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.