A modern subscription marketer’s playbook — with price anchors, trials, and win-back tactics — is part of the legacy of Professor Daniel Kahneman, who died in March at the age of 90.

This Nobel Prize-winning Israeli psychologist revealed the limits of human reason and laid the foundation for the field of behavioural economics studying instincts. 

Kahneman’s work with Amos Tversky upended classical economic assumptions of human rationality in decision-making as they identified common mental shortcuts, or “heuristics,” that lead to predictable errors.

• Framing effects: making different choices based on how options are presented.

• Anchoring: over-relying on initial information when making estimates.

• Endowment effect and loss aversion: feeling losses more intensely than equivalent gains.

From theory to practice

As these instinctive behaviours are common and repeatable, they can be prompted or triggered. 

This makes the behavioural economics theory inspiring and applicable, for example, for marketers trying to influence decisions of consumers.

Here are examples from the communications I collected in the past few months:

• Framing by The New York Times: When presenting a subscription price as US$1/week, The Times makes it sound more affordable than US$4 every four weeks or US$208 every 12 months.

• Anchoring by France’s Le Figaro: With the product line of three options, Le Figaro nudges consumers to choose the middle “recommended” option, which is rich but less expensive than the “premium” option.

• Endowment effect and loss aversion as used by the Financial Times in the U.K.: During the cancellation flow, the FT reminds the reader what she would miss out on — from coverage on Russia’s and China’s next moves, the most-read stories of the day, to her favourite reads on fashion. 

Kahneman’s best-selling popular book Thinking, Fast and Slow, published in 2011, described these heuristics and some others, such as the power of social proof (e.g., “Join over 1 million subscribers”). 

He also warned: “We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events.”

Scientific revolutions

During my last Easter holiday, I returned to Kahneman’s classic book and read it alongside a new biography of a Renaissance astronomer Nicolaus Copernicus, Revolutions, by Wojciech Orlinski. 

While the two scientists studied different domains and at different times, their discoveries transformed our understanding of the world.

Copernicus proposed that the Earth revolves around the Sun, rather than vice versa. This challenged centuries of orthodox belief which placed Earth at the centre of the universe.

Similarly, Kahneman challenged classic assumptions in economics that portrayed humans as rational agents who consistently make optimal choices that maximise their benefit.

The analogy has limits. Copernicus’ theory sparked a fierce resistance from the Church and was slow to gain acceptance, while behavioural economics has gained ground quickly, with the Nobel Prize awarded to Kahneman in 2002.

Kahneman’s book is a masterpiece, but practitioners may prefer more actionable textbooks by the professor’s disciples, such as Nancy Harbut’s Using Behavioural Science in Marketing, published in 2022.

Interested in practical lessons from behavioural economists? Join our virtual Subscriber Retention Master Class in June.

Greg’s Readers First newsletter is a public face of a revenue and media subscriptions initiative by INMA, outlined here. INMA members may subscribe here.

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