Why we really are distracted by shiny objects.

February 10, 2012 BY danariely

Choosing Brighter Instead of Tastier Candies May Be Good For You:

How Visual Properties of Choice Options Influence Our Decisions

by Mili Milosavljevic, Ph.D.

In 2009, Tropicana redesigned the packaging of its orange juice in an attempt “to reinforce the brand and product attributes [and] rejuvenate the category.”  The company said that “for the first time, Tropicana… will be branded ‘100% orange’, which will be featured as a bold, new graphic on all packaging… [A] proprietary fresh cap… will be another visual signal of the brand’s natural, health benefits.”  Less than 2 months after the redesign, dollar sales of Tropicana orange juice had dropped about 19% or $33 million, with competitors picking up Tropicana’s lost market share.  The company’s response was to immediately bring back the previous version of packaging and determine what went wrong.  Some of the surveyed consumers complained that they missed the old packaging and Tropicana was quick to attribute the flop to messing with the usual suspect: emotional bond that consumers had with the old packaging.  Other consumers, however, noted that the redesign had made it more difficult to spot Tropicana on a store shelf or to differentiate it from other brands.  This alternative explanation suggests that replacing the familiar, prominent, dark-green Tropicana brand name on the packaging, with a sleek, bright-green, 90-degree tilted version dwarfed by an enormous glass of orange juice that replaced the orange with a straw coming out of it caused some consumers to miss the brand and simply pick up another instead.

Is it plausible that simple visual features of choice options, such as a package’s color or brightness, influence consumers’ choices?  Mili Milosavljevic, together with a team of vision scientists and neuroscientists, recently conducted a series of eye-tracking studies in which consumers made real choices between snack food items whose brightness of packaging was systematically varied.  When consumers chose between items they prefer (such as a Snickers bar) and visually enhanced, i.e., brighter, but less preferred options (such as Sour Skittles), a significant portion of their choices was biased toward choosing the brighter, less liked, item. This visual saliency bias, or bias toward brighter-colored items, was even stronger when consumers made choices while being engaged in another cognitively demanding task, akin to talking on a cellphone while shopping in a grocery store.  Finally, the bias toward visually brighter items was especially strong when consumers did not have a strong preference for one item over another (i.e., choosing between Snickers and KitKat bars, which consumers stated they like almost equally).  The latter two variations of the experiment is highly representative of today’s competitive market place and consumers’ tendency to multitask.

So where does this visual saliency bias come from?  The explanation lies in the way that our brain processes information.  When making a simple choice, the brain has to process both visual information that allows us to perceive the choice options, and preference information that estimates how much we like these options.  The brain must reconcile all these signals (and more: memory, expectations, goals) in order to arrive at a decision.  So what this research shows is that sometimes the visual information wins over the preference information – a finding that again shows that choices are driven by many forces aside from actual preference.

So is this visual saliency bias good or bad?  More specifically, is it bad for consumers to rely on something as trivial as the brightness of packaging when making a decision?  Not necessarily.  The visual saliency bias is less likely to occur if you are buying a car or a house, or are engaged in other high-stakes decisions.  The bias is more likely to kick in when the decision is less consequential, less costly, you have less time or capacity to fully engage in it, or the options from which you are choosing are liked just the same.

Dr. Milosavljevic and her colleagues showed that when making such simple choices, consumers can spot and choose most of their preferred items in as little as a third of a second.  Granted, the visual saliency bias may, in some instances, lead us to make suboptimal choices, but that may be a small price to pay in order to go about our daily lives making rapid, mostly good, decisions.  After all, who wants to spend an entire afternoon in front of the store shelf choosing between Snickers and Sour Skittles?

The psychology of money and habits

November 1, 2009 BY danariely

Money is an integral part of modern life. We constantly make decisions about whether we’re willing to pay for different products and, if so, how much we are willing to pay. In fact, we make decisions about money so often that we consider money to be a natural part of our environment.

However, money is a relatively recent invention, and despite its incredible economic usefulness it does come with its own set of problems. In particular, it turns out that decisions about money are often non-intuitive and, in fact, quite difficult. Consider the following situation as an example: You are thirsty, tired, and annoyed and just want a cup of coffee. You see two coffee shops across the street from each another. One is a specialty coffee shop that sells handcrafted, designer coffee and the other is Dunkin’ Donuts which sells standard, decent coffee. The price difference between the two options is $1.75 for your cup-a-joe. Now, how do you decide if the benefit of the handcrafted coffee drink is worth the additional $1.75?

What you should do (if you wanted to be rational about it) is consider all of the things that you could buy with that $1.75, now as well as in the future, and decide to buy the expensive coffee only if the difference between the two coffees is more valuable than all of those other possibilities. But of course this computation would take hours, it is incredibly complex, and who even knows all the possible options to consider?

So what do we do when we need to make decisions but making them “correctly” is too time consuming and difficult? We adopt simplifying rules, which academics call heuristics, and these heuristics provide us with actionable outcomes that might not be ideal but they help us to reach a decision. In the case of coffee and other, similar decisions, one of the heuristics we often use is to look at our own past behaviors and if we find evidence of relevant past decisions, we simply repeat those. In the case of coffee, for example, you might search your memory for other instances in which you visited regular fancy coffee shops. Assess which one of those two behaviors is more frequent and then you tell yourself “If I’ve done Action X more than Action Y in the past, this must mean that I prefer Action X to action Y” and as a consequence, you make your decision.

The strategy of looking at our past behaviors and repeating them, might seem at first glance to be very reasonable. However, it also suffers from at least two potential problems. First, it can make a few mediocre decisions into a long-term habit. For example, after we have gone to a fancy coffee shop three times in a row, we might reason that this is a great decision for us and continue with the same strategy for a long time. The second downfall is that when the conditions in the market change, we are unlikely to revise our strategy. For example, if the price difference between the fancy & standard coffee shop used to be 25¢ and over the years has increased to $1.75, we might stay with our original decision even though the conditions that supported it are no longer applicable.

In light of our current financial situation, many people these days are looking for places to cut financial spending. Once we understand how we use habits as a way to simplify our financial decision-making, we can also look more effectively into ways to save money. If we assume that our past decisions have always been sensible and reasonable then we should not scrutinize our long-term habits. After all, if we’ve done something for five years, it must be a great decision. But if we understand that long-term, repeated behaviors might reflect our habitual decision-making in the face of complex financial decisions more than they reflect what is truly best for us, we might first examine our old habits and carefully consider whether they indeed make sense or not. We can examine our subscription to the ESPN Sports Package, our annual subscription to the opera, our yearly Disneyland vacation, or our monthly visit to the hairdresser. By examining these habits, and quitting them when it makes sense to do so, we might actually discover ways in which we could reduce our spending on a long-term basis.

Yes, money is complex, and it is incredibly difficult for us to carefully examine every purchasing decision we make. But the advantage of examining our habits is that it might lead us to create good ones that will benefit us for a long time.