By Dan Monheit, 26.8.22
Question submitted by Damon, Springvale
Man it’s good to be back in the cinemas. Sure, Netflix on the couch has been nice, but there’s just something magical about those big comfy chairs, the red carpets synonymous with blockbusters, and the smell of butter and salt in the air.
So let’s talk about that butter and salt shall we? We know there’s multiple sizes but usually just one winner; Ol’ Mr. Medium.
A little bit hungry? Medium will do the trick.
Absolutely starving? Better grab the medium.
Just had dinner but feels weird to sit here with nothing? Let’s go medium.
This behaviour is even stranger when you consider how big (and expensive) the medium sized popcorn usually is. I mean, have you ever seen one outside of its natural environment? It’s bloody huge! That much popped corn has more business being dinner for four than a snack in the dark for one.
So indeed, what’s going on here? If you love a mystery and can handle the drama, let’s go behind the scenes and find out what’s happening with everyone’s favourite movie snack.
Anchoring
Anchoring describes our tendency to depend too heavily on the first piece of information we receive when making a decision. Any subsequent information is weighed up against this first piece, which now serves as an ‘anchor’.
Our main guys Kahneman and Tversky set out to test the power and pervasiveness of Anchoring back in 1974. At the centre of this experiment was a specially designed roulette wheel, rigged to only land on numbers 10 and 65. Participants would give the wheel a spin, and after seeing which number it landed on, were asked to guess the percentage of African countries in the United Nations.
What’s the link between a roulette wheel and African countries in the UN? Absolutely nothing. So one shouldn’t influence the other, right?
Wrong.
On average, people who saw the wheel land on number 10 estimated that 25% of African countries were in the UN. Conversely, those who saw the wheel land on number 65 gave an average estimate that was almost double, at 45%. Without realising it, participants had been ‘anchored’ by the number they’d spun and made their high or low guesses accordingly.
Anchors are everywhere. You might assess the value of your own home based on your neighbours, or set your salary expectations based on what your friends earn. Neither of these are truly accurate predictors, but they set the scene for us to work around.
So what about popcorn? The (comically) large box sitting just to the right of trusty ol’ medium has a lot to answer for. While it is occasionally a legitimate choice for some, it’s really there as a decoy, setting an anchor for what we’d buy if we really wanted to go crazy. Next to that big boy, Mr. Medium really does look like a sensible choice.
(And for those behavioural science nerds out there looking for a little extra credit, there’s also a lesser known bias called the ‘Center Stage Effect’ which refers to our tendency to prefer options framed in the middle of two others.)
When we look at setting price or sizing options for our own range, we need to be hyper-aware of the category anchors that already exist. From here, we can decide where we want to fit in (e.g. ‘the same for less’) or whether we want to challenge them and drop anchors of our own (e.g. super premium or ultra cheap). If all else fails, you can always select medium and hope for the best!
Behaviourally Yours,
PS If you missed the last edition, you can still check out why we go on spending sprees with our tax returns here.
Bad Decisions Podcast
Learn more about Anchoring in episode 7 of the Bad Decisions podcast.
Got a question?
Is there something you’ve always wondered about?
Send it through to AskDan@hardhat.com.au
Want more?
Check out Mi-3’s write up on DocuSign’s Andrea Dixon and Dan Monheit’s keynote presentation at the LinkedIn B2B Next summit stage here.
