In a recent NYT review of her new book, "The Art of Choosing," Sheena Iyengar says that "Human beings are born to choose. But human beings are also born to create meaning. Choice and meaning are intertwined. We use choice to define our identities, and our choices are determined by the meanings we give them, from advertising-driven associations to personal relationships and philosophical commitments."
To this, behavioral psychologist Dan Ariely, responds: yes, we may use choice to define our identities. But we are also hopelessly irrational. We may think that our choices are determined by the meanings we give them, but in fact, this is an illusion.
Why? We have, as humans, a need to create meaning. To do so, we tend - the same as with sight and memory - to fill the stuff in in order to close the gaps that we can't see, remember, or make sense of. And what we can't see or remember or make sense of, we simply invent. We do the same thing when it comes to our choices: we make a decision first, and then tell stories about it after the fact.
This is interesting. On a daily basis, each one of us make incredible amount of decisions based on limited information. Because we are not quite aware how we do it (cognitive blindness), we often resort to some form of rationalization and/or to claiming that we trusted our gut. And this is precisely what gets us into trouble: it opens up an incredibly vast space for systemic, predictable mistakes. In other words, out of our craving for meaning, we submit to illusions.
Alright, but how do we really make decisions then? Ariely claims that we in fact turn to local context to infer what we like and don't like. When situations are complex, defaults have incredible force on behavior. In other words, when there is a lot to choose from, we submit to people who make interfaces: who gather, organize, and present information to us and who opt to make some of that information a default. (Have you ever wondered why Amazon managed to sustain a continuous growth in the past two years when all other business suffered, or why in Fresh Direct-s "natural" navigation there isn't a single item that belongs to low-priced grocery?) Beyond just mere defaults, it turns out that social and cognitive clues in our immediate decision-making context count more than, for example, brand associations. A study titled "Rethinking Brand Contamination" demonstrated that people value luxury brands based on whether an individual carrying it wears expensive clothes or has a look of a rich person. Without these additional cues or context, observers were less likely to differentiate between regular and luxury products. Additionally, they were willing to pay a way higher average price for a luxury bag when they saw if against a neutral background. Another study, conducted by Nielsen Bases unit, found that in-store marketing has significant advantage over television as a leading medium for creating awareness of new products. What does this tell us about the way we define brand equity?
Then, in situations when people don't have anchor how to behave, which is the case when we create something new or design new environments (think Apple iPhone and iPad and Twitter and Foursquare), the latitude of defaults and design clues becomes enormous. When we make decisions, we make them in silos, and we don't compare them across categories. All it took Starbucks to establish its empire was to call its coffee a different name to separate themselves from other coffee shops (and to make us pay 3 times more for a cup of coffee than we normally would). Similarly, the genius of Apple was not to lose sight of elements of design of environments it created (including naming its product, iBooks being the latest example) - knowing that's an incredible force in people's decision making. While eBooks may have had been a failed concept in the past decade (and while consumers were ready to pay no more than $9.99 for an "e-book"), the books that we can now download on our iPads are called "i-books" (something associated with Apple) and they will cost more - as much as $14.99 - which we are ready to pay for.
While these insights might have had a limited business and marketing power at the time before digital media (brand advertising is what counted back then), today we encounter a digital interface in almost any decision that we make - from choosing two products in a store, to deciding how much money to donate to a political campaign, how much time to spend interacting with some brand or how much personal information to reveal while doing it.
This is to say that findings like above cannot anymore happily remain in the domain of "interesting things to think about" but should be taken seriously. Defaults, social and cognitive clues, and designs all have a powerful impact on our behavior. They steer us towards "self-herding", which refers to our tendency to, once we made first decision, stick to it. Our first choice also influences all consequent ones, and the reason we do so is that we don't remember our emotional states or why we made a decision - we only remember our actions. The only think we need to do then is to repeat them, and this is how habits (or, brand loyalty) are formed. In other words, it our actions create - they do not reveal - our preferences.
Ok, now back to Sheena Iyengar and brands. Results of her famous jam experiment started a powerful trend of thinking that too much choice is not good for us. But neither is less choice. Interesting part is that the way we talk about brands in digital environment today fits here perfectly: James Surowietcki and Umair Haque claim that too much information about products kills brands; Erick Schmidt and others, claim that information abundance, in fact, makes brand more important than ever. Those who are in-between say that we should think of brands as filters for all this information, which is just another way of saying that the only reason that shoppers don't suffer a nervous breakdown in a cereal isle is that they, in fact, eerily recall all those awesome brand associations that make their hand reach one box of cereal over another.
Where does all of this leave us? Instead of thinking like the little Goldilocks who wants "just right" amount of information to simplify things, we should in fact embrace complexity full-force and turn to exploring the ways we gather, organize, and present the crazy amount of information that we encounter every day. In other words, when we talk about choice today, let's talk now about defaults, social clues, product categories, and a design of our decision-making contexts.
People indeed do have cognitive limitations that skew their choices in certain ways that we are not aware of - that's a fact - but now they also have this powerful digital tools that can act like our decision-making scaffolds and that can make us aware of all our mental illusions that we could not see before. And our ability to see all those factors that influence how we choose may reduce our need to invent explanations for our behaviors.
The same goes for marketing. The way things are still largely done in the industry is make decisions first, tell enticing stories about it after the fact (which only left us with a profound disagreement on what kind of advertising slogans and marketing campaigns work and what doesn't). It is not surprising then that, when we encountered way too many gaps in behavior of people and technology, our solution was to fill them out with what "makes sense" to us based on what we already know (all cognitive errors work in the same way.) This, in turn, opened a vast space for systematic, predictable mistakes ("let's create another brand video game, and to hell with it.") Our craving for meaning as an industry allowed us to submit to powerful illusions - such are brand image and brand promise and our definitions of brand equity and brand value. This sort of cognitive blindness opens up some uncomfortable questions. But so what.