Friction is bad for business
In 2011 New Zealand had a savings problem.
The truth is, New Zealanders spent way too much money on impulse purchases. They spent NZ$ 16.1 million EVERY. SINGLE. DAY.
And they saved too little. In fact, only 49% had a savings account.
That's why when it comes to savings New Zealand was ranked #23 out of 29 countries in the OECD.
Why is it a lot easier to spend money than to save money?
Psychology explains it.
You see, rewards from savings aren't instant.
The striatum, the part of our brain's reward system, releases dopamine when you buy something. And this gives us a feeling of pleasure and control.
Which is why humans tend to value instant rewards more than long-term rewards.
Psychologists call this the Hyperbolic Discounting bias.
Also, "Marketing has done a very good job at creating opportunities for impulse buying. We've never created opportunities for impulse saving."
Inspired by this insight from a 2010 Rory Sutherland TED talk conference Westpac bank had a crazy idea.
Westpac developed an iPhone app called The Impulse Saver.
This app was as simple as a big red button.
And all Westpac bank customers had to do was to press that button, select an amount between NZ $5 and NZ $100... And booooom. That amount was instantly transferred from their checking account to their savings account.
In 2011, another Kiwi Bank called ASB launched a savings tool. They called it Save The Change.
It basically lets ASB customers round up all their debit/credit card purchases. And then transfers their spare change into savings.
In the first two years, ASB customers saved NZ$40 million. And 10 years later, in 2021, ASB customers were collectively saving about NZ$4 million a month.
Reducing friction provokes sales.
》”Dangerous” Ideas
1/ Sometimes to drive behavioral change all you have to do is to reframe how you present choices to consumers.
That’s clever choice architecture.
2/ Sludge is bad for business.
Sludge often leads to invisible costs that can hurt society and your business. Any type of friction in a process that prevents people of doing what they want to do, that's a sludge.
Sludge can exist in four forms leading to four types of costs (Shahab & Lades, 2020):
3/ Hunt for revelations about what your audience needs, but communicate what they want in a way that resonates. It’s way more profitable.
Your pal,
🚀 Founder & Chief Copywriter: Teardwn
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