414. Structuring Complex Choices: The "S" in NUDGES Explained (Refreshed Episode)

Welcome to episode 414 of the Brainy Business Understanding the Psychology of why People.

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S in nudges structuring complex choices Ready?

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You are listening to the Brainy Business Podcast where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now here's your host, Melina Palmer.

Hello.

Hello everyone.

My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. Today's episode is all about structuring complex choices. The S in Nudges Although we talk about nudges on the show all the time, it's been a while since we refreshed a dedicated episode from the original seven part series on nudges and choice architecture as did back in February and March of 2019.

Wow.

It's amazing how time flies, right? This episode was the last in the series and is all about making choices easier for people by being thoughtful about the place they're in, what you want them to do, why it matters, and how to group information so you can reduce the choices and make it easier for someone to happily do business with you. Remember, research shows we humans make up to 35,000 decisions each every day, so you want to be thinking in terms of those micro moments. Each decision point is another opportunity for someone to ask themselves, is this really worth it? When you understand those complex choices and can make the decisions easier for people without them having to ask, it can go a long way in terms of your experience and whether or not people complete a process, whether they're having happy about it or whether they get lost in the ether. Tips of course on how to do all this well throughout our conversation today. First though, don't forget that there are links for everything, including my top related past episodes and books waiting for you in the show. Notes for this episode, which are found within the app you're listening to and at the brainy business.com 414.

All right.

Let'S talk about structuring complex choices.

First, I want to revisit mapping for a quick second because it's the foundation for complex choices. As I said in episode 37 on understanding mapping, which you should definitely revisit after this one if you haven't listened to it yet. Thaler and Sunstein describe a mapping as the relation between choice and welfare and use a simple example of choosing a flavor of ice cream in one of their papers on choice architecture. As they say, some tasks like picking out an ice cream flavor are relatively easy, while others, like choosing a medical treatment, are considerably more difficult. But at their core, the path from the choice and its outcome is called a mapping. With ice cream, most people know what flavor they might choose, especially if there are only three flavors. Do you want strawberry, chocolate or vanilla? You have a favorite and some sort of mapping in your brain already that lets you know which choice you will enjoy the most. And if they have considerably more flavors, maybe some exotic ones you've never tried before, like lemon, lavender or maple bacon. You can always do a taste test to see which you like best and avoid accidentally buying a giant scoop of ice cream that tastes more like soap than scrumptious. This, of course, gets harder when we get into more difficult choices. Recall the decision about what treatment to undergo after a cancer diagnosis, which I outlined in the Mappings episode Checking Back to the Show Notes it looks like this story started around 4 minutes and 49 seconds in episode 37. If you want to revisit it, the task of the Choice Architect that's you is to set up a system that helps make the map as clear and easy as possible so the chooser can select the options that are best for them and make them better off. The five steps I created and identified in understanding mapping were 1 encourage thoughtful review and open mindedness, 2 break it down, 3 make it relatable, 4 help them get there and 5 call to action. Revisit that episode and its worksheet for details on all of those categories. With small choices, people tend to evaluate all the options to determine which is best. But when you get into a more complex choice, there's a need for filtering and removing options to help people make sense of it all and actually, you know, make a choice. Let's say you've been offered and accepted a job in a brand new city far away from where you live now, and while you may be able to visit once in advance, it's mostly a sight unseen situation and you need to make the best possible choice with the tools available to you. Your two choices are which office you want to work in, the company has given you three to choose from, and which apartment you want to rent. For the offices, you can have a compensatory strategy where you can visit all three offices, determine which aspects are universal as well as how they differ, and make an effort to rank those items. Let's say you look at location of the building itself and its proximity to your favorite foods or coffee places, the location within the office, large windows or a view the size of the office itself and those people around you, someone you really want to be near or someone maybe you want to avoid. Now you go through some sort of process to weight these items against each other. How does so and so's loud chitchat convert into square footage or window size? While it's not a perfect science, you can determine what's most important to you and make a decision you know you feel comfortable with and barter on items you know you're willing to compromise on for those you aren't. The choice is complex, but you can know the vast majority of the variables because there are only three offices to choose from and you can physically visit all three to evaluate and compare. As you know, picking an apartment is not the same. There are likely thousands of apartments available and you couldn't possibly visit them all. It would be a full time job and with the turnover it would also be an endless one. The compensatory strategy doesn't work here. Instead you need what is called elimination by aspects. The chooser must pick a few attributes that matter to them, number of bedrooms and bathrooms, commute, budget, pet friendly, whatever, and use those to narrow down the field. You can then make large sweeping eliminations and based on these aspects and say it has to be a five minute walk to a bus or subway with two bedrooms and can't be more than $1,500 per month. Or maybe it needs to be a 30 minute commute to the office, pet friendly and under 1750 per month. You've done this. You probably do it all the time without realizing it and you're likely happy with the results most of the time. This does mean of course, that when you eliminate everything that is over a certain arbitrary line in the sand, you could be getting rid of something almost perfect that's just outside the parameters. Perhaps you chose a pet friendly one bedroom apartment that is 29 minutes from the office in an older building that's a little musty smelling for 1750 and didn't realize there was a pet friendly two bedroom for only $1500. If you were will to have a 32 minute commute because your line in the sand, your large elimination got rid of everything over 30 minutes. But this is the risk we take with elimination by aspects and the constant battle of complex choices. When someone physically can't look at everything and know all the possible options, they still need to make a choice. So how do you as the choice architect, help them to do that? Well, the Internet has made this a whole lot easier. I don't really know what I would have talked about in a world before Expedia, Zillow, Amazon, Netflix, and the countless other aggregators out there. The examples of complex choices being simplified abound in our lives today. We've always had these same types of decisions to make in modern society anyway, but now we can really see great ways of simplifying those choices and why Mapping is so important. I talked about menus in that episode on mapping and how a pre sort was important to help people make sense of what they were looking at and trying to order. While alphabetical order makes sense for book titles and authors, it would be a pretty frustrating way to sort through items on a menu. Even price alone would be obnoxious for most people, and it would make it very difficult to compare two steaks that were $8 different if there were 16 other item items between them. So sorting by appetizers, soup, salad, entrees, and desserts is common. There can be further categories within to help, and maybe the items inside are organized by price or some other attribute. But if I know I don't want appetizers or chicken or pasta dishes, I can eliminate those options from my mental bandwidth and only look in the section I care about. I joke all the time about how much easier it is for me to go to restaurant when I have celiac disease. It means that there are only, you know, two or three gluten free options. In some places there are more. But when I go out to eat at a restaurant and I know what is has worked in the past, what doesn't make me really sick, I typically order the same one or two things and it makes my choice so much easier where the other people at the table have to debate between, you know, 65 options of what they may want or not and all the different features and things. So I like to joke that it's more of a blessing than a curse having this restriction. In the episode on the Overwhelmed Brain, I talked about an experiment with types of jam. When people were presented with lots of options, let's say 24 types of jam, they tasted a lot, but most people didn't buy anything when only given the option to taste three types of jam. There were less tastes overall, but a lot more sales. This is because we're overwhelmed by all the aspects of choices, and when you start throwing in lots of arbitrary items, it can make a simple choice complex. Consider this. You go to a restaurant and order toast. They say we have three kinds of spread. Would you like grape, strawberry or orange marmalade? You can quickly make A choice. Maybe one of those options made you say yuck inside your head immediately or, you know, strawberries, your favorite. Either way, you can pretty quickly choose. And this is a simple decision. In the taste test scenario, you may try one or all three and then choose something and think, you know, we don't have toast enough. I should pick up some bread on the way out. The kids will love a change of pace. Easy. What about if you go to the restaurant and say you just want a piece of toast? They say, great. We specialize in spreads here, so you just let me know which one you want. We have raspberry, sugar free, raspberry, raspberry, vanilla, orange, currant, strawberry, triple berry, seedless strawberry, strawberry, balsamic, grape, grape, lavender, lemon, lavender, chocolate, chocolate, hazelnut, marionberry, BlackBerry breeze, cinnamon sugar, peanut butter, almond butter, maple, mango or pineapple. You would likely be left feeling dumbfounded. This is now a very complex choice. Do you want savory or sweet? Seedless or sugar free? Are some of those chunky? What in the world would maple mango taste like? Did they say grape lavender? How much sugar is in the cinnamon sugar and is that a spread or a sprinkle? Is the peanut butter chunky or smooth? You might instead say, never mind, I'll just have coffee. You've now left the entire experience feeling frustrated and you can see why. The taste testers would try a bunch of things but not have much to relate to and make a decision to buy instead. They would likely decide to think on it and buy one next time, which they will likely forget about by then. Check out episode 12 on relativity for more on how our brains value items and we need similar comparison points. Consider instead if this was a restaurant that only served toast and spreads, you go in expecting a lot of options and maybe can do a taste test on something if you really want. The menu would split up all the toppings into categories. Maybe you can mix and match and eventually try them all. Then it feels like a benefit and you want a lot of choice, but only when it's properly handled. Think about places like Cold Stone Creamery where you have tons of options for toppings and mix ins and ice cream flavors. You could go there for every meal for an entire year and not make it through every possible combination. And that's a good thing. They make suggestions to help you see how flavors could go together. If you see one with vanilla ice cream, strawberries, graham cracker crumbs and white chocolate chips, you have a baseline to start with and can adjust from this is using a different form of anchoring and adjustment to help someone with their complex choice. You can then simplify your options and say, I like that, but I would rather have strawberry ice cream and milk chocolate chips or I want bananas instead of graham cracker crumbs. Whatever. Showing someone a way the aspects could come together can help them make a more complex choice and feel good about it, and it can help them eliminate things they know they don't want when they're properly categorized together. When looking at your own business, it's important to recognize if you have an inherently complex choice or if you are needlessly creating a complex choice, which is making things harder than they should be. And in either case, it's best to look at ways to simplify and make the choice as easy as possible for someone let's look at the air conditioning example one last time. As I've shown throughout the series, the company we worked with made it a very simple choice in their offering, which is good. Even though the choice of getting air conditioning or not is a complex one. It is not the simple ac. Yes, no. But as you've heard me say already, it is the choice of individual fans going on vacation on hot days, getting a pool, filling our tubs with ice, central air, portable units. All sorts of choices that would make it pretty complex when you expand out, and any company could quickly make it so the choice is unnecessarily complex and cost themselves sales. We actually hit a snag in our installation process and they found out the heating unit we had was the smallest, approved for the size of our house and fine for heating, but not what they recommend for air conditioning. They said it would be fine most of the time, but when we really need it, there would not be enough cold air coming through and we would be hot on those really hot days, especially upstairs, which is where all the bedrooms are, we found ourselves with a much more complex choice. Do we scrap the whole thing and go back to fans or whatnot? Go with the smaller AC unit and hope it would not be too hot on the hot days? Replace the heating to get the bigger unit, which we could put the properly sized AC unit onto, which added about 50% to the cost, or for double the price. If we have to replace the heating unit anyway, we could go to a heat pump instead of central air. This was not the situation we wanted to be faced with, but the guy who originally quoted us came out to explain the options and his recommendations based on his expertise to help us evaluate the benefits of a heat pump and what a three and a half ton AC unit meant compared to a 4 ton unit and how that would translate into our comfort come the hot summer months. When we had questions, he had suggestions and expertise. Instead of giving vague and frustrating responses to everything like well, you know, some people like this and some people like that. It's really all on your preference. He didn't tell us what to do, but he explained some of the benefits and possible negatives, looked up everything we had questions on, and walked us through the process with no pressure to decide anything definitively. Right then they had to come back to do any of the work work, so that was a bit of a given. Even when this became a more complex and frustrating choice, the options were presented in a way that made us comfortable and didn't make us want to bail on the whole situation, which is something a company could easily do badly. People talk themselves out of business more often than they realize, and often that's because you're making the choices more complex than they need to be. Give the necessary information, but don't overload people. Consider the questions you're being asked and answer them just the question being asked without throwing a bunch of other stuff to think about. And with complex choices, don't be afraid of silence in the conversation. People need time to process. I have really enjoyed digging into this hypothetical example of an air conditioning company as if they were a client who hired me to help them incorporate choice architects, architecture and nudges into their business. As you can see, using behavioral economics in business is about much more than just messaging or branding or sales or any single aspect. And it is about more than just one concept like loss aversion or framing or relativity. To really incorporate behavioral economics into a business, it's important to know all the concepts, how they work together, where the give and take is to make sure you aren't unintentionally breaking one area while fixing or testing another concept. And this isn't something that is achieved and mastered in a single call or conversation. But my favorite thing to do is work with a business in an ongoing fashion. Really get to know what they're about, what their goals are, and start testing things. If you've been listening to this series and think your business is ready to uplevel and start really incorporating how the brains of your customers and employees work into your processes, products and brand. Let's talk. I would love to work with you and help you make your business as brain friendly as possible. Either visit the brainybusiness.com and click on Work with Me to schedule your free discovery call or send an email directly to melina the brainy business.com so we can connect about the best way to help you reach your goals and answer the big questions in your business. And yes, I work with everyone from small businesses and solopreneurs up to corporations so there is likely a package that will work for you. All right, before we close out our series on nudges, we have to dig into other examples of structuring complex choices. Try and think about how each one could could apply to your business, even if they don't seem related right off the bat. And use the free worksheet I've made available to you at the brainy business.com 41 One of the examples I loved from Thaler and Sunstein's article on Choice architecture was for a paint company and how they structure their complex choices. There are a lot of colors out there to choose from, and when picking a choice for a wall, it's hard to know what will look look best. You aren't choosing just between blue and red, but what shades of blue, how red is red? What's the undertone? Glossy matte? The names they choose would be no help. As they said after their evaluation, three similar shades of beige were called Roasted Sesame Seed, Oklahoma Wheat and Kansas Grain. I can appreciate the need for creative names, so they aren't calling their paint choices Beige beigier and Beigest or Greenish Beige, True Beige and Beige est Beige. There isn't much flexibility, and I'm guessing naming the swatches is where the real fun and creativity lies in the world of paint creation. But if they tried to force customers to pick and request their colors based on names alone? Terrible. What about a numbering system? So you want beige? Do you want beige 1, 2, 3, 654? Also not helpful. If you've ever tried to use Pantone color codes or hex codes or RGB or CMYK to pick something close to the color you have, you know this is not really how it works. The color wheel or a wall of paint swatches makes a big difference. And now with technology, paint suppliers, interior designers, retailers and stores like Home Depot and Lowe's which sell paint, can show a mock up of a house with the paint color on the walls to see if that red is just right or looks way too intense when it's on all four walls in the ceiling. Because we're at the end of the series and as I said earlier, this concept is one that has been made much easier both both to understand and implement by computers and the Internet. I'm going to approach this a little differently. If you've been to one of my innovation sessions or if you have done work in innovation, this is a system you might recognize. I'm going to give an example of companies or methods for structuring complex choice and I want you to think about how their methods could be applied to your business. I talked about this a little bit in episode four on Questions or Answers. Essentially this technique can help you shake things up, get out of your comfort zone, which is where you get too close to things and can't see opportunities that might be staring right back at you. Your brain is using those rules of thumb more than you want it to, so you need to teach it to think a little differently. So I will give examples of a company or a system and I want you to think of how they might approach your business. Let's say you were a product based business selling jewelry organizers. As my client Kelsey does at the Knotted Wood, her customers can choose designs they like and then choose from four lengths, five stains and two metal finishes. With each new design she essentially creates 40 new product options with with all those combinations, not to mention bundling. As you can imagine, if not well structured, even this choice could become very complex. There is a link to her website in the show notes if you want to see her choice architecture in action or just shop for a new jewelry organizer. If she was stuck in thinking about how to offer her choices to customers, I might suggest thinking about how Amazon would suggest solve the problem. We would then say, well Amazon has suggestions of what people might like based on their past purchases or what others have bought. So we could feature and recommend top sellers first or those that are a better size for materials purposes and thus profitable for the business. Remember those episodes on mapping and incentives. I would also recommend that you listening and any of my clients try to look at more than just the cursory decision. Are you asking the right question? Solving it in the right way? Is this really the choice a customer should be making? Alright, here's a list of companies who do a great job with structuring complex choices. I want you to try and get into the mindset of each when thinking about your business and how an executive from that company would attack a problem if they were in your shoes for a day. You can use the worksheet@thebrainybusiness.com 41 to take notes and feel free to pause in between each example so you can really think about how they would approach this instead of listening to it straight through. Alright, Number one Amazon. I already explained some of their features. They make suggestions based on other purchases or top featured items. How do they do the initial sort? When you type something in sponsored by ads price Our next example is Google. They have millions of related results come back based on complex algorithms categorized by the most popular. First you can narrow a search by categories, images, news, scholarly articles, etc. Expedia also uses most common choices in filtering to make top suggestions. People can set their own filters for number of stops, airline carriers, travel packages with hotels and cars to save money, options to refilter and sort but there is a default Zillow put in lots of criteria at the beginning to help with the elimination by aspects up front. There are then sliding scales and other ways. It's easy to add items in see pictures and heart things you like, Zappos suggestions similar to Amazon and a robust return policy in case you aren't happy and want to try something else. Netflix suggested titles makes you pick your favorite types of shows up front to help build your initial recommendations. Categorized by type TV, movies, kids or genre, drama, comedy, action, etc. Coke and the new system they created called Freestyle Similar to the Cold Stone Creamery example, Coke created their Freestyle machines which are available in various restaurants and movie theaters to create a complex choice and a new product line that didn't previously exist. Instead of only having Coke, Diet Coke or Cherry Coke at a system that the staff needs to get drinks out of, there are now hundreds of flavors and options people can put together however they want. You could get plain Coke, Coke with lime, raspberry, orange, vanilla or grape and the same add ins for Diet Coke, Sprite, Dr. Pepper, but it's all well categorized to make it not feel overwhelming. Target or a grocery store different products from lots of manufacturers sorted into aisles of like products. Some high profile areas get little bundled nudges or suggestions like peanut butter near the jelly or cereal by the milk. A cell phone store, Verizon T Mobile, Sprint rely on customer service agents to have lots of conversations with people to make recommendations based on interests, intentions and important features. Then they recommend add on items and data plans as well to use these products. Contract plans are often used to help cover this upfront cost. Volvo or any other car sales show models with all the features added in and incorporate those into a test drive to trigger loss aversion and perceived ownership. Give people the option to remove features or items they do not want and showcase flashier items on the floor. Also relying on trained sales staff if you didn't take physical notes now maybe you're driving or at the gym. Let that ruminate in your head for a while and download the free worksheet at the Brainy when you can remember to think about ways you can reduce complexity, as well as how you might add complexity to your business. I hope you've enjoyed this series on nudges and choice architecture. Seven episodes felt like a ton to put into a series, so thank you for those of you who have tuned in for the whole thing. I've gotten a lot of great feedback from listeners that they have like liked this series because it made the tips feel really actionable and helped them to think through the complexity of their businesses and way more areas where behavioral economics can be incorporated to help improve their business. At the end of the day, every business, from nonprofits to service based businesses to people selling products of all sizes and prices to financial institutions and state agencies, it's always based on choice. Every interaction you have with customers in person, over the phone or via your website is full of options and choices. And it's your job as a business to structure those choices in the best way possible, using a map so the customers know what's in their best interest, aligning the incentives to set up a default, and giving feedback along the way for all those errors you expect people to make. Take.

So what got your brain buzzing as you learned about structuring complex choices today? For me, I think far too many people and companies underestimate how complex the experience is and thus how many choices they're thrusting upon their customers and team members. People make it so much more difficult to do business with them than they need to. Even mundane experiences like like eating at a restaurant can get so complex and not worth it very quickly. There's a standard there we're pretty used to, so we don't think about it too much. But you can ask yourself if the way you're structuring your information and experience is the same as if a restaurant were to have all its items listed alphabetically.

Sure, it's accurate, it could work. But is it a good experience?

Of course not. Consider the journey, what you want people to do, and different ways you could group and present information to help land on a final structure. And don't just jump in with the first idea and structure that comes to mind. Do some tests to see what works, what resonates with people, what you might be missing. And yes, there are some episodes linked in the show notes to help you do that, including the one on Understanding Mapping, which I referenced during this episode today. And my episode on understanding what problem you're solving to help you think through that process a little more. Those links to my top related past episodes and books are waiting for you in the app you're listening to and@the brainybusiness.com 414. And just like that, episode 414 on structuring complex choices is done. Join me Friday for a brand new episode with Anthony Damsis, Deputy Head of Behavioral Finance at TD Wealth. It's going to be a lot of fun. You don't want to miss it. Until then, thanks again for listening and learning with me. And remember to be thoughtful.

Thank you for listening to the Brainy Business Podcast. Molina offers virtual strategy sessions, workshops, and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness. Com.