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Yifan Zhang and Geoff Oberhofer, the duo behind Gym-Pact, the behavioral economics gym plan in Boston we posted about earlier this year, have taken a 10-pack of questions about fitness, business, and human behavior. While Gym-Pact has arrangements with Boston-area gyms, the company has just released an iPhone app at www.pactapp.com to help people keep commitments at gyms anywhere. Yifan and Geoff answered our questions over email. A transcript is below.





Nudge blog: How do you make money from your plan? Just like a regular gym, you seem to profit more when people miss their appointments. Is that the case?

Gym Pact: We actually get people to the gym on 90% of the days they commit! Gym-Pact’s model does not profit from people missing appointments. Rather, our main revenue comes from the service we provide to gyms (selling discounted memberships, referring people, etc).

NB: You don’t own a gym. Instead you partner with existing gyms. What kind of success have you had with these partnerships in Boston? Do your members visit more frequently? Are you tracking data, particularly on success and failure rates?

GP: Yes! We love data, and so far the data loves us back. We’ve held our 90% success rate for now over 5 months, and our members commit on average to 3.5 days per week!

NB: Have you experimented with the design of the penalty itself? Are certain size penalties delivered at certain times more effective than others?

GP: While we don’t want to change things up too much for our current members, who find our existing system very effective, we are launching an iPhone app. We’re accepting 100 beta testers currently at www.pactapp.com, and we will be trying a few motivational fee designs, including just tracking attendance without the fee. If you’re interested in giving this a shot, all you need is an iPhone and we can set you up at any gym in the country.

NB: How do you enforce the commitments people make?

GP: We have our patent-pending attendance system placed at partner gyms, where Gym-Pact members text us a constantly updating code when they check in and out of the gym. We (now have an) iPhone app to track attendance as well. Our members put up money to motivate their fitness commitments, and we enforce those commitments based on attendance.

NB: By putting the penalty for missing the gym in financial terms, does it actually boomerang and lead people to skip more often? In other words, do financial penalties crowd out personal norms?

GP: Not that we’ve seen so far. Regular exercise is something all of our members strive for, and they know it’s good for them! We just give them the extra kick to get to the gym with the regularity they’ve always wanted.

NB: What have you learned more generally about human behavior and fitness since you first conceived of this idea?

GP: When given the opportunity, people will cheat! We have to make sure that our Gym-Pact(SM) system is cheat-proof so that there are no excuses and no opportunities for members to cheat themselves of regular exercise, only results.

NB: Do you have any intentions to revise Gym Pact’s business model by incorporating more behavioral theory?

GP: We have a few ideas that we will be testing out with our iPhone app – more to come on this!

NB: If you owned your own gym and could design it from top to bottom drawing on behavioral economics, what sorts of features would you consider?

GP: We would definitely structure the membership fee to incentivize regular exercise. Regular attendance is not only good for members, it’s great for gyms because it’s the strongest signal that a member will continue being a member of the gym.

NB: How does your iPhone commitment app work?

GP: We use GPS technology and our database of gym locations in the U.S. to take attendance. Other than that, it is the same Gym-Pact(SM) program. For our beta testers, however, we will be adding a few more options so if you’re curious, feel free to try it out!

NB: Do you have any plans to incorporate social media in the device to enforce commitments through peer pressure?

GP: Yes! Sharing your successes and competing with friends is one of the strongest motivators, and we definitely will be incorporating these aspects to our app and regular Gym-Pact program.

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Assorted links

1) NudgerSize – the iPhone app that motivates you to exercise more. It costs $.99 to download.

2) Choice architecture to generate repeat customers using old lottery tickets. Hat tip: Jeff Maystruck.

3) 85 percent of shoppers pick a product because of its color. Hat tip: Melanie Cook.

4) The power of secret commitment strategies. Hat tip: K.O.

5) The Campaign Company defines a nudge as an intervention that offers a positive reward in conjunction with a passive decision making process.

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1) Can the phrase “I look forward to receiving your information so I can process your case as soon as possible,” increase successful food stamp applications?

2) The city of Boulder, Colorado, is challenging its residents to be healthy and act sustainably. Hat tip: Kare Anderson.

3) A behavioral economics explanation for sticky prices and celebrity endorsers: We take our cues about price from others. Hat tip: Mostly Economics.

4) Do the new larger bars on your iPhone 4 make you feel better about your reception? Hat tip Pete Novosel.

5) National Geographic on smiling energy bills and friendly competition.

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1) Zero-sum ethics. People who feel good about their green purchases cut a few ethical corners later.

2) Starwood Hotels experiments with letting environmentally-minded guests opt out of room cleaning (plus get a small discount). Hat tip: Kare Anderson.

3) Split the check by bumping iPhones. Hat tip: Adam W.

4) NCAA selection bias. Playing in one of the six power conferences is worth an extra 1.75 seeds in the NCAA tournament.

5) Looking to get elementary school kids to be more active? Paint brightly colored castles, dragons, clock faces, mazes, snakes and ladders on the playground. Hat tip: Randy Scott.

Addendum: Calorie counts at chain restaurants are going to be harder to ignore, says AP.

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The New York Times, while pondering whether there is a “method in cellphone madness,” finds this behavior “weird.”

When Apple and AT&T started offering the iPhone for $199, plus $30 a month for Internet access, sales shot up, even though the previous deal — $399 for the phone and $20 a month — cost less over a two-year contract.

The $199 iPhone was the 3G model. Was the additional speed worth $40?

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Epocrates helps compile prescription drug lists – even when you’ve forgotten the name and only remember the color, size, and shape of the pills.


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Over at Thought Gadgets, Ben Kunz sees behavioral economics in iPhone pricing. He says the phone’s “reference price,” (ie. it’s original retail price of $599) and customers’ perceived “transaction utility” (ie. whether or not customers think they are getting a good or fair deal), which are concepts popularized by Thaler, can explain Apple’s marketing strategy over the past year. Kunz seems to be going against conventional wisdom since he applauds the massive price cuts on the iPhone, including a $200 cut just a few months after its initial release, as part of a shrewd strategic campaign. So much for Apple customer backlash? Memories are short when the product is great.

How has Apple played this pricing game?

1. First, optimize margins based on (margin per product x total sales). In simple terms, you can either sell a few products with huge margins, or sell many products with lower margins. Apple in effect did both, by launching the original iPhone with a $599 price tag, taxing early adopters, then sliding the scale down to $399 and now $199 to reach more of the masses.

2. Then, if possible, obscure the reference price altogether. Thaler noted that most people buy a car, or a suit, or candy in a movie theater by comparing it to what they think “a fair price” is. Sometimes a clever marketer can obscure this reference price. Candy in movie theaters comes in really strange, large boxes — boxes that you won’t find anywhere else. The reason? You can’t really calculate whether $4 for an oversized box of candy is a good deal.

Steve Jobs obscured the reference price with an iPhone design that didn’t look like anything else.

3: Third, work to increase the reference price. By comparing the new $199 iPhone to the $599 original phone, Steve Jobs is in essence competing with his prior self — and winning. The $400 in savings is fiction, but it feels like a good deal.

4: Bundle price components to mask what you can. The iPhone generates revenue for Apple not just from the $199 sales price, but from hundreds of dollars in hidden data fees paid to AT&T (and then to Apple) and all the iTunes songs you download. Data fees are bundled with the AT&T separate bill. ITunes fees are grouped into your personal music account. The total is again obscured, because each bundle is treated separately in the consumer’s mind.

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