Thursday, October 31, 2013

Cognitive Biases and You: The Anchoring Effect

This is one in a series of posts on cognitive biases and how they apply to digital content and strategy. If you'd like to learn more about the thinking and experimental work behind these theories, I highly recommend Thinking, Fast and Slow, by Daniel Kahneman. 

The anchoring effect should be familiar to anyone who's been on the wrong side of a low-ball offer. This cognitive bias refers to the terrible, irresistible effects of the opening bid (or offer, or estimate) on subsequent attempts to find the correct value of something.
Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor. For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable even if they are still higher than what the car is really worth.
You may have run into this when negotiating the salary for your current job. If you allowed your employer to make the opening offer, and if that offer was quite a bit too low, there's an excellent chance that you settled for too little money even if you were happy with the ultimate offer. In one famous study, participants were asked to estimate a number they had no reason to know off-hand: the percentage of countries in the U.N. that are African. Before they submitted their guess, they watched a roulette wheel stop at a number; the wheel was set to stop on either 10 or 65. Participants who saw the wheel stop on 10 submitted estimates that were, on average, 25% lower than participants who saw the wheel stop on 65.

The anchoring effect is powerful and unavoidable. Even if the participants are experts in the field they're quizzed on, they are affected by anchoring. Even if you tell participants about the anchoring effect, instruct them to correct for it, and offer a monetary reward if they succeed in doing so, they are still influenced by it.

In brief: numbers have a context. When we see a number, our first reaction is to compare it to another number, and the number we use for the comparison is whatever we already have in mind.

This has tremendous implications for your communications. If you are trying to communicate that a number is small (for instance, the price of your product), you need to be very careful not to introduce that number immediately after another number that is smaller. If you are trying to communicate that a number is large (for instance, the number of deaths from something that your non-profit is targeting), you cannot introduce that number after another that is larger.

It's easy to look at the anchoring effect and think that using it to your advantage is unethical. It smacks of the used car salesman or the hard-nosed negotiator who refuses to pay a fair price. That would be a mistake, though, because the anchoring effect is unavoidable. The anchoring effect is not a technique, it's a description of what will happen whether or not you choose to engage with it. If you're not consciously thinking about this effect, you're leaving things to chance, and your business/campaign/cause deserves better than that.

Tuesday, October 29, 2013

Cognitive Biases and You: The Ambiguity Effect

This is the first of a series of posts on cognitive biases and how they apply to digital content and strategy. If you'd like to learn more about the thinking and experimental work behind these theories, I highly recommend Thinking, Fast and Slow, by Daniel Kahneman. 

Whenever you build a site, write an article, film a video, or plan a campaign, the first thing you should be thinking about is your audience. Who are you trying to reach/persuade/convert/entertain? What do they want, and what is motivating them?

For a long time, economics was dominated by the rational actor theory, by which everyone is motivated to produce the best possible outcome for themselves. For just as long, economists and policy makers have been perplexed by peoples' stubborn insistence on not acting rationally. They smoke cigarettes in the full knowledge that it will hurt their health, they drink and drive, they eat unhealthy foods, and they have a bad habit of hanging with the wrong crowd rather than doing the things that will keep them healthy and happy throughout their lives.

The problem is that the rational actor is a mirage. None of us are calculating machines. We come into situations and make judgments as best we're able, but at the same time we're dealing with whatever emotional baggage our day has heaped upon us, we don't have all the evidence we might need, we're subject to social pressures, and so on.

We are not rational actors, and neither are the visitors to your website. The decisions they make on your site—the links they click, the videos they watch, the options they select—are not always rational, but they do follow certain rules or heuristics. One of these is the Ambiguity Effect.
The ambiguity effect is a cognitive bias where decision making is affected by a lack of information, or "ambiguity." The effect implies that people tend to select options for which the probability of a favorable outcome is known, over an option for which the probability of a favorable outcome is unknown.
Examples of the ambiguity effect include the Wall Street investor who favors low-risk investments that bring a more certain return over high risk/high reward alternatives (even if, over the long term, the safer investment is unlikely to bring a higher return), or the customer at an ice cream shop who always goes with chocolate because she knows she likes that flavor and is a little uncertain about the others. When we are presented with ambiguity, there's a cognitive cost in figuring out whether it's worth our while to jump off into the unknown. In many circumstances, we won't bother thinking it through. We'll simply opt for the more certain outcome, even if the other might have been better.

Consider the newspaper paywall. Just now I visited the online version of the Financial Times. I found an interesting article and clicked on the headline. I then immediately ran into the subscription screen. I certainly wasn't in the mood to sign up for one of the paying options. I hadn't even read a single article yet, the value was not clear to me. But I also felt reluctant to sign up for the free option. I have to hand over my email address; will they spam me? I'm allowed eight free articles per month; is this more than enough or will I run out? At the point of making my decision I don't have the answers to these questions—I am operating in the context of ambiguity—and this fills me with a somewhat irrational reluctance to sign up for any of the options. I close the window and return to my usual browsing habits.

So what are the positives that emerge from this situation?

  1. Clarity is possibly the most important element of your content strategy. If you want readers to click a link, make it extremely clear what's on the other side of that click. If you want them to sign up for a service, be extremely clear and succinct about what they get (and don't get). When the ambiguity effect comes into play, the more understandable of two options will win.
  2. Anything that produces even a hint of distrust is death. Use your digital platforms to present yourself and what you stand for with honesty, transparency, and authenticity. Give your customers a reason to trust you, and much of the ambiguity guiding their decisions will be dispelled.