Making choices: little things can matter a lot

Throughout the day our decisions are influenced by the context in which we make them. Choices aren’t made in a vacuum so marketers need to understand the (often small and seemingly insignificant) factors that can have substantial effects on how people choose. Here are four ways in which decision-making may be affected.

Navigating choice via extremes
Part of the context for choice is the awareness of the other options available. We navigate from extreme choices and tend to pick the middle option as a compromise, a phenomenon known as ‘extremeness aversion’. So introducing a third option to two existing options can change preferences and context considerably.

For example, a Thames cruise company in London  added a premium dinner package cruise option to its range of cruises. It included some particularly splendid champagne and was priced much higher than the other standard dinner cruise packages. As anchoring  theory predicts, the company found that demand for the new premium package was fairly low, but people used it as a reference point to value the other packages more highly. As a result, the company saw an average transaction  value increase of 11 per cent in dinner package sales.

Conversely, when we would like people to think a little harder about their choice, it’s worth considering avoiding presenting  consumers with three options or five options, thus hiding the default choice of the middle option using choice architecture. Four options might well be a better choice set.

The subconscious influence of order
Sheena Lyengar, professor of marketing at Columbia University and an expert in choice architecture, illustrated in a study of car purchasing in Germany how important order effects can be.

She observed consumers purchasing a new car from a German  car manufacturer who had to make a number of configuration choices to finalise the design of the car – everything from the engine to the mirrors. Consumers  were guided in two different ways: one group began the task with simple choices of just four options for things like gearshift style, and progressed to having to select from as many as 56 options for interior  colour. The second group did the opposite and began with having to select from a large number of options.

Those who began with small, simple choices and worked up to more complex choices made better selections, were more likely to avoid the default, and felt less overloaded and more satisfied with their choices than those who started with a large number of configuration choices first.

Less choice can often offer more
When  there is too much information,  we can become overwhelmed and take shortcuts and perhaps just pick the first option. Or we may simply put off making a decision for fear of making a bad choice and not buy anything at all.
 
apple: simplified product choice when steve Jobs returned to the helm


Choices aren’t made in a vacuum so marketers need to understand the factors that can have substantial effects on how people choose.

In marketing  and business, we sometimes get over-excited by the potential  to increase choice as, for example, Apple did in the 1990s. A company knows its brands, products and services much better than its customers do and can forget that every additional choice offered, while conceptually good for the brand, can be disorientating and confusing for consumers – a phenomenon that is sometimes called the ‘curse of knowledge’. So it’s useful to be aware of the ‘tipping point’ or threshold  beyond which more choice actually works against sales and customer satisfaction. In fact, when Steve Jobs came back to rescue Apple in 1996, the first thing he did was to radically simplify choice.

In the digital age the plethora of online content  means choice overload is also a factor. Nicholas Carr, in his book The Shallows: What the Internet is Doing to Our Brains, draws attention to several pieces of research which show that we can become overwhelmed when reading an article online if there are too many hyperlinks embedded in it. We become distracted and tired from needing to make continual choices about whether to click on a link. Research has also found that we absorb less information when reading a heavily hyperlinked article and are more likely to miss the primary message. Footnotes are often preferable.

Moreover,  some advertisers have adopted the use of skim links – hyperlinks which are unrelated to the article yet advertise a product or service. While skim links may be an effective form of ad sales, they are yet another  distraction and their irrelevance to the main article can be an irritation.

Demographic influences on choice
Different demographic characteristics will affect decision-making.  Researchers are coming to the conclusion that older people generally process information very differently from younger adults. Deliberative capacity working memory, long-term memory, quick processing and numerical ability all typically begin to decline in our twenties and for elderly people it becomes an increasingly limited resource. Educational attainment helps to offset this cognitive decline, but not fully.

However, recent evidence suggests that older people offset this decline through a heavier reliance on three other processes that help to compensate:

• First, the old are more selective in using their deliberate thinking capacity and so often will not engage deeply. This may mean a preference for less choice so their decisions are easier.
• Second, they rely far more on intuitive and emotional cues, leading to the finding that older adults showed far greater preference for emotional advertisements than younger adults.
• Third, older people make shortcuts in decision-making based on personal experience and memory. One study illustrated how older women were able to make faster

Seeking out less information, than their younger peers, and yet arrive at the same decisions. This is particularly critical in investment or pension products, where people are often presented with far too much unnecessary choice presented  in excessively complex language.
Numerical ability also affects decision-making. Less numerate people are much more likely to be influenced by verbal information, personal narratives and anecdotes, and could make poor decisions when faced with numerical information.

Conclusion
Designing the most appropriate choice architecture and applying some of these powerful tools
to steer people in a particular direction needs to be carefully informed by an in-depth understanding of the unique conscious and subconscious behavioural drivers.

Crawford Hollingworth is founder of The Behavioural Architects

This article was taken from the January 2014 issue of Market Leader. Browse the archive here.