Don't Listen To Your Customers - Do This Instead | Kristen Berman | TEDxBerlin

Summary

The speaker, a behavioral scientist, reveals that the difference in retirement savings among companies isn't due to education, income, or age, but rather the default settings in place. Using the example of automatic enrollment in retirement savings, she explains how 'opt-out' systems lead to higher savings rates compared to 'opt-in' ones. She advocates for behavioral design, a three-step process involving behavioral diagnosis, identifying psychological biases, and real-world experimentation, to create solutions that lead to positive behavior change. The talk emphasizes the importance of studying actions over words to build effective products that help people be healthier, wealthier, and happier.

Takeaways

• 📊 There's a significant disparity in retirement savings among employees, with some companies having nearly 90% of employees saving, while others struggle to reach 50%.
• 🌟 Companies with high savings rates automatically enroll employees in retirement plans, making it the default action, whereas others require employees to opt-in, leading to lower participation.
• 👩‍🔬 The speaker, a behavioral scientist, emphasizes that understanding and influencing behavior is crucial for designing effective products and solutions.
• 🗣️ Traditional market research methods like interviews and surveys often fail to predict actual behavior accurately because they rely on what people say rather than what they do.
• 🚫 People tend to underreport past behaviors that are socially undesirable or forgettable, making it unreliable to base solutions on self-reported past actions.
• 🔮 When asked about future actions, people often overestimate their future compliance, envisioning an ideal self that doesn't account for real-life complexities.
• 🍏 Environmental factors significantly impact behavior, as illustrated by a company's failed attempt to encourage healthy eating by providing apples, which were ignored in favor of fries.
• 🤔 The 'why' questions are often misleading because people attribute their actions to rational, thoughtful decisions rather than the default or easiest options.
• 🛠 Behavioral design involves a three-step process: behavioral diagnosis, identifying psychological biases, and real-world experimentation to understand and influence behavior effectively.
• 🎓 A case study on increasing financial aid applications demonstrated the power of behavioral design by simplifying the application process and integrating it into the enrollment procedure, leading to a significant increase in applications.

Q & A

What is the key difference between companies with high and low employee retirement savings rates?

The key difference is that companies with high savings rates automatically enroll employees into retirement savings plans, making it the default action, whereas companies with low rates require employees to opt-in themselves.

Why do some employees fail to save for retirement despite having the intention to do so?

Employees may fail to save for retirement because they are not automatically enrolled in a savings plan and face the inertia of having to take action themselves, which they might not do due to various psychological biases and the complexity of the decision-making environment.

What role does behavioral science play in designing products that change behavior?

Behavioral science plays a crucial role by providing insights into how people actually behave and the psychological biases that influence their decisions, allowing for the design of products that nudge users towards desired behaviors.

Why are traditional methods of understanding customer behavior, like interviews and surveys, often ineffective?

Traditional methods are often ineffective because they rely on what people say they will do, rather than what they actually do. People's self-reported behaviors and intentions can be influenced by social desirability bias, forgetfulness, and an inability to accurately predict future actions.

What is the three-step process of behavioral design as mentioned in the script?

The three-step process of behavioral design includes: 1) Conducting a behavioral diagnosis to map out all the steps and actions required for a desired outcome, 2) Identifying psychological biases that affect decision-making, and 3) Studying what people actually do through real-world experiments rather than relying on what they say.

How does the example of Carla illustrate the impact of default settings on retirement savings?

Carla, who earns under thirty thousand dollars a year, is saving for retirement because she was automatically enrolled in a savings plan when she was hired. This shows that defaults can significantly influence behavior, leading to positive outcomes like retirement savings.

What is the significance of the 'behavioral diagnosis' in the context of behavioral design?

Behavioral diagnosis is significant as it helps identify all the steps and actions required to achieve a desired outcome, allowing designers to understand and address the barriers and facilitators in the decision-making process.

Can you provide an example of how behavioral design was applied to solve a real-world problem mentioned in the script?

Behavioral design was applied to increase financial aid applications among eligible students. By diagnosing the application process, identifying cognitive overload as a bias, and running an experiment to simplify the decision, the likelihood of students applying for aid was significantly increased.

Why do people often underreport their past behaviors in surveys?

People often underreport their past behaviors in surveys due to social desirability bias, where they report what they think is socially acceptable or what they believe others will report, and because of forgetfulness, as they may not accurately remember their past actions.

How does the script challenge the common belief that people's future actions are determined by their rational decisions?

The script challenges this belief by demonstrating that people's future actions are often not accurately predicted by their stated intentions. Instead, environmental factors and psychological biases play a significant role in determining actual behavior.

What is the importance of studying actual behavior rather than relying on self-reported reasons for actions?

Studying actual behavior is important because it provides a more accurate understanding of how people truly act in various situations. Relying on self-reported reasons can be misleading due to biases and inaccuracies in how people perceive and report their motivations and actions.

Outlines

00:00

💼 The Impact of Automatic Enrollment on Retirement Savings

The paragraph discusses the significant difference in retirement savings between companies with high and low employee savings rates. It suggests that the usual factors like education, income, or age do not explain this gap. Instead, the key lies in the company's policy on retirement savings. Employees at companies with automatic enrollment in retirement savings tend to save more because they are opted into the program by default, whereas those who must opt themselves in often do not start saving. The speaker, a behavioral scientist, emphasizes that people's actions do not align with their stated reasons for saving, highlighting the importance of studying behavior rather than relying on self-reported motivations.

05:01

🤔 Behavioral Discrepancies: What People Say vs. What They Do

This section delves into the discrepancy between what people claim they will do and what they actually do, particularly in the context of health behaviors like hand-washing. It points out that people often underreport undesirable past behaviors and overestimate their future compliance with beneficial actions. The speaker explains that people's predictions of their future actions are often inaccurate due to an overly optimistic view of themselves and an inability to anticipate real-life obstacles. The paragraph also illustrates how environmental factors can influence behavior more than stated preferences, using the example of a company providing free apples to encourage healthy eating, which failed because the apples were not taken due to their placement near less healthy options.

10:05

🧠 Behavioral Design: Beyond Surveys and Interviews

The speaker introduces behavioral design as a methodology that leverages insights from behavioral science to inform design decisions. It outlines a three-step process: behavioral diagnosis to map out the steps to a desired outcome, identifying psychological biases that affect decision-making, and conducting real-world experiments to study actual behavior rather than relying on self-reported intentions. The speaker shares a case study of increasing financial aid applications among eligible students, where traditional questioning methods failed, but behavioral design strategies successfully tripled the application rate by integrating the application process into enrollment, thus streamlining the decision and reducing cognitive overload.

15:08

🌟 The Future of Behavioral Design

In the concluding paragraph, the speaker emphasizes the importance of adopting behavioral design for organizations aiming to improve people's well-being. It calls for a shift from traditional methods like interviews and surveys, which often yield inaccurate predictions of behavior, to studying and shaping actual behavior through environmental design. The speaker argues that by understanding and influencing the factors that truly drive behavior, organizations can create solutions that lead to happier, healthier, and wealthier lives.

Keywords

💡Behavioral Science

Behavioral science is an interdisciplinary field that studies human behavior and the processes underlying it, integrating perspectives from psychology, sociology, neuroscience, and economics. In the video, behavioral science is crucial as it forms the basis for understanding why people do not always act in line with what they say they will do. The speaker, a behavioral scientist, uses this field to help companies design products that encourage positive behaviors, such as saving for retirement.

💡Default

A default setting is a preselected option in a system that requires no action to be chosen. In the context of the video, defaults are shown to have a significant impact on behavior. For example, companies that automatically enroll employees in retirement savings plans see higher participation rates because the default action is to save, which aligns with the concept of 'nudging' people towards beneficial outcomes without forcing them.

💡Retirement Savings

Retirement savings refer to the funds accumulated over an individual's working life to support themselves during retirement. The video emphasizes the importance of saving for retirement and how behavioral design can influence this behavior. It contrasts companies with high and low employee savings rates, highlighting the impact of automatic enrollment as a default setting.

💡Behavioral Design

Behavioral design is the application of insights from behavioral science to inform design decisions. It is a three-step process involving a behavioral diagnosis, identifying psychological biases, and conducting real-world experiments. The video showcases how behavioral design can lead to meaningful changes in behavior, such as increasing financial aid applications among students, by focusing on what people actually do rather than what they say they will do.

💡Cognitive Overload

Cognitive overload occurs when individuals have too much information to process, or when they are making complex decisions that require significant mental effort. In the video, it is identified as a psychological bias that prevents students from applying for financial aid. By simplifying the application process and integrating it into the enrollment procedure, the speaker's team reduces cognitive overload and increases application rates.

💡Financial Aid

Financial aid refers to the various forms of assistance, such as grants, scholarships, and loans, provided to students to help them afford education. The video uses the example of financial aid to illustrate how behavioral design can address the gap between intention and action. It points out that simply providing information about eligibility does not translate into increased applications, highlighting the need for behavioral interventions.

💡Psychological Biases

Psychological biases are systematic patterns of deviation from rationality in judgment, where irrational processes affect decision-making. The video discusses how biases like loss aversion, social norms, and optimism can influence decisions. Understanding these biases is key to behavioral design, as it allows for the creation of interventions that account for how people actually behave rather than relying on rational assumptions.

💡Optimism Bias

Optimism bias is a psychological bias where individuals tend to be overly optimistic about their own abilities, future outcomes, or the likelihood of positive events. In the video, this bias is mentioned as a factor that can lead people to overestimate their ability to remember to take medication or save for retirement, which is why behavioral design interventions are necessary to counteract such biases.

💡Loss Aversion

Loss aversion is a cognitive bias where people prefer avoiding losses to acquiring equivalent gains. The video does not explicitly mention loss aversion, but it is a concept within behavioral science that could be relevant to understanding why defaults are effective. People may be more motivated to avoid the 'loss' of missing out on retirement savings or other benefits than to actively seek out the gains.

💡Surveys and Interviews

Surveys and interviews are research tools used to collect data from individuals, typically to understand their opinions, behaviors, or needs. The video critiques the reliance on these methods for designing products and services, arguing that they often fail to predict actual behavior accurately. Instead, the speaker advocates for studying what people do through behavioral design and experimentation.

💡Healthcare Providers

Healthcare providers are organizations or individuals that deliver healthcare services. The video mentions healthcare providers in the context of medication adherence, noting that despite their role in helping patients, many patients still fail to take their medications as prescribed. This highlights the need for behavioral design to address the gap between intention and action in healthcare.

Highlights

Some companies have close to 50% of their employees saving for retirement, while others have over 90%.

The difference in retirement savings is not explained by the usual suspects like education, income, or age.

Automatic enrollment in retirement savings is a key factor for high savings rates.

Behavioral scientist emphasizes the importance of studying what people do, not just what they say.

People tend to overestimate their future actions, like saving for retirement, due to an idealized self-image.

Traditional methods of understanding customer behavior through interviews and surveys are often misleading.

People often underreport their past behaviors, especially those not socially acceptable.

Future behavior predictions are often inaccurate due to an inability to forecast all environmental factors.

Environmental context plays a significant role in decision-making, which is often overlooked in surveys.

Behavioral design is a three-step process involving behavioral diagnosis, identifying psychological biases, and real-world experimentation.

Behavioral design has been successfully applied in companies like Google, Aetna, and PayPal.

In the case of student loan debt, traditional questioning led to incorrect assumptions about student behavior.

A behavioral design experiment at a college increased financial aid applications by simplifying the process.

Behavioral design focuses on shaping the environment to lead to the best outcomes rather than relying on self-reported intentions.

The future of organizations lies in studying actual behavior and applying behavioral design for meaningful change.

Transcripts

this is one of my favorite charts in

social science some companies have close

to 50% of their employees saving for

retirement but some have over 90 percent

employees on the right will be sipping

mimosas on the beach in their retirement

communities

well employees on the Left will likely

be hanging out in their cubicles well

into their 70s so what explains the

difference between these two types of

companies that could lead to such a

massive gap raise your hand if you think

it's level of Education raise your hand

if you think it's income raise your hand

if you think it's age it turns out it

has nothing to do with the usual

suspects

let me ensure you - Carla Carla makes

under thirty thousand dollars a year

she works at a retail clothing shop she

has an eight-year-old son and things are

tight but Carla is saving for retirement

she is on the right this secret for

Carla and others like her is the form

that she fills out when she first gets

hired in this chart employees on the

right are automatically enrolled into

retirement savings

it was the default they did nothing and

they start saving people on the Left had

to fill out a form themselves they also

did nothing but instead they didn't

start saving I'm a behavioral scientist

I've worked for the last decade in

Silicon Valley helping hundreds of

companies build products that change

behavior for good when we ask people why

are you saving for retirement over 80

percent say because I care about my

future

it sounds great it's just flat-out wrong

could you imagine answering an interview

question with because it was the default

of course not and only 6% of people do

as a behavioral scientist I study the

gap between what people say they will do

and what they actually do most

organizations today design products by

talking to customers they ask some

questions with interviews they do

surveys they do focus groups and it

sounds logical right the problem is it's

not working financial providers should

help us with overspending but our bank

accounts aren't growing health care

providers should help us with overeating

but our waste lines are definitely

growing social media should help us

connect but we are lonelier than ever

today I'm gonna give you a sneak peek

into my work we'll unpack why we study

what people do and not what they say

we'll go into how to actually understand

behavior and build solutions that help

people be happier healthier and

wealthier traditionally companies ask

three types of questions to understand

you their customer they ask you about

the past what have you done

they ask you about the future what will

you do and they ask you why you do

something but can we trust the answers

to these questions maybe less than you

think let's take each one and figure out

if it could be misleading us so first

the past what have you done

so imagine you work at a hospital and

want to avoid the unnecessary spread of

infection increasing hand-washing is a

proven solution so if you ask people to

report their past hand-washing behavior

can you trust what they say so let's try

this how many of you forgot to wash your

hands the last time you went to the

bathroom please raise your hands and

avoid your neighbors face so are you

telling the truth well we put cameras in

the bathroom to figure out who could be

lying just kidding but it is easy to see

that you may lie when asked this

question in public but even in a private

survey people say they forget to wash

their hands only one in a hundred times

they go to the toilet people tend to

underreport

questions about the past behavior for

two reasons first it's just not socially

acceptable to tell the truth so do you

text and drive of course not

do you eat chocolate in the morning

before work I have never done that do

you forget to wash your hands nope

people often answer what they think

everybody else will answer we could

never fix hand-washing if we built

solutions based on those answers and

second we just forget you've likely been

to the bathroom 2,500 times do you

really remember the 2470 first time we

cannot report accurately if we do not

remember so let's take the second type

of question questions that ask us about

the future what will you do so imagine

you're a healthcare organization that

helps people with high blood pressure or

hypertension patients that fail to take

their medication on a daily basis have

three times higher risk of dying of

stroke compared to patients who take it

properly so as an organization you may

want to ask people if they need help

remembering to take the

life-saving medication in our study 58%

of people said that they don't need any

help to take this medication they think

if taking the medication is important of

course I will do it

sadly hypertension adherence is famously

low 50% of people stop taking it

entirely within the first year how could

people get this so wrong they say they

don't need any help but clearly they do

when asking people about their future

behavior they are imagining an ideal

self in the future I am a perfect person

in the future of course I will take my

life-saving medication they forget that

in the present moment

life is happening you have to take your

kid to work early or there's a work

fire-drill going on people cannot

predict their future accurately because

they cannot forecast all of the other

things going on in their environment and

how they will react let's take another

example so a large company in Los

Angeles wanted to encourage their

employees to eat healthier in surveys 60

percent of people say that they would

take an apple if it was put out so the

company began putting out free apples in

their cafeteria and what happened nobody

took the apples so the company called us

to unpack what was going on

first we observed their lunch hour so

sure enough apples were prominently

displayed but after two hours no apples

were taken but after one look at their

cafeteria we figured out what was going

on the apples were competing with the

fries

when asking people questions about their

future behavior organizations assume

that our responses represent strong

preferences sure we like apples but if

the environment isn't conducive to

taking apples they're not cut up or the

next to the greasy fries then we won't

take the Apple interview questions are

asked in a vacuum as if the environment

of decision making has no effect on our

behavior so unless we could replicate

the exact environment of decision making

we cannot trust people to tell us what

they will or they won't do what about

the third type of question questions

that ask us why we do something these

types of questions are the most

misleading this is the Carla why are you

saving for retirement question when

asked people say that they are saving

for retirement because they care about

their future and it's true they do care

about their future but that is

completely unrelated to why they are

saving or not saving they choose to save

because it was the easiest option at the

time it was the default we act as if we

are highly rational people and this is

reflected in how we answer questions I

thought about this deeply and I

considered all the options and I made

the best decision for me it's unlikely

we'd say something like I was just too

lazy to uncheck that box or I did

whatever else is doing or I actually

have no idea

and yet these statements are closer to

the truth so if we want to figure out

why somebody does what they do we cannot

ask them but if we can't trust people to

tell us the truth how do organizations

understand behavior and build solutions

that help people

so the answer is behavioral design

behavioral design uses insights from the

field of behavioral science to inform

design decisions behavioral design is a

three-step process first we do a

behavioral diagnosis this is a literal

map of every single step every single

action somebody must take to get to the

desired outcome and then we identify the

psychological biases at play when making

a decision this could be social norms or

loss aversion or optimism bias these

biases affect our decision-making and

third we study what people do and not

what they say this is a real-world

experiment we've done behavioral design

with companies like Google Aetna PayPal

and many others let's take an example so

student loan debt is crushing us college

students however two million students

we're eligible to apply for free

financial aid and did not apply when you

ask students why didn't you apply they

say lack of information about financial

aid eligibility

however when Harvard researchers didn't

experiment they found that giving

students information about financial aid

eligibility had no effect on behavior

change this is a domain in which asking

people questions will surely lead you

astray our team was tasked with

increasing applications and we used

behavioral design the first step we did

a behavioral diagnosis and found out

that it was over 20 steps and close to

an hour for students to complete this

application second we identified that

cognitive overload was the bias most

present in student decision-making

weighing back-and-forth the option to

apply or not apply

created this cognitive overload that

pushed the decision off until tomorrow

tomorrow came the student still have

decided and the deadline passed and

finally we ran an experiment to reduce

cognitive overload for half the student

population we texted them that they

could apply and a deadline for the other

half we texted them letting them know

that filling out the financial aid form

was now a part of the enrollment process

we didn't force students to apply but we

removed the decision deadlock by making

it part of the standard process for

people who did not apply the prior year

our experiment tripled the likelihood

that a student would apply for financial

aid if this is rolled out an additional

two hundred and thirty thousand more

students may apply and get financial aid

this is behavioral design from diagnosis

to identifying bias to experimentation

we create meaningful behavior change

because instead of asking people why

didn't you apply we watch what they do

and shape the environment to lead to the

best outcome the stakes are high so

people want to eat healthy they want to

save for retirement they want to take

their pills but they don't because in

nearly every domain solutions are still

being built based on interviews surveys

and focus groups we need to move from

relying on asking people questions and

move to studying what they actually do

this is behavioral design this is the

future for organizations that want to

make us happier healthier and wealthier

thank you

[Applause]