1 00:00:09,360 --> 00:00:13,280 Speaker 1: Hey, everyone, welcome to another edition of Wisdom Wednesdays. Now, 2 00:00:13,360 --> 00:00:17,439 Speaker 1: before we get into this week's Wisdom Wednesday, a couple 3 00:00:17,480 --> 00:00:19,919 Speaker 1: of announcements, one of which is pretty excact. Say, they're 4 00:00:19,920 --> 00:00:22,160 Speaker 1: both pretty exciting. One is a little bit more exciting 5 00:00:22,200 --> 00:00:26,759 Speaker 1: than the other. My new book, The Hardiness Effect is 6 00:00:26,960 --> 00:00:31,520 Speaker 1: not on seal for pre order. You can buy it 7 00:00:31,640 --> 00:00:35,400 Speaker 1: on Amazon or if you live in Australia you can 8 00:00:35,520 --> 00:00:39,760 Speaker 1: buy it in book toopia dot com dot au and 9 00:00:39,800 --> 00:00:43,080 Speaker 1: it's got a twenty six percent discount, which I wasn't 10 00:00:43,120 --> 00:00:45,519 Speaker 1: even a whord off. So the full title love it 11 00:00:45,560 --> 00:00:49,680 Speaker 1: is The Hardiness Effect. Grow from Stress, optimize health and 12 00:00:50,000 --> 00:00:55,000 Speaker 1: live longer. And the second announcement is that I am 13 00:00:55,160 --> 00:00:58,240 Speaker 1: shortly going to be changing the name of the podcast 14 00:00:58,880 --> 00:01:04,080 Speaker 1: from the Poultale Podcast to the Heartiness Lab Podcast. And 15 00:01:04,120 --> 00:01:09,000 Speaker 1: that is really to coincide with the activation of the 16 00:01:09,000 --> 00:01:12,600 Speaker 1: Hardiness Lab with my old mate, Professor Grant Schofield. And 17 00:01:12,600 --> 00:01:15,440 Speaker 1: if you're a longtime listener, you will have heard Grant 18 00:01:15,520 --> 00:01:18,959 Speaker 1: on the podcast probably four times I think, and we 19 00:01:19,120 --> 00:01:22,960 Speaker 1: are collaborating to research all things hardiness. And if you 20 00:01:23,040 --> 00:01:26,039 Speaker 1: really want to know what that's about, get in and 21 00:01:26,080 --> 00:01:29,760 Speaker 1: pre order the book. On book Toopia or on Amazon, 22 00:01:30,560 --> 00:01:34,280 Speaker 1: and I enough of the plugs, let's get on with 23 00:01:34,440 --> 00:01:38,240 Speaker 1: the podcast. So today I'm going to talk about something 24 00:01:38,280 --> 00:01:42,920 Speaker 1: that actually came across today and just remembered about it. 25 00:01:43,760 --> 00:01:47,119 Speaker 1: And it's something that happens almost every time you make 26 00:01:47,200 --> 00:01:50,040 Speaker 1: a purchase, or quite often not every time, but it's 27 00:01:50,080 --> 00:01:53,680 Speaker 1: whether you're buying popcorn at the movies, a coffee or tea, 28 00:01:53,840 --> 00:01:57,560 Speaker 1: a holiday package or a phone plan. Now you probably 29 00:01:57,640 --> 00:02:01,080 Speaker 1: think when you're making these decisions of if there's different 30 00:02:01,120 --> 00:02:04,640 Speaker 1: things on offer, that you're making a rational choice. But 31 00:02:04,760 --> 00:02:08,280 Speaker 1: the truth is that often you're being nudged, coaxed, and 32 00:02:08,400 --> 00:02:14,799 Speaker 1: sometimes outright who dwinked by some very clever psychological tactics. 33 00:02:15,200 --> 00:02:18,200 Speaker 1: And two of the big ones that marketers use are 34 00:02:18,240 --> 00:02:22,440 Speaker 1: the decoy effect and anchoring bias. So let's start with 35 00:02:22,480 --> 00:02:26,720 Speaker 1: the decoy effect. So imagine you're at the cinema and 36 00:02:27,000 --> 00:02:29,960 Speaker 1: you go to buy some popcorn and you see a 37 00:02:30,080 --> 00:02:33,280 Speaker 1: small bucket of popcorn for four bucks and a large 38 00:02:33,280 --> 00:02:36,760 Speaker 1: one for seven bucks, and you're leaning towards the small, 39 00:02:37,400 --> 00:02:40,600 Speaker 1: and then you see a medium one for six dollars fifty. 40 00:02:41,040 --> 00:02:44,840 Speaker 1: Now suddenly the large one seems like a no brainer, 41 00:02:45,120 --> 00:02:47,760 Speaker 1: and you walk away patting yourself on the back, thinking 42 00:02:47,800 --> 00:02:51,280 Speaker 1: that you're a savvy shopper, But you've just been played. 43 00:02:51,800 --> 00:02:55,600 Speaker 1: The medium one wasn't really there to be sold. It's 44 00:02:55,639 --> 00:02:59,240 Speaker 1: a decoy designed to make the large one look like 45 00:02:59,320 --> 00:03:03,239 Speaker 1: a bargain. And this is done with lots of different products. Now, 46 00:03:03,320 --> 00:03:09,120 Speaker 1: probably the most famous demonstration of this decoy effect was 47 00:03:09,160 --> 00:03:13,520 Speaker 1: actually an experiment run by the behavioral economist Dan Arley, 48 00:03:13,639 --> 00:03:16,800 Speaker 1: and I read about it in his book is brilliant 49 00:03:16,800 --> 00:03:21,359 Speaker 1: book actually, which is called Predictably Irrational. The hidden forces 50 00:03:21,360 --> 00:03:24,359 Speaker 1: that sheep are decisions and it's a book that everybody 51 00:03:24,400 --> 00:03:27,639 Speaker 1: should read. But anyway, he did this real world experiment 52 00:03:28,919 --> 00:03:34,240 Speaker 1: were he persuaded the magazine The Economist to enable him 53 00:03:34,280 --> 00:03:40,600 Speaker 1: to control or to set some pricing for them, and 54 00:03:40,960 --> 00:03:46,600 Speaker 1: he offered web only subscription for fifty nine bucks, then 55 00:03:46,640 --> 00:03:50,920 Speaker 1: a print only subscription for one hundred and twenty five bucks, 56 00:03:51,400 --> 00:03:55,280 Speaker 1: and a web and print subscription for one hundred and 57 00:03:55,280 --> 00:03:59,560 Speaker 1: twenty five bucks. Now, the print only option makes no 58 00:03:59,640 --> 00:04:02,760 Speaker 1: sense whatsoever. Why would you pay one hundred and twenty 59 00:04:02,800 --> 00:04:05,320 Speaker 1: five bucks for print only when you could get web 60 00:04:05,360 --> 00:04:09,000 Speaker 1: in print for the same price. But when he had it, 61 00:04:09,080 --> 00:04:12,800 Speaker 1: there most people went for the Web in print coumbo. 62 00:04:13,400 --> 00:04:16,080 Speaker 1: But then he run the experiment where he took it 63 00:04:16,120 --> 00:04:18,839 Speaker 1: away and only offered the web only and the Web 64 00:04:18,880 --> 00:04:22,880 Speaker 1: in print, and far fewer bought the Web in print, 65 00:04:23,240 --> 00:04:25,960 Speaker 1: and he showed that the decoy had done its job, 66 00:04:26,480 --> 00:04:31,000 Speaker 1: steering people towards the most profitable choice without them even 67 00:04:31,120 --> 00:04:35,520 Speaker 1: realizing it. Now, let's talk about another one that's quite similar, 68 00:04:35,720 --> 00:04:40,159 Speaker 1: is called anchoring bias, and that's our tendency to rely 69 00:04:40,400 --> 00:04:45,200 Speaker 1: too heavily on the first number we see when making decisions. 70 00:04:45,520 --> 00:04:48,400 Speaker 1: So let's say you're looking at you're looking at buying 71 00:04:48,400 --> 00:04:52,920 Speaker 1: a fancy watch, and the tag says was twelve hundred bucks, 72 00:04:53,240 --> 00:04:56,640 Speaker 1: now four hundred and ninety nine. Now that twelve hundred 73 00:04:56,640 --> 00:05:00,120 Speaker 1: figure might be plucked out of thinner, but it's and 74 00:05:00,160 --> 00:05:04,880 Speaker 1: I anchored in your brain as the real original value, 75 00:05:05,400 --> 00:05:08,440 Speaker 1: making the four hundred and ninety nine dollars one look 76 00:05:08,600 --> 00:05:12,080 Speaker 1: like a steal. And this trick works even when the 77 00:05:12,240 --> 00:05:15,720 Speaker 1: anchor is a relevant right. So studies show, and I've 78 00:05:15,720 --> 00:05:19,640 Speaker 1: actually run experiments on this in the workshop, that if 79 00:05:19,720 --> 00:05:24,520 Speaker 1: you get somebody to think about a random number, or 80 00:05:24,600 --> 00:05:27,840 Speaker 1: in these studies, you spin a wheel and there's a 81 00:05:27,960 --> 00:05:32,760 Speaker 1: random number that's generated, and they see that number before 82 00:05:32,920 --> 00:05:36,839 Speaker 1: they make a guess about a question or statistic. Their 83 00:05:37,040 --> 00:05:40,800 Speaker 1: guess is skewed towards the number you saw. And you 84 00:05:40,839 --> 00:05:44,120 Speaker 1: can run two different experiments, and I've run this before. 85 00:05:45,400 --> 00:05:49,040 Speaker 1: So you divide a room into three groups and they 86 00:05:49,120 --> 00:05:52,200 Speaker 1: get three different Those groups get different bits of paper 87 00:05:52,240 --> 00:05:55,080 Speaker 1: and they're all about guessing the length of the Mississippi River. 88 00:05:55,440 --> 00:05:57,120 Speaker 1: So one of them, it's just a piece of paper 89 00:05:57,160 --> 00:05:59,120 Speaker 1: and it says what's the length of the Mississippi River? 90 00:06:00,080 --> 00:06:05,040 Speaker 1: And what happens is the median estimate is about eight 91 00:06:05,080 --> 00:06:08,880 Speaker 1: hundred miles. This is an experiment done by Dan Canneman, 92 00:06:09,000 --> 00:06:12,040 Speaker 1: and I've actually repeated this experiment, right. So the first 93 00:06:12,040 --> 00:06:14,880 Speaker 1: one where you just straight out ask them the length 94 00:06:14,920 --> 00:06:18,640 Speaker 1: of it in miles, the median answers eight hundred. Then 95 00:06:18,720 --> 00:06:21,599 Speaker 1: a second group has a piece of paper and it's 96 00:06:21,640 --> 00:06:25,800 Speaker 1: two questions. Is the Mississippi River greater or less than 97 00:06:25,880 --> 00:06:28,360 Speaker 1: seventy miles long? The second question is what is the 98 00:06:28,440 --> 00:06:32,200 Speaker 1: length of the Mississippi River. The third group gets a 99 00:06:32,240 --> 00:06:35,520 Speaker 1: different sheet of paper. Is the Mississippi River greater or 100 00:06:35,600 --> 00:06:39,320 Speaker 1: less than two thousand miles long? And then the second 101 00:06:39,400 --> 00:06:42,000 Speaker 1: question is what is the length of the Mississippi River? 102 00:06:42,200 --> 00:06:45,200 Speaker 1: So all three groups are guessing. Right. The first group, 103 00:06:45,240 --> 00:06:48,479 Speaker 1: whether you just asked them what is the length? Their 104 00:06:49,120 --> 00:06:53,559 Speaker 1: median the middle estimate is eight hundred miles. The second group, 105 00:06:53,880 --> 00:06:57,240 Speaker 1: where you anchor that with the question is a greater 106 00:06:57,320 --> 00:07:00,760 Speaker 1: or less than seventy miles long, they actually guess and 107 00:07:01,120 --> 00:07:04,200 Speaker 1: the median guess is three hundred miles. And then the 108 00:07:04,240 --> 00:07:08,279 Speaker 1: third group, where the anchoring question is is the Mississippi 109 00:07:08,400 --> 00:07:11,760 Speaker 1: River greater or less than two thousand miles long? Their 110 00:07:11,920 --> 00:07:16,960 Speaker 1: median answer for the length is actually fifteen hundred miles. 111 00:07:17,320 --> 00:07:22,240 Speaker 1: So just that showed that putting a low anchor drives 112 00:07:22,280 --> 00:07:25,200 Speaker 1: it down than what people would actually guess, and a 113 00:07:25,320 --> 00:07:29,400 Speaker 1: high anchor actually drives it up. And it is being 114 00:07:29,640 --> 00:07:36,480 Speaker 1: widely replicated. So we are often duped by this anchoring tactic. Right, 115 00:07:36,880 --> 00:07:40,360 Speaker 1: So going back to that watch that twelve hundred dollars 116 00:07:40,480 --> 00:07:42,720 Speaker 1: was twelve hundred dollars is just an anchor's now four 117 00:07:42,840 --> 00:07:47,240 Speaker 1: hundred and ninety nine. And multiple supermarkets in Australia have 118 00:07:47,320 --> 00:07:53,120 Speaker 1: been shown they've been prosecuted for inflating prices. They was 119 00:07:53,160 --> 00:07:55,080 Speaker 1: originally this and then they drop it down, it was 120 00:07:55,160 --> 00:07:58,880 Speaker 1: never that price. All sorts of shops do this as well. 121 00:07:59,280 --> 00:08:02,640 Speaker 1: So you might be book in some travel and a 122 00:08:02,680 --> 00:08:05,600 Speaker 1: travel website might show you there's a luxury suite at 123 00:08:05,640 --> 00:08:09,040 Speaker 1: a ridiculous price, and that's right next to deluxe option 124 00:08:09,760 --> 00:08:13,920 Speaker 1: that's only slightly more than the standard, And the pricey 125 00:08:14,120 --> 00:08:17,200 Speaker 1: luxury suite suite is not there to be sold at all, 126 00:08:17,600 --> 00:08:22,400 Speaker 1: it's just to make the deluxe options seem irresistible. Now, 127 00:08:22,800 --> 00:08:25,640 Speaker 1: the thing about both of these tactics is that they 128 00:08:25,880 --> 00:08:29,280 Speaker 1: make you feel like you're making an informed choice, but 129 00:08:29,440 --> 00:08:34,679 Speaker 1: in reality, you're making a relative choice, not an absolute one. 130 00:08:35,080 --> 00:08:38,080 Speaker 1: Your brain is comparing options in front of you, rather 131 00:08:38,160 --> 00:08:41,200 Speaker 1: than asking do I even need this? And if I do, 132 00:08:41,320 --> 00:08:45,120 Speaker 1: what's at worth to me in isolation. So here's the takeaway. 133 00:08:45,679 --> 00:08:48,319 Speaker 1: Next time a deal feels too good to pass up, 134 00:08:48,559 --> 00:08:51,760 Speaker 1: strip away the context. Would you still choose it if 135 00:08:51,800 --> 00:08:55,360 Speaker 1: the other options weren't there? Would you still think five 136 00:08:55,480 --> 00:08:58,559 Speaker 1: hundred bucks was cheap if you'd never seen the original 137 00:08:58,679 --> 00:09:02,520 Speaker 1: twelve hundred dollars price. And if anybody's ever been to 138 00:09:02,679 --> 00:09:06,480 Speaker 1: countries where they haggle, and you will see this over 139 00:09:06,520 --> 00:09:10,320 Speaker 1: and over again, whether it's Asia, Middle East, or South America. 140 00:09:10,840 --> 00:09:14,120 Speaker 1: You will see going up and you ask the price 141 00:09:14,160 --> 00:09:18,040 Speaker 1: of something, and you'll see them start with a ridiculously 142 00:09:18,120 --> 00:09:20,640 Speaker 1: high price, and then you start to haggle, but they've 143 00:09:20,720 --> 00:09:23,680 Speaker 1: actually set the anchoring. So I'd actually taught my kids 144 00:09:23,679 --> 00:09:27,320 Speaker 1: when we were traveling. When that happens, your first price 145 00:09:27,440 --> 00:09:31,600 Speaker 1: goes really low so that you set a counter anchor, 146 00:09:32,080 --> 00:09:35,280 Speaker 1: and then you meet somewhere in the middle. So it's 147 00:09:35,320 --> 00:09:40,040 Speaker 1: a really interesting little experiment. So remember in marketing, the 148 00:09:40,080 --> 00:09:43,760 Speaker 1: most effective way to guide you isn't to take away 149 00:09:43,800 --> 00:09:47,719 Speaker 1: your freedom of choice. It's to make you feel like 150 00:09:47,760 --> 00:09:52,320 Speaker 1: you're making a free choice while quietly nudging you exactly 151 00:09:52,400 --> 00:09:55,000 Speaker 1: where you want you to go. So the key here 152 00:09:55,440 --> 00:10:00,640 Speaker 1: is to be curious and skeptical. Catch you next time.