by Rory Sutherland Watch the Original
Perspective matters - how we frame an activity can affect our experience of it. Psychological solutions, such as dot matrix displays and Korean traffic lights, are often more effective than engineering and economic solutions. Economics often overlooks the psychological impact of money and how it affects people's willingness to pay, while marketing and advertising create value that should not be overlooked. Perception is leaky, so it is important to choose the correct frame of reference when trying to improve a product or service, as branded products can be more effective than unbranded ones.
- Psychological solutions can be more effective than engineering and economic solutions.
- Economics often overlooks the psychological impact of money and how it affects people's willingness to pay.
- Marketing and advertising create value that should not be overlooked.
- Perception is leaky, so it is important to choose the correct frame of reference when trying to improve a product or service.
- Branded products can be more effective than unbranded products.
- Summary Notes
- Key Learnings
- Framing Your Experiences: The Key to Happiness
- Psychological Solutions: Reducing Uncertainty on the London Underground
- Solving Problems with Psychology and Technology
- Creating Value Through Marketing and Advertising
- Branding: Improve Product & Service Perception
Framing Your Experiences: The Key to Happiness
Framing matters: one activity can make us feel great or terrible depending on how we view it. Pensioners are happier than the unemployed because they believe they've chosen to be pensioners. Animals without control over their circumstances can become depressed. Similarly, what costs us money can be a curse or a blessing, depending on how we frame it. "The power to re-brand things -- to understand that our experiences, costs, things don't actually much depend on what they really are, but on how we view them -- I genuinely think can't be overstated" Our perception of a situation, product, or service can be more important than the reality and should be taken into consideration. This highlights how marketing and advertising can be more effective than just relying on engineering and economic solutions.
Psychological Solutions: Reducing Uncertainty on the London Underground
Psychological solutions are often overlooked compared to engineering and economic solutions, yet they can be more effective. An example of a successful psychological solution is the dot matrix display boards on the London Underground, which reduce the uncertainty of waiting for a train. "Pay 20,000 pounds in tax toward health, and you're merely feeling a mug. Pay 20,000 pounds to endow a hospital ward, and you're called a philanthropist" Perception can influence how people feel about their actions. A difference in framing can make a big difference in how people are willing to pay whether it's money or time. Psychological solutions can be more effective than engineering and economic solutions in these situations.
Solving Problems with Psychology and Technology
The Korean approach to traffic lights can reduce road rage and accidents. Businesses, such as Google, often use both technological and psychological insights to be successful. Psychology can be used to solve problems we may not have known were problems, such as getting people to take their antibiotics. Economics often overlooks the fact that a cost is affected by its meaning, not just its amount. Examples such as express lanes at toll crossings or airports show that people value time differently and may be willing to pay more for faster service. “We merely have a collection of random individual insights without an overall model.” Having a unified framework for psychological solutions is essential for their effective implementation. Without one, various insights will not fit together and be less effective.
Creating Value Through Marketing and Advertising
Economists often fail to understand the psychological impact of money and how it affects people's willingness to pay. Ludwig Von Mises argued that marketing and advertising create value and should not be viewed as a "dubious" form of value. He used the example of a restaurant to illustrate how creating a pleasant context can be just as important as creating the primary product. “People who have an existing framework -- an economic framework, an engineering framework -- feel that, actually, logic is its own answer.” Having an existing framework can give people a false sense of security that logical solutions are all that is needed, when in reality psychological solutions can also be incredibly effective.
Branding: Improve Product & Service Perception
Perception is leaky, so it is important to choose the correct frame of reference when trying to improve a product or service. Branded products are more effective than unbranded products, and perception can have an impact on the perceived value of a product or service. "Google is as much a psychological success as it is a technological one" Technology alone is not enough to make a successful business. It requires an understanding of human psychology to create something that resonates with customers.