The little voice
Human decision-making is often flawed due to cognitive biases, limited self-control, and emotional influences. Unlike traditional economic models that assume people act rationally, behavioural economics recognises that people need subtle guidance to make better choices. This guidance can be referred to as a nudge. Nudges leverage principles like default options, reminders, and choice architecture to steer people toward healthier, wealthier, and more socially beneficial outcomes without restricting their freedom of choice.
Behavioural economics offers a revolutionary perspective on influence, blending rational science with emotional art. By understanding cognitive biases, companies can move beyond traditional “rational” persuasion methods and instead design experiences that resonate emotionally and instinctively with audiences. This new perspective shifts the focus from forcing decisions to shaping environments where better decisions are the natural result.
Unlike classical economics, which assumes people are rational, behavioural economics reveals that choice architecture—the way choices are framed, presented, and structured—matters more than logic alone. This shift has changed the art of influence, enabling marketers to use “nudges” like scarcity cues, personalised content, and small wins (like progress bars) to guide user behaviour without coercion. The science is clear: when companies design for human psychology, they achieve stronger emotional connections, sustained engagement, and higher conversion rates.
For example, automatically enrolling employees in retirement savings plans (with the option to opt-out) increases participation rates significantly, addressing issues related to bounded willpower and procrastination. Similarly, placing healthy foods at eye level in stores encourages better dietary choices by capitalising on the availability heuristic, where people are more likely to choose what is most visible.
Nudges are essential because they improve individual well-being while also generating positive societal impacts. Encouraging better health choices reduces healthcare costs, while promoting financial literacy and savings behaviour enhances long-term financial security. On a larger scale, nudges can promote environmentally friendly behaviours, such as reducing energy consumption, by showing people how their usage compares to their neighbours.
Ultimately, better-designed nudges address the real-world limitations of human decision-making, helping people achieve outcomes they genuinely want instead of struggling to interpret and justify “gut feelings.”
The quest to understand
Our “gut feelings” are shaped by mental shortcuts, known as heuristics, which can mislead us, but is essential for navigating complexity and uncertainty, offering a fast, instinctive response when rational deliberation is too slow, or we simply do not have the information necessary to reason through a situation. The field that aims to study and understand these heuristics is called Behavioural Economics and encompasses a range of principles that explain how humans think, feel, and act, particularly in decision-making and behaviour.
Behavioural economics challenges the traditional view that people are purely rational decision-makers. Instead, it recognises that human behaviour is influenced by emotions, impulses, and environmental factors. Unlike neoclassical economics, which assumes people always act in their best long-term interest, behavioural economics highlights how people often make suboptimal choices despite knowing better. Through experiments and real-world observations, it reveals that human decisions are shaped by psychological and situational factors, not just logic or reason.
The key principles of behavioural economics reveal the complex nature of human decision-making, emphasising the limits of rationality and the influence of psychological biases.
The availability heuristic describes how people judge the likelihood of events based on how easily examples come to mind. For instance, after hearing about a plane crash, people may overestimate the danger of flying, even if statistically it’s safer than driving. This ties closely to bounded rationality, which suggests that people make decisions with limited cognitive resources, information, and time, relying on mental shortcuts like the availability heuristic instead of exhaustive analysis.
Bounded self-interest reflects how people do not always act in pure self-interest, often considering fairness, altruism, or social norms when making choices. This principle complements bounded willpower, which highlights people’s difficulty in resisting immediate temptations for long-term gains, such as overspending or procrastinating on health goals. Together, these principles show how human decision-making diverges from the “rational agent” model assumed in classical economics.
Prospect theory introduces the idea that people evaluate potential gains and losses relative to a reference point, not absolute change. It connects directly to loss aversion, where people feel the pain of losses more acutely than the pleasure of equivalent gains, leading to risk-averse behaviour in gains and risk-seeking behaviour in losses. This helps explain phenomena like reluctance to sell losing investments or gamble more aggressively to “win back” losses.
The sunk-cost fallacy occurs when people continue an endeavour because they have already invested resources, even when it’s irrational to do so. It’s fuelled by loss aversion, as people feel compelled to avoid admitting a loss. This can sometimes inform mental accounting which refers to the human tendency to categorize money differently depending on the context even if the value is the same leading to inconsistent financial decisions. For example, a person might buy more of a discounted item, leading them to spend the same monetary amount than if they had just purchased the more expensive item.
These principles collectively demonstrate that human decision-making is far from perfectly rational. They are essential to behavioural economics because they expose the psychological underpinnings of economic behaviour, providing insight into consumer choices, policy design, and financial decision-making.
Breaking barriers
Shifting to an approach driven and supported by behavioural economics research and practices requires rethinking long-standing assumptions, which can face pushback from stakeholders accustomed to conventional methods. There is also an ethical debate surrounding nudges. Critics argue that nudging can be manipulative, especially if people are unaware they are being guided. The line between benevolent guidance and coercion is often blurry, raising questions about autonomy, consent, and the ethical limits of behavioural interventions. Addressing these concerns requires transparency and public trust.
Measurement and evaluation also present significant challenges. Unlike traditional policies that rely on clear-cut metrics, behavioural interventions often produce subtle, long-term, and context-dependent outcomes. Success in implementing behavioural science requires rigorous testing, pilot studies, and ongoing adjustment, which can be costly, time-consuming, and politically difficult to justify without guaranteed results.
There is also a lack of interdisciplinary collaboration. Behavioural insights require input from psychology, economics, sociology, and data science, but policy and business environments often operate in silos. Without cross-disciplinary cooperation, it’s hard to design interventions that account for the full complexity of human behaviour. Overcoming this hurdle requires breaking down institutional barriers and fostering a culture of collaboration.
The ultimate goal of implementing behavioural insights as standard practice is to create a mutually beneficial system where business outcomes improve while also supporting customer well-being and satisfaction.
We need to demonstrate that using behavioural insights can increase profitability, operational efficiency, and competitive advantage. Behavioural interventions, such as nudges, reduce costs associated with customer churn, payment defaults, and decision fatigue. For example, simplifying user interfaces or offering personalized product recommendations can boost conversion rates and revenue. By highlighting the return on investment (ROI) from these strategies, businesses can build stakeholder confidence in the long-term benefits of behavioural-driven decision-making.
For customers, the goal is to enhance their decision-making experience and empower them to make better choices. Behavioural insights can simplify complex decisions, reduce cognitive overload, and promote healthier financial, health, or consumption habits. For instance, “save more tomorrow” programs encourage employees to increase savings incrementally over time, helping them achieve long-term goals with minimal friction. By prioritizing customer welfare, businesses foster trust, loyalty, and brand reputation, which in turn drives growth and customer retention.
Ultimately, aligning stakeholder interests with customer well-being ensures that behavioural insights aren’t seen as manipulative but as tools for positive change.
Put it to the test
Understanding behavioural economics and the effect it has on human decision-making can drive innovation, improve user experience, and increase profitability. By leveraging the availability heuristic, companies can design user interfaces and recommendation systems that prioritise visibility and ease of access. For example, search engines and streaming platforms highlight trending or “popular” content because users are more likely to engage with familiar or top-of-mind options. This increases user interaction, retention, and ad revenue.
Bounded rationality highlights that users have limited cognitive resources, so simplifying complex choices becomes a strategic advantage. Tech companies like Apple and Google reduce decision fatigue by offering clean, intuitive interfaces and minimal choices, leading to faster decision-making and higher customer satisfaction. Similarly, bounded willpower can be addressed by introducing reminders, deadlines, or “commitment devices” like app-based fitness trackers that nudge users toward healthier habits, promoting engagement and brand loyalty. Companies offering subscription services capitalise on bounded self-interest by incorporating social proof, such as user reviews or “people like you also bought” prompts, encouraging people to make decisions that align with community norms.
Prospect theory and loss aversion are central to pricing strategies, especially in e-commerce and SaaS (software as a service) models. Companies use free trials, limited-time offers, and “last chance” notifications to create a perception of potential loss, which motivates quicker purchase decisions. Loss aversion also underpins the “freemium” model, where users are reluctant to lose access to premium features, encouraging them to convert to paid subscriptions. Meanwhile, the sunk-cost fallacy is exploited in gaming, social media, and online platforms where users invest time or effort (like building in-game assets or creating profiles) and are reluctant to leave, keeping engagement high.
Mental accounting informs how companies design payment structures, such as “buy now, pay later” plans, subscription bundling, and loyalty rewards. By framing payments as smaller, manageable chunks, companies reduce perceived financial pain, increasing conversions. Across the industry, these principles not only enhance individual company performance but also drive sector-wide innovation. By making products more user-friendly, accessible, and personalised, companies increase adoption of technology, accelerate digital transformation, and influence industry standards. In essence, applying behavioural economics enables science and tech firms to better align with human behaviour, enhancing both individual firm competitiveness and the overall industry’s capacity for user-centric design and growth.
Insights in action
We can adapt these principles to foster deeper emotional connections, drive audience engagement, and increase revenue. While some companies use behavioural science to simplify decision-making and boost conversions, others can leverage them to craft more immersive experiences, build fan loyalty, and optimise content monetisation strategies.
The availability heuristic can be used to shape how content is presented. Just as tech firms prioritise “trending” items, entertainment companies can use “top picks,” “most-watched,” or “fan favourites” sections on streaming platforms to influence viewing choices. Highlighting high-visibility content increases engagement, especially when combined with social proof, like “90% of viewers watched this next.” This approach not only drives views but also boosts content discovery for creators.
Bounded rationality can be applied in content curation and recommendation algorithms. With the overwhelming number of streaming options, platforms like Netflix and Spotify reduce cognitive overload by using AI-driven personalisation to offer tailored recommendations. Creative companies can refine this approach by adding contextual recommendations (like mood-based playlists or seasonally relevant films) to ensure viewers feel their needs are met without extensive searching. Bounded willpower can be leveraged in subscription models, such as automatically rolling over free trials or encouraging binge-watching with “next episode” countdowns. By reducing friction and encouraging continuous engagement, entertainment companies increase screen time, thereby driving ad revenue or justifying subscription fees.
Loss aversion is evident in “fear of missing out” (FOMO) tactics, such as limited-time releases, exclusive access to early screenings, or artist pre-sale concert tickets. These scarcity-based strategies increase urgency and prompt faster action from fans. Prospect theory can be used in dynamic pricing for concert tickets, where early-bird prices are framed as “discounts” relative to higher future prices. This framing makes fans feel they’re gaining a deal, driving early sales. Additionally, the sunk-cost fallacy is a major driver of fan loyalty, especially in entertainment franchises. Once fans have invested time in binge-watching a multi-season series or following an artist’s career, they are more likely to stay engaged with sequels, spin-offs, or merchandise, as they feel a psychological need to see the story through to completion.
Mental accounting can be used to frame subscription fees or in-app purchases as “micro-payments” rather than large expenses. For instance, offering users the option to buy individual episodes, virtual concert tickets, or in-game content using “coins” or platform-specific currencies makes spending feel less tangible. This encourages fans to make more frequent purchases while perceiving them as smaller, isolated costs rather than part of a larger spending pattern.
The emotional nature of consuming creative content gives us, those who produce that content in the form of our products and services for our patrons, a distinct advantage. The opportunity to more deeply leverage psychological effects like nostalgia, excitement, and curiosity to create memorable and lasting audience experiences is presented to us, and we must seize it.
Behaviour decoded
Businesses that achieve this alignment position themselves as ethical market leaders, driving shared value for all parties involved while building a foundation for long-term success and social responsibility. By prioritising ethical transparency, rigorous evaluation, and interdisciplinary collaboration, stakeholders can create more effective, human-centred solutions to pressing societal issues. Embedding behavioural insights into operations, is an intentional step showing that the business aims to drive sustainable growth, customer loyalty, and social impact and adopting the key principles can turn passive audiences into active, loyal participants. Through strategic use of FOMO, curated recommendations, personalised experiences, and dynamic pricing, they increase fan engagement, boost revenue, and shape industry norms.
Spotify’s annual “Wrapped” campaign provides users with a personalised summary of their most-listened-to songs, artists, and genres. The campaign encourages users to share their Wrapped stats on social media, amplifying visibility and participation. The availability heuristic is at play, as people are more likely to engage with and share content that is highly personal, recent, and memorable. Loss aversion is also present, as users feel compelled to participate for fear of missing out (FOMO) on a collective cultural experience. The campaign drives massive social engagement, increases brand visibility, and reinforces emotional attachment to Spotify as a “partner” in users’ musical journeys.
Amazon offers “buy now, pay later” options, allowing customers to split payments into smaller, interest-free instalments. This strategy taps into mental accounting, where smaller, recurring payments are viewed as less painful than a large, single expense. Prospect theory also plays a role, as customers perceive the initial cost reduction (smaller upfront payment) as a gain, which feels psychologically rewarding. The approach increases purchase conversions, reduces shopping cart abandonment, and drives impulse buying, especially for higher-priced products.
Tinder introduced the “Super Like” option, which gives users a limited number of enhanced “likes” that notify the other person of extra interest. Loss aversion plays a role, as users feel compelled to use their limited daily Super Likes to avoid “wasting” them. Prospect theory is also relevant, as users perceive a “Super Like” as a more valuable interaction than a standard like, increasing its emotional significance. This feature increased app engagement, boosted paid subscriptions (as users could buy additional Super Likes), and gamified the dating experience, making it more exciting and emotionally charged.
At its core, behavioural economics merges data-driven science with creative storytelling. While tech companies use algorithms to optimise choice architecture, creative industries turn these insights into compelling emotional experiences. For instance, gaming companies use sunk-cost fallacy principles to keep players engaged, while entertainment platforms apply loss aversion and FOMO to keep viewers watching. This interdisciplinary approach unlocks a holistic view of influence that goes beyond transactions, fostering deeper human connections with brands, products, and platforms.
As this field evolves, we can expect even more personalised, context-aware experiences. AI-driven recommendation engines, emotionally intelligent apps, and adaptive choice environments will shift the balance of power toward companies that master the science of human emotion. This will reshape not just individual industries but the broader art of influence itself.
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