The odds of a good decision
Why stories we tell influence the choices we make.
Do you think you make good decisions? Last week I talked about the problem of too many choices making decisions harder, and where no decision was indeed a decision. This week, let’s get into why we’re prone to making bad decisions.
The odds are you aren’t the best at it. None of us are. Nor are your customers. But if you understand why, you can put yourself in a better position to make good decisions. And you also put yourself in a better position to tell a good story about your brand for your customers.
Before we go further, note that unless you have created a story around your product, it’s just a commodity and any reasonable option will do. Simon Sinek calls this “Finding your Why” and it’s why I mention the importance of this in branding over and over and over.
Why do we make bad decisions yet think we’re good at it?
Psychologist Dan Gilbert has conducted a lot of research in this area and it comes down being poor at assessing both the odds of a good or bad decision, and the expected value.
Each are influenced by the context in which choices are presented.
Let’s illustrate this with pricing.
Pricing, like decision making is an art. There’s a reason why products are often priced at $29, $49 and $99. SO MUCH CHEAPER than $30, $50, $100! A house that’s $990,000 seems far less expensive than one that’s $1,000,000.
Reference pricing is a key tactic to anchor value. How much more likely are you to buy something that’s on sale for $1,499 that was originally $2,000? Even if it never actually sold for the higher price, your frame is that this is a $2,000 product you can now have for just $1499. Why would you, a smart person, pass that up?
But this doesn’t just apply to ‘sale pricing’. There’s often a high-priced item, whether it’s on a menu or shelf or website that creates a point of reference for the value that makes the choice companies want their customers to make seem downright reasonable.
Psychologies Dan Gilbert illustrates this with wine. You go to a wine shop to choose a nice bottle of wine for dinner. Not too cheap. Not too expensive. So they offer the cheap one. And then a super expensive one above even the more expensive option you’d consider (i.e. $15, $30, $50, $250). This influences you to choose one more than you originally considered because it now seems quite reasonable. Whereas maybe you were headed for the $30 bottle you now think $50 isn’t so bad.
Yet he rightly states that once you are home, that reference no longer exists and you’re just drinking a nice bottle of wine. And likely would’ve enjoyed the $30 just as much.
Another example is driving across town to save $100. You’d easily do it to save that on a $200 item but you wouldn’t for a $30,000 item. Why? Because in the context of $30,000, $100 is like a latte. In the context of a $200 item, it’s a fine halibut filet. In the end, $100 is still $100.
We’re easily influenced by our past experiences and unconscious biases. Unless we slow down and think about the decision we’re going to make, we don’t realize how these affect us.
The key to making better decisions, then, is to recognize your biases and how you make comparisons:
Comparing with the past - it used to be expensive and now is not.
Comparing with what’s possible - “look at the really expensive one. This one definitely the right choice for me.”
The stories we tell ourselves impact the decisions we make. And these are the most powerful stories in the world.
“How you talk about your experiences will dictate how you feel about them. Reframing our goals and rewriting our stories are powerful tools. Nobody can tell us how to feel about something . . . . How we label an experience can completely change how we perceive it.” - Alexi Pappas
Knowing this, you’re better able to reframe your product positioning to create the context needed for your ideal customer based on their needs and values.
If you’re not yet sure what this might be, one way to uncover this is to interview them for perspectives that flip an initial problem on its head. Find out what stories THEY are telling themselves.
Know who the right people to make the decision to buy from you are and what they think.
Key decision makers should be those that:
Have a deep understanding of the problem they need to solve.
Have the ability to solve the problem.
Understand the full impacts of their decisions.
Left unchecked, the odds we’re making the good decisions are less than we imagine. Being conscious at understanding how the stories you tell yourself influence your decisions will not only help you get better your decision making but also reframing and storytelling to help your customers make good decisions.
