Choice Architecture and the Four Decision-Making Shortcuts

Organizing dinner amongst friends is stressful. The most difficult decision is always the venue despite everyone’s indifference. Neither the organizer nor the guests want to be responsible for an evening of bad food or service by suggesting a location. Limiting the choices to a few restaurants helps but doesn’t generally bring the party any closer to a decision. The most effective strategy is to pick a default venue (by proximity, rating or personal preference) and invite guests to make other suggestions. Indecision by the guests is now an acceptable option and it absolves the organizer from the weight of their recommendation.

Business owners face variations of the same dilemma, though the consequences of a bad decision are often more severe than a bad dinner with friends. With multiple stakeholders and even more options, the decision-making process is often drawn-out and deliberate. What we don’t realize is that despite our best efforts to be methodical, sometimes our actions are influenced by factors we aren’t even aware of. Our minds take decision-making shortcuts.

One of the most powerful shortcuts we use is accepting the default option when things get complicated. In a paper published in 2003, Eric J. Johnson and Daniel G. Goldstein observed a dramatic disparity in the rate of organ donation between various European countries.

Source: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324774

The staggering discrepancy between these European countries is the result of one small difference in their Department of Motor Vehicle’s forms: “Check this box if you want to be in the organ donation program.” When this box was checked by default (i.e. in the blue countries), 85-99% of citizens were willing to donate their organs. When this box was unchecked by default (i.e. the red countries), only 4-27% were willing to donate their organs.

Two conclusions were drawn from this study:

  1. When decisions are hard and complex, we don’t make any choice at all. This may be the result of loss aversion, wherein the fear of choosing the wrong option, thus incurring loss, causes indecision. Under these circumstances, we fall back on simplifying strategies. We take the path of least resistance and accept the default option; we look to an authority for guidance; or we take cues from past experiences or social norms.
  2. The meaning we assign to the choice is influenced by the default option. When participants are asked to opt-in, the decision is seen as more important. Conversely, decisions where participants have to opt-out are perceived as less significant. Going back to the organ donation example, another related study surveyed the citizens of each country and found that the countries that employ an opt-in policy see the decision akin to donating 20% of their annual salary to charity. In contrast, countries that use an opt-out policy perceive it to be similar to giving 2% of their annual income to charity.[1]

It is unsettling to believe our choices, and even our values, are influenced by the design of a form. We like to perceive ourselves as having independent thoughts and known preferences. Given complete information, we have the capacity and the freedom to make the best decision. And yet, human idiosyncrasies consistently reveal themselves in our actions through both trivial (e.g. dinner) and complex (e.g. organ donation) decisions.

Choice architecture describes how decisions can be influenced by the way the questions and answers are presented. Selecting the default option is a transparent technique in guiding behaviour. More subtle influences include ordering, anchoring or narrowing the selection.

How can understanding these biases help your business?

  • Define the default.
    Create the path of least resistance by preselecting a default. This could mean leaving the subscription checkbox selected or highlighting the most common option in the pricing table. Conversely, if you want the consumer to think twice, require them to take an explicit action before they can proceed such as agreeing to the terms of service or adding a confirmation or preview state. Defaults through selection are explicit whereas making a recommendation is suggesting a default implicitly.
  • Ordering matters.
    In situations where the customer has no strong preference, or doesn’t know enough about the problem to choose, people tend to select the middle option in an ordered list. It is the safest choice amongst each extreme, thus minimizing risk if they’ve made the wrong decision. For example, if consumers have the option of three packages with varying features, they are more likely to select the middle option because they aren’t yet aware of which option is best for them.
  • Anchoring.
    We compare in relative terms. Without knowing the true value of something, we compare it to past experiences or similar things. When listing products, consider ordering them from most expensive to least expensive. Items following the first product will seem cheap in comparison. Or, if you’re going to ask someone to value something abstract, establish an anchor like leaving a $20 dollar bill to seed a tip jar or suggesting a donation amount.
  • Narrowing the selection.
    When there are too many options to process, consumers encounter the paradox of choice and the options are paralyzing. Take away that anxiety by creating subsets that are more manageable. Just as a default is selected amongst a few, a subset can be selected amongst many. For example, the 10 most popular items, staff picks or a monthly promotion.
You may also consider using a combination of these techniques. This is the case with popular SaaS company, SlideShare. It defined its “default” state by highlighting their most popular option, the Silver package out of its four offerings. It’s the safest choice, and it’s backed by social proof.
It's only fair to share...
Share on FacebookGoogle+Tweet about this on TwitterShare on LinkedIn

Leave a Reply