February 7, As Americans we are proud of the fact that we get to choose our government leaders. We may not always like the choices presented to us on the ballot, but we get to vote. For example, which TV service do I use and then once it's hooked up, which channel will I watch? Do I want a regular coffee or a coffee drink? What should I wear to work?
Which route do I take to get to work? You get the idea. So one might wonder, just how many decisions do we make in a day? You can decide if you want to keep reading.
This might seem like confirmation of their weak character -- after all, they could presumably save money and improve their nutrition by eating meals at home instead of buying ready-to-eat snacks.
Not for nothing are these items called impulse purchases. At this point, you get it. Choice is hard. There are some decisions that will never be easy. Think of Neo, the protagonist from The Matrix , faced with the option to swallow a red pill and discover a harsh reality, or take the blue pill and stick with a comfortable fantasy.
For marketers and salespeople, however, there are concrete, actionable ways to make the buying process easier for their prospects. Less really is more. Faced with choice overload, people are less likely to buy. The trick is to find the balance between having enough options to attract buyers in the first place, but not so many that consumers become overwhelmed and walk away. It's difficult, but if a company can find that sweet spot, they'll reap the rewards.
So, if consumers are able to connect with a product on a visceral level, they will be more likely to buy it. Think back to that grocery store with its 42, products. Separating products into discrete categories prevents choice overload by slimming down the number of products consumers have to compare to each other.
A German car company that allows consumers to completely customize their own cars found that presenting choices with fewer options first and slowly building up to more complex decisions -- such as picking from 56 different exterior car colors -- kept consumers more engaged.
Choice may be hard, but our brains are capable of astoundingly complex calculations -- researchers needed 82, processors to simulate a single second of human brain activity. Building up from the simple choices to more complex ones, however, is necessary to prevent dropoff during the buying process. Parkinson's Law theorizes that work expands to fill the time available for completion.
So, if you have a PM deadline, you'll work until PM. If you have a PM deadline, you'll get the same amount of work done by PM.
Use this framework to streamline your decision making process. If you need to choose a vendor and just can't make up your mind -- set yourself a deadline for making the decision, and stick to it. But by being aware of the psychological factors that affect our choices -- and recognizing how a decision we make at 8 a. Originally published Aug 14, PM, updated July 25 Logo - Full Color. Contact Sales. Overview of all products. Marketing Hub Marketing automation software. Service Hub Customer service software.
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The floor manager shifts the wage system from an hourly wage perspective to a straight piece rate system.
The more widgets a worker creates, the higher his or her prospective income will be. Under this incentive system less productive workers may stay the same, but highly productive workers will respond by increasing their production. Privacy Policy.
Skip to main content. Principles of Economics. Search for:. Individual Decision Making. Scarcity Leads to Tradeoffs and Choice When scarce resources are used, actors are forced to make choices that have an opportunity cost. Learning Objectives Give examples of economic trade-offs. Key Takeaways Key Points Scarce resources diminish as they are used and almost all resources are scarce.
In order to use a scarce resource, you are inherently using the resource for one purpose and not an alternative. The cost of using a resource is called the opportunity cost: the value of the next best alternative that you could be using the resource for instead.
Key Terms Scarce : Insufficient to meet demand. Opportunity cost : The value of the best alternative forgone. Individuals Face Opportunity Costs Individuals face opportunity costs when they choose one course of action over another.
Learning Objectives Distinguish between explicit costs and opportunity costs. Key Takeaways Key Points The opportunity cost is the value of the next best alternative foregone. Every decision necessarily means giving up other options, which all have a value. The opportunity cost is the value one could have derived from using the same resources another way, though this is not always easily quantifiable. Key Terms Opportunity Costs : The value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources.
Individuals Make Decisions at the Margins Individuals will choose the option that yields the greatest net marginal benefit. Learning Objectives Apply the concepts of marginal analysis and utility to decision-making.
Key Takeaways Key Points The marginal cost or benefit is the amount that a decision will change the total cost or benefit from where it is currently. Individuals will make choice that maximizes the net marginal benefit marginal benefit — marginal cost. While total or average cost and benefit are important, provided enough resources, individuals will look only at the net marginal benefit.
Key Terms marginal benefit : The additional benefit from taking a course of action. Individuals Respond to Incentives Incentives are ways to encourage or discourage certain behaviors or choices. Key Takeaways Key Points Price is one of the main incentives studied in economics.
Price incentivizes producers to supply a certain amount, and consumers to purchase a certain amount. Economics is mainly concerned with studying remunerative incentives those that concern material reward. Individuals, firms, and governments all change incentives in hopes of encouraging desired outcomes. Key Terms incentive : Something that motivates an individual to perform an action. Licenses and Attributions.
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