People aren’t stupid – they just often act that way. Noted behavioral economist Dan Ariely explains what that should mean for strategists.
Dan Ariely is one of the world’s foremost experts in behavioral economics, the study of how people behave when making business and financial decisions.
Ariely’s insights should make executives think twice about the wisdom of the decisions they regularly make — as well as the inner processes they rely on to make those decisions. Why, for example, will managers veto a 10% cost increase for a $1 million project while thinking nothing of a 1% overrun on a $10 million budget — even though the actual amount is the same? Why will they often agonize trying to choose between two close alternatives when they’re frequently better off just flipping a coin?
In this wide-ranging interview, Ariely talks about how Apple Inc.’s initial decision to price the iPhone at $600 only to drop it to $400 soon after might not have been a mistake but instead a very shrewd marketing maneuver. He also explains why a product monopoly might not necessarily be desirable because it can lead to consumer confusion, resulting in slow sales. With regards to hiring practices, Ariely strongly questions the interviewing processes routinely used and asserts that some companies might be better off hiring graduates from reputable colleges at random. Toward the end of the interview, he describes his research that has investigated ways in which teams might be better able to make group decisions. Lastly, Ariely explains one of his most valuable managerial insights — that adding even just a little meaning to employees’ work will often increase their motivation enormously.
3 Comments On: A Manager’s Guide to Human Irrationalities
If we do the restraurant ordering test in China, the result might be different. Ordering the item ordered by the first one is not a problem in China. The need to be seen as individualistic is not as important in the dinner table.
too few versus too many choices is known to marketers for a long time. but the issue of the customer mind space has not been successfully resolved by any organization. though lot of advances market research techniques are available. so it may be our area of concern, but to do something about it frankly may not be possible
I would be glad to test the software on improving group decision making. I am in charge of business development and making good decisions is extremely important to our group.