Integrating Behavioral Economics into the design process

Use behavioral science techniques to design more effective experiences. Reduce your users’ uncertainty.

As I promised in the previous edition in my substrack, today we’ll explore some of the behavioral economics heuristics used in product or service design, with practical examples of how to apply them. I won’t cover them all, but I’ll focus on the ones I find most relevant and, above all, the ones that have given me the best results when designing experiences.

“Change might not be fast and it isn’t always easy, but with time and effort, almost any habit can be reshaped.” — Charles Duhigg, The Power of Habit

Behavioral economics is used to help people make better decisions, avoiding the negative influence of cognitive biases. A key concept in this field is nudging, popularized by economist Richard Thaler and legal scholar Cass Sunstein in their book “Nudge: Improving Decisions about Health, Wealth, and Happiness”. Basically, this approach is like being that empathetic friend who gives you ego-free advice, without being the annoying one who forces you to do things or constantly says, “I told you so.”

We’ve all been there: facing a tough decision, with a million things running through our heads. And that’s where heuristics come in — those mental shortcuts that help us avoid analysis paralysis and allow us to make decisions faster. That’s exactly what we want to offer our users when they need to make important decisions in our products.

When we integrate this scientific approach into design, we help users make better decisions without feeling manipulated. We design with their brains in mind and give them that little push so they don’t get stuck.

But beware of crossing the line. Heuristics are super useful, but don’t become the Darth Vader of UX with dark patterns (those sneaky techniques that trick users into doing things they didn’t want to). A common bad example of this is making it difficult to cancel a subscription. We’ve all been victims of telecom companies or gyms that force you to go in person just to cancel. Horrible! This only creates frustration and manipulates people into paying for something they no longer want.

Don’t be that villain. Because, at the end of the day, you’ll have metrics that look high but are ultimately empty. Sure, money might be coming in, but users won’t stick around for more than a month, and complaint tickets will skyrocket. And don’t even get me started on bad reviews. 🙄

Key Heuristics and How to Apply Them in Products or Businesses

1. Anchoring effect Imagine your user enters a subscription app. The first thing they see on the pricing page is the most expensive or complete plan, like the premium plan. This plan acts as an anchor that sets a reference for value. From there, even though there are cheaper options, those options now seem much more attractive compared to the premium plan, because their perception of what is “expensive” has already been influenced by the first option they saw. As a result, the user tends to choose the middle options or even the premium plan, thinking they’re getting a better value.

Just like Calendly does on its pricing page in the landing web, highlighting the most recommended option.

2. Loss aversion A cloud storage service sends a message to the user saying they’re almost out of space, and if they don’t pay, poof — there go all the thousands of photos of their pet! The trick here is to remind them of what they’ll lose if they don’t upgrade: extra space or access to features that make their life easier. In the end, they’ll likely renew, because they don’t want to lose all those cherished memories.

Duolingo reminding me that I should be practicing my Italian lessons to avoid losing my progress in the app.

3. Scarcity effect On an e-commerce platform, a label that says, “Only 3 items left in stock” can create urgency and push users out of decision paralysis. Users tend to value something more when it seems like it’s about to run out, prompting them to make a quicker decision. 🏃🏻‍♀️

Amazon using the scarcity effect to encourage purchases.

4. Paradox of choice Too many options = brain short-circuit. Imagine a finance app with 27 different investment types. The user is likely to have a mini heart attack. But if you simplify it to three options (low, medium, high risk), your user’s brain will thank you. 😉

Takeaways

Biases are those mental knots that sabotage us, while heuristics help us make decisions quickly, even if it doesn’t always mean we’re making the perfect choice. But at least they get us out of the mess.

I encourage you to use these heuristics when presenting your research findings to the business. This will help guide the decision-making process and suggest improvements based on people’s mental models.

Other links

Thaler, Richard H., & Sunstein, Cass R. (2009). Nudge: Improving Decisions about Health, Wealth, and Happiness. Penguin Books. https://www.amazon.com/Nudge-Improving-Decisions-Health-Happiness/dp/014311526X