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How Status Quo Bias Affects Your Decisions
Status quo bias
Status quo bias is when we prefer that our environment and situation should remain unchanged.
The bias has the most impact in the area of decision-making, as we tend to prefer the more familiar choice over the less familiar, but often better, option.
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Common Explanations for Status Quo Bias
These explanations are all irrational for preferring the status quo:
- Loss Aversion: When we make decisions, we weigh the potential for loss more heavily than the potential for gain.
- Sunk Costs: We continue to invest resources like time, money, or effort into a specific endeavor just because we are already invested, not because it is the best choice.
- Cognitive Dissonance: In decision-making, we an option as more valuable once we have chosen it. Considering an alternative can cause cognitive dissonance.
- Mere Exposure Effect: It states that people prefer something they've been exposed to before.
- Rationality vs. Irrationality: We may choose to keep our current situation because of the potential transition cost of switching to an alternative. It becomes irrational when we ignore choices that can improve a situation because we want to maintain the status quo.
Status Quo Bias examples
- When offered several sandwich options, individuals often choose a sandwich they have eaten before.
- In 1985, Coca Cola reformulated the original Coke flavor and started selling a "New Coke." Although blind taste tests found many consumers preferred New Coke, consumers continued to buy Coke Classic. New Coke was discontinued in 1992.
- In political elections, the current candidate is more likely to win than the challenger.
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Cognitive Bias
Cognitive Bias is a predictable pattern of mental errors where we misperceive reality and move away from the most likely way of reaching our goals.
These mental blind spots...
Unconscious Bias
Unconscious bias refers to unconscious forms of discrimination and stereotyping. Unconscious bias often leads to discrimination, be it deliberate or unintentional.
Unconscious bias is different from cognitive biases. Cognitive biases relate to our brains' particular wiring, while unconscious bias refers to perceptions between different groups and are specific to different societies.
How to Reduce Unconscious Bias
- Recognise that the unconscious bias is a systemic issue. Internal cultures need to be checked and addressed first.
- There is no shame or guilt in unconscious bias. Unconscious bias stems from our tendency to categorise people into social groups and often doesn't match our conscious values.
- It takes a series of conversations and interventions to prevent and protect against unconscious bias.
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Cognitive biases
...are common thinking errors that harm our rational decision-making.
We don't always see things as they are. We don't simply glean information through the senses and act on it; inste...
Optimism Bias
Is our tendency to overestimate the odds of our own success compared to other people's.
Overly optimistic predictions can be dangerous, leading us to waste time and resources pursuing unrealistic goals. In the real world of business, things don't always work out for the best, and it serves us well to know when conditions are not on our side.
How to control the optimism bias
- Be skeptical of your own rosy expectations for your work.
- Assume projects will be more difficult and more expensive than you initially think they will.
- Don't trust your good ideas to manifest through positive thinking - be ready to fight for them.
- Trust the numbers. Numbers are firm but fair, and getting intimate with your business's cash flow can help you make more rational decisions.
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Free Shipping: Shopper Psychology
A study done on online shopping behaviour showed that 70 percent of the shoppers abandon their shopping basket, leaving the app/website. The main reason for this behaviour is the unexpected...
The Framing Effect Of Costs
Framing is a bias-inducing technique that seems to tilt buyer preferences by providing the same information in different ways. It makes people see the same data in such a way that it affects their choices.
Example: A $10 watch with $5 shipping charges may be a turn-off for buyers, but the same watch costing $15 with zero shipping charges, and FREE SHIPPING clearly labelled in bold, makes more people buy it, even though they are paying the same amount of money for the same watch.
The Decoy Effect
Often an extra choice is given to the buyer (looking at a set of options) to tilt the purchase in favour of a particular option. The decoy option is only there to shift the mindset, and is also called the asymmetrically dominated option.
The decoy effect changes the perception of the offer in the eyes of the buyer.
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