Behavioural Economics guidelines to help you boost conversions

While most of us like to believe that we are rational, there are several gaps in our rationality. These
are some ways in which we create our own version of reality based on what we see, hear and
experience.

Richard Thaler (author of the bestseller “Misbehaving” – which is a must read for marketeers) talks
about Mental Accounting theory. Mental accounting theory also explains that the way we frame a
value proposition can have an impact on consumer buying decision.

This is based on the premise that value is reference dependent. Thus, if we re-frame the reference
point, we can modify the value of an event. Hedonic framing refers to how people try to maximise
psychological pleasure and minimise pain when faced with decisions regarding losses and gains.

Some principles of Hedonic Framing:

1. Segregate gains

Ten gains of 100 INR feel better than one big gain of 1000 INR. Similarly, the above
advertisement says save $ 3 every month by using a payment channel instead of saying save $ 36 a
year. This segregation of gains appeals much more to the consumers.

2. Integrate losses

A single loss of INR 100 feels better than 10 losses INR 10 each. The app capitalises on
this by allowing the user to purchase on various platforms and stores and allowing a
single payment for all of these in one go. This way the losses are integrated and its
intensity reduced.
3. Combine smaller losses with large gain
We should integrate large gains with smaller losses to neutralize the disproportionate
disutility from losses. In the following offer, a gain of 194 dollars is pitted against small
loss of choosing the right monthly subscription.

4. Separate smaller gains from larger losses

 We should try to experience as many small gains as possible. We can maximise value
by separating small gain from a large loss. In the following example – the big impact of
2 month subscription is offset by discount/ free service offered in subsequent months.