Behavioral Economics and Social Games Playdom Business Intelligence Team Dave Botkin Elena Rykhlevskaia

Agenda How does brain make $$ decisions Behavioral economics principles to: Help customers understand their preferences Price virtual goods Influence purchase decisions

Your money and your brain We all look the same in an MRI machine

Your brain knows your decision before you know it Nucleus accumbens Prefrontal cortex Anterior insula Gain prediction Loss prediction Strategic reasoning + execution

Brain activation predicts your decision to purchase

How do we decide? Reason guides soul to truthIntelligent intuition Reason vs. emotions Reason + emotions

Rational + Emotional = Decision Ames room: heuristics cause a mistake Emotions are a decision making resource Fast Help with complex choices Emotions can misguide us Heuristics / biases

Helping game players make a decision How do you help them discover their preferences? How do you price virtual goods? How do you influence users to buy? Know what they want Know what they are willing to pay Inspire immediate action Gain prediction Reasoning & execution Loss prediction

Help customers find what they want Efficiency Aesthetics Different customers value different things. E.g.: Financial gain/loss optimization Time Revenge & competition

Revenge and competition

Saving time

Efficiency seekers choose best alternatives

Which one would you choose?

Efficiency seeker’s city

Decorator’s city

Aesthetes / Decorators chose things they “like” Don’t know own preferences that well Context matters Rely on reference points to understand own preferences

We do not know our preferences well

Which sweetheart would you buy? $32,000 $30,000 STEVE THE COMEDIAN $32,000 MOST FUN

Context matters Online only - $59.00 Online + print - $ Print only - $ Online Online+Print Print Only Percent sales 3 options 2 options

Financial gain/loss optimization Deals, discounts and bundles

Increasing perceived value Good things cost more $$$ Brain pleasure centers light up to pricier goods Expensive drugs work better Lower priced items assumed to be of lower value Good things are wanted by everyone else

Pricing Coherent arbitrariness - there is no “right” price in a consumer’s mind How much are customers willing to pay? Anchoring and reference – people use nearby comparison and adjustment

How do we infer value? $279$429

Anchoring 59% 3% Willing to attend a poetry reading 35% 8% Would attend for free

Default option provides an anchor

Conversion Avoid choice overload Minimize perceived loss with respect to gain Use weapons of influence

Avoid choice overload % customers who purchased jam jam variety offered for tasting

What would you change in this store front to help customer decide?

Minimize perceived loss with respect to gain Loss aversion: Losses are 3X more painful than gains are pleasurable Paid contract spoilage recovery vs. instant completion: 3x more users opt in

Loss aversion KEEPKEEP

Influence ammo: Social referencing Validation Scarcity Conformity

Influence ammo: Reciprocity

Recap Know what your customers want Know what they are willing to pay Inspire immediate action

Resources

Treat virtual goods as retail and consumer products Reference successful retail practices outside of the social gaming space Research psychology of consumption Framing and presentation Optimize number of choices Experiment with context Make some options “pop” Techniques for suggesting a price Anchoring, reference points Try charging 2X more Things to try today

Thanks!