How can a product achieve user loyalty and a leading position on the market? Anyone who creates new digital products has wondered about this. But to answer this question, you need to understand how decision-making works and how it can be affected.
For the last few decades, this has been the subject of behavioral economics, which studies the social, psychological, emotional, behavioral, and economic relationships between consumer and product. In the digital realm, behavioral economics has merged with design into a new whole.
Why is it so important for startuppers, designers, and developers to study the laws of behavior and psychology? Knowing these principles helps businesses increase user engagement and the efficiency of their market offering, and may even result in the creation of new markets. We see examples of it all around us.
What exactly is this tool, what can it do, and what does it have to do with design?
Let’s take a look at the Design–Behavior–Economy sequence. Understanding how it works will help you map the behavior of your product, find the best way of positioning it on the market, and identify the necessary functions and features. In fact, it’s also useful to know these principles in everyday life: you will easily notice the crude exploitation of consumer psychology by unethical advertisers.
Even a small change in an app may seriously affect user engagement and satisfaction, which in its turn will affect the overall commercial success of your business. This is achieved through the principles of user–product interaction.
The Design–Behavior–Economy sequence implies building a user–product interaction scenario that is geared not only toward the user’s immediate needs but also their path, motives, triggers, and psychological mechanisms. This is the most general way of applying psychology in design. The products that follow this behavior are widely known. The ones that ignore it rarely make it past the concept stage. Understanding this sequence is essential for the success of any modern startup, given the current instability and likely emergence of what Nassim Taleb calls “black swans.”
Any interaction with the digital world, whether commercial or personal, is rife with successful applications of this sequence. Robinhood, Netflix, Uber, Slack, Airbnb — each of these solutions was revolutionary for its market niche, sometimes even creating its own “blue ocean” (as described in Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renée Mauborgne). Whereas traditionally “blue oceans” were about injecting a new meaning to the already existing niches, these days this process follows a different template: a conventional sector + a digital tool that completely changes how it is perceived by the consumer.
Sure, market environment, competition, and demand have all played their part in making these companies successful. But no less important were their intuitive design and a commitment to building stable, long-term psychological bonds. These may be the decisive factors for your startup, as well!
Using the above sequence and keeping user psychology in focus is what paves the way to revolutions that seem to come out of the blue, rocking the existing sectors and market niches.
Behavioral Design is the name that succinctly describes this tool and the Design–Behavior–Economy sequence it contains (see Digital Behavior Design by T. Dalton Combs and Ramsay A. Brown). It’s a tool for enhancing the necessary (and useful) actions by the user while at the same time lowering the chance of undesirable ones. Just like any tool (say, a hammer), it can be used for multiple purposes. Using it requires an ethical and responsible approach.
To understand how this tool can be used in practice, let’s break it down into constituent elements. You will notice many of them in the products you use and will be able to introduce them in your own startup.
Cue: this is what the user associates with a specific product (with the association preceding its actual use). There are different kinds of cues: internal (thoughts, feelings); external (a newsfeed post, a tune, other people’s opinions, etc.); and artificial (such as a logo controlled by the Facebook marketing team; to everyone else, it will be an external cue).
Action: this is what we want the user to do. The action should be useful, doable, and specific (“10-minute walk” as opposed to “short walk”). Remember that here the designer is almost a wizard, so they must use their powers only for constructive purposes.
Reward: this is the outcome of the action that will form a habit. This outcome must be not merely positive, but unexpected, even exciting. This process relies on the famed neurotransmitter dopamine, which keeps creating new neural pathways even as you are reading this article. The reward can take on different forms and manifestations, depending on the product and target audience.
This can radically change the user’s impression of many seemingly “boring” processes.
For example, the impressive animation that accompanies stock trading in the Robinhood app is designed to elicit a feeling of being pleasantly surprised, which will transform into a habit (at the same time demolishing the common stereotype that investing is hard).
Just as no two computers can be exactly the same (because they will store different data), many products will be customized for every individual user. The most obvious examples are the Facebook feed, the YouTube homepage, and Instagram. The trend toward greater personalization is growing exponentially, extending to exercise (apps and smartwatches), travel (Google Maps), and so on.
While Uber upset the entire taxi industry and left tens of thousands of drivers jobless in its first few years of operation, today it’s the primary source of income for hundreds of thousands more. It is perhaps the most straightforward example of market transformation based on the “blue ocean” strategy and an understanding of user psychology. Today, the company’s priorities include optimizing car services and cutting the amount of urban traffic, which will also minimize the environmental impact.
Another good example is Airbnb, which managed to create a “blue ocean” within an established market and has even surpassed the combined market capitalization of the top three hotel chains globally (Marriott, Hilton, and Hyatt). This tool is so easy to use that it has allowed millions of people around the world to find new sources of income by renting out their homes. This case is especially notable because the company’s careful strategy and use of behavioral design principles enabled it to overcome people’s traditional reluctance to share their homes with strangers.
It would be hard to find someone who has not felt the engaging influence of social media platforms such as Facebook, Instagram, TikTok, and so on. However, few people realize that it’s a carefully designed algorithm based on one of the strongest psychological effects known as variable reward (see Hooked by Nir Eyal). You don’t know what the algorithm will offer you next, do you?
Meanwhile, Robinhood has managed to overcome the common stereotype that the financial market is only accessible to professional investors and people with specialized backgrounds. The app significantly lowered the financial market entry threshold (to just a few dollars) as well as the age requirements for investors (leading to an unprecedented influx of millennials and zoomers). The overall volume of transactions grew as a result. This effect owes a lot to the app’s use of visual effects and user flow, which efficiently integrates the principles described in 3 above.
Today, the success of any digital product relies to a large extent on design and its psychological underpinnings. How can you apply these rules and principles in a real project?
Here are a few practical tips:
- Engage user emotions. It’s no secret that users often rely on emotions in decision-making. The designer’s job is to use this factor to encourage useful actions. In designing user flow, keep an eye on the CAR model and make sure to integrate its elements into your design.
- Follow a psychological approach to design, audience targeting, and product positioning. This will enable you to transform even the most traditional and established niches by creating your own “blue ocean.”
- Use your newly acquired skills ethically and positively. The target action must be beneficial to the user and their environment, creating value and encouraging positive externalities.