You will also learn how to apply this simple yet powerful method of predictive analytics to optimize your marketing and user acquisition.

For more information, click here

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Lloyd Melnick

This is Lloyd Melnick’s personal blog.  All views and opinions expressed on this website are mine alone and do not represent those of people, institutions or organizations that I may or may not be associated with in professional or personal capacity.

I am a serial builder of businesses (senior leadership on three exits worth over $700 million), successful in big (Disney, Stars Group/PokerStars, Zynga) and small companies (Merscom, Spooky Cool Labs) with over 20 years experience in the gaming and casino space.  Currently, I am on the Board of Directors of Murka and GM of VGW’s Chumba Casino

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