Digital psychology is increasingly influencing digital strategy.

I’m not going to define what digital psychology means here, though there is an academic discipline of cyber psychology.

But let’s take a look at some experiements in decision theory that can be applied to marketing online.

These examples are taken from Peter Ayton, Associate Dean Research at City University London, an expert in decision theory, or why we make the choices we do. You can see the whole presentation on SlideShare.

Peter was speaking at a Reading Room event discussing the role of Digital Psychology.

Determination of value is contextual

People don’t know what they want if you ask them. They decide what they want after reviewing context. Comparative evaluation is easier.

How would you feel if you were given this ice cream? A bit disappointed?

What about this ice cream? Happier?

Below you can see the prices people said they would pay for each ice cream, both in isolation and in tandem.

Christopher Hsee is the Theodore O. Yntema Professor of Behavioral Science and Marketing at the University of Chicago Booth School of Business.

Willingness to pay (WTP) can also be shown to differ depending on context in the experiment below using dictionaries.

The slightly torn dictionary with 20,000 entries was valued $7 higher when offered with the smaller tome.

Chris Hsee who conducted the study comments thus:

To say that an attribute is hard to evaluate…means that people do not know whether a given value on that attribute is good or bad…

See more about pricing models on the Econsultancy blog.

How you pose a question makes a difference

Shafir conducted an experiment in 1993 where he asked people:

Imagine that you serve on a jury of an only-child sole-custody case following a messy divorce. To which parent would you award sole custody of the child?

Parent A

  • Average income
  • Average health
  • Average working hours
  • Reasonable rapport with the child
  • Relatively stable social life

Parent B

  • Above average income
  • Very close relationship with the child
  • Extremely active social life
  • Lots of work-related travel
  • Minor health problems

The question is then rephrased and asked to another sample set, this time:

To which parent would you deny sole custody of the child?

Shafir determined that people are looking for preferences they can justify.

The compromise effect

This is quite a well known phenomenon. Simonson in 1989 said that:

Items can gain market share when new options are added to the market when they become the compromise or middle option in the choice set.

This is the classic idea that diners will not order the cheapest or most expensive bottle of wine.

Attraction effect

Introducing an inferior or decoy item will make a second option seem superior.

In this example from the Economist, the print subscription is the decoy. It’s more scientifically known as asymmetric dominance.

Values are influenced by reference points.

Beliefs are constructed

How happy are you with your life in general?

How many dates did you go have last month?

The answers to these questions differ, depending on the order you ask them. Ask the dating question first and the answers to the two questions are more strongly correlative (0.66 compared to 0.12) i.e. many dates, very happy.