The economics of good design
Considering the economics of design improves user experience
Economics is frequently associated with business, finance or politics. Design may conjure thoughts of art and aesthetics. As a designer with an economics background, I’ve noticed that few people associate the two fields with each other. However, there is immense opportunity to combine design principles with economic theory to create valuable products and services.
Before diving into specifics, we must understand how a typical economist and designer think. At its core, economics explores how people respond to incentives. Money is one incentive, but so is social status, recognition or the opportunity to save time. Designers explore how people accomplish goals in a particular context. For UX designers, this could mean creating an intuitive way for someone to purchase an item through a mobile application. In this example, economic incentives play a role beyond the decision to purchase. A user may think: How long will it take me to buy this? Is this a good quality item? Is this a reputable company?
In order for people to make rational economic decisions online, interfaces need to be designed with incentives in mind. To do this, designers should familiarize themselves with economic principles that will add value to businesses, designs and the people who use them.
Create Value
Economists may think of value as how much they could price an item, whereas designers may think of it as how it can satisfy someone’s needs. However, a highly valued product or experience can be created with both goals in mind.
John Heskett illustrates this in his theory of value creation. He demonstrates that user-centered design that occurs early in the product development process, alongside labor and capital, creates more value. This type of collaboration ensures that the right incentives are being met and that a product is viewed as valuable enough to be purchased.
“If you think that good design is expensive, you should look at the cost of bad design.” — Dr. Ralf Speth CEO Jaguar Land Rover
What Dr. Speth meant in this famous quote is it is expensive to go back to the beginning to redesign something. Imagine realizing at the final stage of development that your target audience has no idea how (or why) they should use your product. Early user testing eliminates this from happening and ensures that design is worth the investment.
Consider Costs
Every choice we make is an evaluation of costs and benefits. When people go through an online experience, the phenomenon of “friction costs” becomes important. A friction cost occurs whenever the user is prevented from completing an action or achieving a goal.
An economist may think that to increase user benefits, one should remove every instance of friction cost. This is true in instances where there are too many steps (illustrated by growth.design’s Headspace onboarding), unclear navigation, or too much information on a screen. However, small friction costs may lead to large benefits in user experience.
The best examples of this are in error prevention. Friction serves to slow down people who may be conducting actions too fast. For example, whenever you delete items, you may have a popup screen asking if you are sure this is the intended action. Other significant examples of friction occur when users log in, such as in multi-step authentication or requiring identity confirmation before purchasing items.
Understand How People Decide
Beyond evaluating costs and benefits, there are other steps to consider when designing for user choice. Stephen Wendel illustrates this using his CREATE framework, which draws on behavioral economics to explain why and how people take action.
- Cue — What prompts the person to think about the product?
- Reaction — How does the person react emotionally?
- Evaluation — Cost-benefit analysis occurs here. Is it worth the person’s time or resources?
- Ability — Does the person have the resources to complete their goal?
- Timing — Is there urgency to make a decision right now?
- Experience — What is the person’s prior experience with this action?
Each step of this process can be designed with economic and psychological principles in mind. Let’s use an app that incentivizes people to cook meals as an example. The app may send a reminder as a cue to demonstrate cooking as a valuable action given the timing (perhaps around dinner). The reminder may remind the user of a time they cooked with friends, using social proof as an incentive to create a positive reaction. The evaluation stage is where the app may leverage existing motivations to convince the person that cooking is better for their health by providing clear choices on what meal to cook and how. Checking back in with the user to ask about their decision ensures a positive experience next time around, too.
There are many other behavioral economic principles that influence design. While the psychology behind these principles explain how people use products for designs to be successful, the incentives of businesses and users must be aligned. The next time your company begins developing a new product or you begin prototyping a new experience, ask: What are the economics of this design?
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