Reduce Costs

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Reduce Costs

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INFLUENCE TACTICS

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Reduce Costs

Reduce what people need to invest to encourage action.

What is it:

Every time we decide to do something, it costs us—whether it’s in time, effort, missed chances, or even mental strain. These costs influence our decisions, often leading us to choose one action over another. Over time, if the costs are too high, they can stop us from doing things altogether. By understanding and reducing these costs, we can make it easier for people to take action and prevent these barriers from arising.

When to use it best:

How to use it:

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1. Identify Possible Costs

   Look at the different types of costs involved, like money, physical and mental effort, missed opportunities, and the skills or tools needed.

   What costs could stop people from getting involved?

   Are these costs one-time or ongoing?

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2. Focus on Key Costs

   Work out which costs most likely put people off. Pay attention to costs that aren’t obvious, as well as those that might change depending on the situation.

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3. Reduce These Costs

   Think of ways to make it cheaper or less demanding for people to engage with what you’re offering. This could mean making processes simpler, automating steps, or offering extra help.

   How can we make it easier for people to use our service or product?

   What can we do to take on some of the burdens for them?

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4. Eliminate Costs Where Possible

   If you can, get rid of costs completely to make it even easier for people to act. You might offer free trials, drop fees, or make parts of your service smoother.

   How can we remove barriers without hurting our service or setting expectations too high?

What’s the science behind it?

• Prospect Theory

  Prospect Theory is a foundational concept in behavioural economics developed by Daniel Kahneman and Amos Tversky, which describes how people make decisions involving risk. Central to this theory is the idea that losses loom larger than gains; in other words, the pain of losing is psychologically more impactful than the pleasure of gaining something of equivalent value. This theory also highlights that people evaluate potential losses and gains not in absolute terms, but from a reference point, which could be their current state or their expectations.
  Reduce Costs tactic is effective because it aligns with the principles of Prospect Theory by minimising the perceived losses (costs) associated with an action. By lowering the investment required—whether it's time, effort, or resources—this approach reduces the psychological burden or 'loss' felt by an individual when contemplating a new or different behavior. This makes the action more appealing as the balance shifts towards gains rather than losses. Essentially, by reducing the costs, the tactic lessens the pain associated with the effort, making people more likely to act because the perceived risk of loss is diminished.

• Status Quo Bias

  A cognitive bias that explains people's preference for the current state of affairs, where any change from this baseline is perceived as a loss. The theory suggests that individuals are more likely to stick with known quantities rather than opting for an alternative, due to the perceived risks and efforts associated with change. This resistance can be seen in various contexts, from everyday choices to significant life decisions, where the fear of loss or the effort required for change outweighs potential benefits.

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