Why your decisions may not be as rational as you believe

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If you believe your decisions are rational, you’re probably not listening to reason. Hidden biases and faulty thinking unbalance the decision-making process without us being aware of their influence.

Who shot JFK? Was it Lee Harvey Oswald, alone in the Texas School Book Depository? Was it the Cubans? The Soviets? The CIA? Or could it have been Lyndon Johnson, who succeeded JFK and therefore had the most to gain? Since Kennedy’s assassination in 1963 a small industry has grown up dedicated to unravelling the circumstances of his death. According to ABC, in the last 50 years more than 2,000 books have been written on the subject. Each amasses an argument and presents the evidence to support its case. Or, more accurately, each begins with a conclusion and then seeks the evidence to support it.

We are Pleased to Confirm

This is an example of confirmation bias and it illustrates a startling flaw in our reasoning. A large proportion of our decisions are based not on a clear reading of the facts, but in hidden biases and dodgy reasoning. And if you think that only applies to our private decisions, think again. Decision-making in business can be just as irrational, and is subject to a whole range of factors that distort our better judgement.

In his book Thinking Fast And Slow, the Nobel Prize-winning behavioural psychologist Professor Daniel Kahneman notes that we have two modes of thought. One is logical, analytical and unhurried, and we’re aware of its gears grinding away whenever we approach a complex problem. The other is fast, intuitive and hidden from us. Bad decisions and the biases that drive them are a result of us thinking fast when we need to think slow.

[Read more…]

The Psychology of Price

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“It’s like when a 39-year-old turns 40, the birthday feels like a big deal,” says Robert Schindler, a professor of marketing at UCLA. He’s talking about the effect of prices that end .99, how just a single penny between two larger amounts creates this symbolic buffer in our minds. So we perceive £3.99 as being closer to £3 than £4, just as the 39-year-old man still believes he’s in his mid-30s: it’s both completely irrational and perfectly understandable. Welcome to the world of psychological pricing.

Shoppers have to process a lot of prices, especially online, to the point where it becomes overwhelming. Our memories only process the first couple of digits of a figure at a time so pounds inevitably take precedence over the trifles of pence. The effect is powerful. When a Chicago grocery store dropped the price of margarine from 89 cents to 71 cents it saw sales rise by a modest 65%. But then it lowered the price again, by just two cents, to 69 cents. The result was a sales jump of 222%. Subtracting that single penny or dollar to reveal a pair of nines is a magic trick for retailers, but it can come at a larger price.

What the industry calls ‘just-below’ prices are linked in our minds with special offers and promotions. According to marketing professor Robert Schindler, the format was introduced in the 1870s as a way for retailers to distinguish discounted products from their full price stock. But at some point the just-below prices simply became the norm, sale or no sale. And so, in 1894, James Eaton & Co could assure the public that its $9.99 check suits were ‘Always the Cheapest’ in newspaper adverts that did away with whole number prices altogether. Today, however, certain stores still retain the approach’s original meaning.

Take Nordstrom, by Wikipedia’s admission an upscale fashion retailer. They price their clothes in whole numbers: a pair of swimming trunks can be yours for precisely $152 and a bow tie will set you back exactly $55. There are cheaper places to buy your swimwear but even Nordstrom have clearance sales. Then you’ll see all sorts of prices: a wool fit suit is now $465.65 and a pair of toe cap boots are down to $126.96. The discounted prices are left with ragged edges. So why use whole numbers in the first place? [Read more…]

Psychtech ‘outsiders’ challenge research insiders to change

This article was originally posted on research-live.com.

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There are much better tools and theories to understand people today than there were in the years when focus groups, shopper panels and use and attitude studies were first devised. Big data allows us to capture observational truths as opposed to claims. And psychology has moved on from psychoanalysis and behaviourism, to decision theory and behavioural economics. 

This shouldn’t be news to anyone in the research industry.  But it’s also true that despite what is discussed in the research journals and blogs, industry insiders definitively lag outsiders in the tech industry when it comes to putting new advances to work.  Why is this?

Some, like Dr Benny Cheung, a director at Decision Technology, suggest many don’t understand the limitations of the old approaches and so don’t see the advantages of these emerging techniques.

“As psychologists we know that two key pillars of existing approaches to market research – asking consumers to extrapolate decision making outside of its natural context/environment, and asking them to tell us why they acted in a certain way – are both flawed. Humans simply are very poor at doing these things.”

People can’t explain their behaviour, but there are tests that can accurately measure an individual’s personality in terms of the ‘big five’ traits, which in turn can predict their future behaviour. [Read more…]

How psychologists cope with cheating on personality tests

By Tomas Chamorro-Premuzic, PhD. 

Cheating a personality test

Are you cynical about personality tests? Do you worry that they may be a waste of time because the people filling them in are likely to fake their answers? Do you think that you might be able to skew the test results yourself? Does that make you think the results of all tests are therefore likely to be bogus?

Well, don’t worry. The chances are that if you’re given a well designed survey, all of those questions will have been factored in and effectively countered.

personality testPersonality tests have been used for clinical, educational, and employment assessment for more than 100 years – information I provide not only to show that they have a proven track record, but also because during that time the tests themselves have been submitted to rigorous assessment. These studies have produced three key findings and strategies for taking the faking out of the equation:

  1. Most people try to skew their results to the same degree. So, for instance, in high stakes tests such as those relating to job interviews, people tend to inflate the points they assume to be positive by around 10-20%. But because most people bend things in the same direction, it’s easy to see where meaningful differences remain.
  2. The best tests conceal their true intentions: people taking them don’t know what is really being assessed, or why certain questions are being asked. What’s more, plenty of tests can also assess how long people take to answer each question and alert assessors to any unusual response patterns or internal inconsistencies. The net result is that it’s generally better to answer honestly than try to game the system. [Read more…]

What makes a disruptive technology?

This article was first seen on – http://betanews.com/2014/08/12/what-makes-a-disruptive-technology/ 

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According to Clayton M Christensen, author of The Innovator’s Dilemma, disruptive innovations are characterized by their ability to create entirely new markets rather than merely update existing markets with new products. They are black swans, rare events where new thinking and changing markets combine to create radical change.

A common example is the light bulb and Pearl Street Station — a major gamble by Thomas Edison. Within years of its development the kerosene lighting industry was all but non-existent, and the world was a brighter place. (The kerosene industry had similarly put an end to the whaling industry — thankfully — a few decades earlier).

Disruptive innovations also tend to involve making things simpler and cheaper than the alternatives, with unexpected results on multiple sectors. The motor car in the late 1800s was too expensive to be disruptive, but Henry Ford’s innovations in the 20th century made it cheap enough to replace the horse drawn carriage (and suddenly there were no more street dung collectors providing manure for farmer’s crops…)

My company, VisualDNA, sits at the intersection of (at least) four disruptive innovations that have arisen over the last five years and that are already making their impact on global society.

I believe that as these four innovations continue to evolve over the second half of this decade, they will create the perfect conditions for VisualDNA’s unique approach to understanding people to create disruptive change on a global scale, across all industry sectors.

1. Big data

Five years ago this term almost didn’t exist but it is now one of the fastest growing ‘most searched for’ terms on the internet (according to Google Data Trends). Analysts Wikibon predict this new sector will grow from almost nothing in 2010 to $50bn dollars by 2017. A report by PAC predicts big data will impact on every aspect of the global economy during the same period.

PAC also found that the fastest growing area of all will be in services to understand big data. Most big data is historical and transactional. Understanding personality, psychology and motivation are the missing ingredients that will enable deep understanding of intent and truly predictive analytics.

VisualDNA’s unique ability to engage users and turn their personality into digital form will be at the forefront of providing this vital information to power conventional big data.

2. Psychology

Psychology is undergoing a number of dramatic changes as new technology allows us to understand how the brain and personality are linked. Neuroimaging allows us to visually track the workings of the brain and identify how different responses and our emotions work at a chemical and neuron-level. Daniel Kahneman’s work on decision-making and behavioral economics is just starting to make itself felt in the mainstream and will become increasingly influential as real-time big data allows us to understand and model human responses at a macro level. Computer scientists are developing ever more sophisticated simulations and models of the brain allowing experiments and analysis to be performed, changing the way we see the brain and raising the possibility of truly understanding ‘what makes us tick’.

As this understanding develops, it will have a major impact on our understanding of people and how they behave. VisualDNA is already leading the way in understanding how individuals behave online, and through our partnerships and research we will continue to be at the forefront of these developments. [Read more…]

The Most Useful Personality Quiz You’ll Take This Week

This article was first seen on The Muse on the 31st of July-  www.themuse.com/advice/the-most-useful-personality-quiz-youll-take-this-week 

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It was after spending 10 minutes taking a “what kind of sloth are you?” quiz that I knew I had a problem.

 

Those little BuzzFeed-style quizzes are so addictive (who doesn’t want to know more about their personality?), but unfortunately aren’t really helping any of us get further in life. (I don’t think my co-workers knowing that I’m a “cuddle sloth” is going to help us best online casino work better together.)

But, thanks to VisualDNA, us aspirational careerists who also have an unfortunate penchant for taking quizzes have a happy medium: the “Who Am I” assessment.

While it’s built in a similar style to your favorite BuzzFeed quiz—a series of questions that have you choose a photo that correlates with your answer—the results of this one are actually based on a well-respected model of personality assessment called “The Big Five.” [Read more…]

The Language of Feelings

In this inspiring talk, Alex the CEO and founder of VisualDNA, shows how today’s internet is powered by naivety.  People don’t understand the value of what they give away for free, i.e. their data.   Alex paints a picture of the foreseeable future where the ‘Internet of Feelings’ transforms our interactions between each other and suggests that from it all will develop a far better connectivity and understanding between people, and a better value exchange between services and their users.

Alex Willcock was recently described by The Guardian newspaper as ‘an Internet visionary’ for his leadership of VisualDNA, one of ‘Five British Tech Companies to Watch’. Alex and his team of 150 people based in London, have pioneered a movement to combine big data and psychology to deliver better understanding across the digital ecosystem including unlocking credit to tens of millions of people.

eTail Europe 2014 – will you be there?

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This year we are sending our very own Edward Weatherall over to the Queen Elizabeth II Conference Centre in London to attend eTail Europe. Are you attending?

eTail Europe is a conference focusing on customers, multi-platform understanding and supporting retail industry growth.

Ed will pose and discuss a variety of significantly telling questions throughout the session, including; Why do we call people who walk into stores ‘customers’ and people who shop online ‘users?’ The session will also focus on how VisualDNA is leveraging 30 years of combined Psychology, customer behaviour and big data to change the perceptions that retailers have of their online customers – moving away from clicks, visits and basket values to personality traits and behaviours.

[Read more…]

Did you attend Psych London 2014? VisualDNA did!

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Last week, we took part in the annual Psych London event hosted by Chinwag. Chinwag Psych is a full day conference covering psychology, neuroscience and behavioural economics. Its mission is to examine the rapidly changing disciplines and explore how they can be applied to business. From practical psychology-based case studies to cutting edge neuroscience, the day-long event was filled with thought-provoking presentations, panel sessions, informed Q & A sessions, plus plenty of time for networking.

This year, the structure of the day was determined by four key words: persuade, analyse, optimise and anticipate. Throughout the day, engaging speakers addressed questions such as ‘How can you be more persuasive?’; ‘When you’re designing a user’s experience, how do you know what’s working?’; ‘How can you optimise your current approach to get the results you want?’; and ‘What’s next?’ [Read more…]

VisualDNA in the news – Ed Weatherall in Retail Week

“Laura Heywood’s loyalty card feature highlighted the challenge of analysing multiple data sources for a single view of the customer: little wonder CMOs increasingly resemble CIOs these days.

For CMOs to have a chance of implementing their data insights these sources need to be brought together. By integrating our clients’ offline purchasing data with online behavioural data and self-declared psychographic data, we generate insights that can’t be found in any single data source.

With predictive analytics now making data more accessible and actionable for CMOs, big data will play an even bigger role in the battle to win and retain customers, so being able to actually use these data sources for marketing is key.”

Ed Weatherall, Director Business Development, VisualDNA

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