Decision-Making: Just How Rational Is It?

Rational Decision Making

Cardinal Path articleWe all like to think we're rational beings. When faced with a decision, we like to think we'll carefully weigh the pros and cons of each possible course of action, then base our decision on a logical analysis.

But it just isn't so. Social scientists have shown that decision-making is largely unconscious and automatic and can be manipulated by savvy marketers.

In Robert Cialdini's classic book, Influence: The Psychology of Persuasion, he discusses six adaptive shortcuts - or rules of thumb - that guide our decision-making.

Cialdini's "Weapons of Influence"

1. Social Proof - "If everyone is doing it, it must be okay."

Social ProofWhen we're faced with a decision, we often observe what others are doing, then simply do likewise. The rule of thumb is simple: "If everyone is doing it, it must be okay."

Most often, following the lead of others is indeed a safe option. And it's certainly easier than doing a real evaluation. But it can sometimes make us do foolish things.

Clever marketers know exactly how to make social proof work to their advantage. Consider the popularity of these forms of social proof:

  • Product ratings and reviews
  • Customer testimonials
  • Best-selling products
  • Twitter followers, Facebook likes, +1s

2. Liking - We are more likely to be persuaded by people like us

Friends Influence DecisionsWe are much more likely to be persuaded by people we like. And we tend to like people who:

  • We're familiar with
  • Are attractive
  • Appear to like us
  • Are involved in a group effort with us
  • Have a sense of humor

Most of all, however, we like people who are similar to us. Similar in terms of age, sex, race, background, hobbies, religious beliefs, etc.

The more people seem "just like us", the more we like them - and the more likely we are to be persuaded by them.

Savvy marketers go to great lengths to understand exactly who their customers are, and to look and act just like them. They'll also encourage customers to act as advocates, by making it easy to share experiences with friends.

3. Reciprocation - We feel a strong impulse to pay favors back

Business ReciprocityWhen someone does us a favor, we feel a strong impulse to pay it back. This adaptive shortcut likely arose early in human evolution, when mutual sharing was necessary for survival. Over centuries, the impulse to repay favors became ingrained. Now, it's hard to resist.

Think of the Hare Krishnas, handing out flowers then ask for donations. They understand that if someone accepts a flower - even if he doesn't want it - he'll feel obliged to donate.

Fast forward to the Internet age, and witness reciprocation on the web: Free software downloads, samples, whitepapers, advice, etc. Once we've accepted a gift or favor, we feel we should give back. This is especially true where the gift is unexpected, has a real value, or when the giver has apparently gone to some trouble.

4. Scarcity - The shorter the supply, the more desirable the product

Scarcity can be valuableWhen products are in short supply, they become more desirable.

It's easy to see how this rule of thumb arose: When resources are scarce, it's a good idea to stock up. But like all other rules of thumb, it can sometimes lead us astray.

A few ways "scarcity" can be employed to boost sales:

  • Low stock indicators
  • Limited time offers
  • Private sales
  • Inside knowledge (i.e. scarce information)

5. Obedience to Authority - Putting Authority to positive use

Marketing Obedience to AuthorityRule of thumb: When we're advised to do something by an authority figure, it's usually a good idea to heed their advice.

Skilled marketers know how to put "authority" to positive use. They know what the "markers of authority" are in their line of business, and how to look and act like an authority figure.

There is, of course, a dark side to this. People will do outlandish things when so ordered by an authority. (Read more about authority.)

6. Commitment and Consistency - Encourage public statements

Online Commitment and ConsistencyOnce we have made a public statement on a topic, we feel compelled to act consistently with that statement. Cialdini provides a great example:

  • When asked if they'd agree to have a "drive carefully" sign placed on their lawn, 17% said yes.
  • When first asked to sign a public-spirited petition, then (two weeks later) asked if they'd agree to the sign, 50% said yes.

The web is the ideal place to implement this principle. Just think how and where customers could be encouraged to make public statements regarding your products or services: testimonials, reviews and ratings, discussion forums, blog comments, tweets, follows, likes, etc.

Other Persuasion Techniques

Other social scientists have expanded on Cialdini's work. Among the most notable is behavioral economist Dan Ariely.

In two remarkable books (Predictably Irrational and The Upside of Irrationality) Ariely describes several additional principles that explain - and can be used to manipulate - our behavior. I'll highlight a few below.

Decision Paralysis

When asked, people typically say they want lots of choice. But in fact, having too much choice makes it hard to decide. We become paralyzed.

Usually, it's better to offer a limited number of options, rather than confusing customers with too much choice.

Divestiture Aversion

We place an unrealistically high value on what we already have; we hate having things taken away from us. Winning $20 feels good, but losing $20 feels much worse.

One thing we don't like to lose is our ability to buy products at a given price. Though getting a discount on something might feel good, avoiding a price increase will likely be more motivating. (See more examples of loss aversion.)

High Price Equals Good

This is among the most pervasive of all adaptive shortcuts: We assume that expensive products are better than cheap ones.

More surprising is how we convince ourselves this is true. Ariely found:

  • When patients were told a pain reliever cost 10 cents per pill, only 50% found that it worked.
  • When they were told it cost $2.50 per pill, 100% found that it worked.

As I wrote in a previous post, offering low prices can backfire.

The Power of Free

'Free' is a very powerful motivator. To a degree, this makes sense. If something is free, there's no risk in accepting it.

But as Dan Ariely points out, our attraction to 'free' exceeds rationality. We'll accept 'free' offers over logically superior alternatives. For example, getting 'Free Shipping' (worth about $7.00) is likely to be more motivating than getting a $10 discount.

The Contrast Principle

We find it very hard to evaluate things in a vacuum; we much prefer to compare and contrast things to other, similar things.

For marketers, one effective technique is to employ decoys. Place an intentionally bad option next to an item you really want to sell, and that latter item will look much better - better not only than the bad option, but better overall.

Do These Techniques Really Work Online?

Just think how many decisions we must make daily. If we performed a considered analysis in making every decision, we'd never get through the day.

Imperfect as our adaptive shorts cuts are, overall they help us. As Cialdini points out, we need them. And the more information we have to process, the more we need them.

On the internet - with its virtually limitless options - we need our adaptive shortcuts more than ever.

Knowledgeable marketers can put these adaptive shortcuts to positive use. For example, you can leverage Scarcity by including low stock indicators. There is nothing unethical about this: You're simply giving visitors information that helps them decide.

Of course, the potential for abuse is vast. That, however, is beyond the scope of this post. For more, see my post on the ethics of online persuasion.

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nickhu | November 2011

Everyone wants to be rational.

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