The Value Perception Dilemma

A few years ago, Rory Sutherland, Vice Chairman at Ogilvy and an enthusiastic practitioner of behavioral science, commented on a peculiar aspect of human value perception. He used the example of the British post office to illustrate his point: people often neglect the value and benefits of the highly-efficient mail service that is capable of delivering lovely postcards across the city for £1.85. Imagine you had to do this yourself: it would deprive you of the best hours in the day and cost you about £25 in transportation. Nonetheless,

“A service for which I might willingly have paid £10, were no cheaper alternative to exist, is sold to me for £1.85 – and yet I do not walk out of the post office punching the air with the feeling that I just saved £8.15 on a £10 good. Instead, I just think, ‘Hey, £1.85 – that’s what a package costs to send, so I guess that’s what it’s worth, meh.’” 1

On the other hand, a lot of us have become devoted customers of name-brand coffee franchises, willing to defend their elaborate drinks with fancy names—even though we could just as easily make coffee at home for as little as a tenth of the price.

From a strictly rational standpoint, i.e. an objective cost-benefit analysis, the price we are willing to pay for each of these two goods does not make any sense. Yet, as we will see in the examples ahead, cognitive bias can arise from the particular context associated with artisanal coffees—and lacking at the post office—that pushes us to different perceptions.

Our brain’s dual systems

After years of behavioral science experiments, Daniel Kahneman and Amos Tversky identified two modes of processing that govern our decision-making processes. Simply named “System 1 and System 2,” they represent cognitive responses triggered by different contexts and the individual’s awareness of their own decision-making processes.

System 1 symbolizes an “autopilot mode,” where decisions are made below the level of consciousness: when this system is dominant, we tend to make choices based on availability, representativeness, and other mental shortcuts, which in turn lead us to gravitate towards fast, intuitive, and effortless options. System 1 is also associated with emotional responses, on which we often rely to reach quick conclusions. System 2, on the contrary, is a deliberative mode that looks for facts, logic, and consistency. It plays an investigative role, running cost-benefit analyses and seeking to make choices based on reason.

Although we generally see ourselves as essentially logical beings, it is when System 1 is active that the “magic,” as Rory Sutherland defines it, happens.2 In his latest book, Alchemy: The Surprising Power of Ideas That Don’t Make Sense, he evokes a paradigm shift towards psychological and behavioral approaches for everyday problems, as states his 4th rule of alchemy:

“The nature of our attention affects the nature of our experience.”

With this in mind, he emphasizes how we underestimate System 1’s share in our decision-making processes, thus leading us to design solutions and responses tailored to the wrong kind of brain. Our “fast” mode is powerful, and has control over our behavior most of the time. In fact, it cannot be shut off, and we have to exert a deliberate (and somtimes great) effort to activate System 2 and delegate choices to it.3 Still, some companies are narrowly focused on System 1, focusing all of their branding, user experience, and advertising efforts instead on appeals to plain rationality.

Context and value perception

In addition to our dual cognitive systems, there is a fundamental element of influence that can distort decisions in many different ways: context. In his best-seller Predictably Irrational, Dan Ariely demonstrates how we rely on inconsistent principles to make decisions.4

In a field experiment conducted with Kristina Shampanier and Nina Mazar, Ariely set up a table at a public building and offered two kinds of chocolate: Lindt truffles for 15 cents and Hershey Kisses for one cent. Each “customer” could only choose one of them.

The results were not surprising. As people compared price and quality, about 73% opted for the truffles and 27% for the Kiss. However, the experimenters then decided to test if a “free” condition could change those preferences by reducing the price of both chocolates by one cent—Lindt truffles were then sold for 14 cents and the Hershey Kiss was given for free. Even though the price of each option had decreased by the same amount, the change had a major impact on people’s preferences: Now only 31% opted for the truffles.5 Voilà!

Another experiment by Princeton psychologists John Darley and Daniel Batson illustrates the power of another contextual element: time pressure.6 In this study, 40 trainee Catholic priests completed a questionnaire about their motivation to join religious services. Right after that, they were asked to record a five-minute talk. Priests were then split into three different groups, where they were put under different levels of time pressure. Individuals from the first group, the “high-hurry” condition, were told “Oh, you’re late. They were expecting you a few minutes ago. The assistant should be waiting for you so you’d better hurry.” In the second group, the “intermediate-hurry” condition, arrivals were told, “The assistant is ready for you, so please go right over.” And finally, in the “low-hurry” condition, the message was, “It’ll be a few minutes before they’re ready for you, but you might as well head on over. If you wait over there, it shouldn’t be long.”

As the participants made their way to their destination, they passed a confederate (somebody who was secretly in on the experiment) pretending to be in distress. Darley and Batson wanted to investigate how many trainees would stop, and if time pressure would influence helping behavior.

The results confirmed their hypothesis: in the high-hurry condition, only 10% of the participants stopped, compared to 45% in the intermediate-hurry condition and 63% in the low-hurry condition. As Richard Shotton explains, “The situation, not the person, determined the behavior.”7

Customer experience and value perception

Back to our first example. Both the postal service and the gourmet coffee franchise work their messages towards the customers, but in doing so, they appeal to different systems.

The first one, the postal service, is focused on a more rational approach, emphasizing efficiency and speed. Even though this approach is valid, it depends, as we have seen above, on a specific level of processing. If the message recipient is not in the right state to parse this information deeply (System 2), those benefits could potentially be bypassed—customers will not even think about them.

Remember your last experience with the postal service: did you pay attention to any details about the postal service and the journey your mail would soon be taking, or were you simply eager to leave as soon as your package was posted? I bet you were staring at your phone for most—if not all—of the time you spent there. When we’re in autopilot mode like this, it is hard for us to perceive any value in the services we use.

On the other side, the gourmet coffee place provides its customers with an aura of luxury, relaxation, and detachment from “the outside world.” As you walk into the shop, you are greeted by a combination of aromas, sensations, and memories. Buying a drink is an immersive process, embedded in a specific culture. We follow a particular set of social norms that guide our movements, perceptions, and even our vocabulary—coffee comes with its own fancy lingo.8,9 You are not just buying a beverage; you are part of a tribe of coffee connoisseurs, relishing a Venti-sized, extra-dry latte. It does not even matter how much it costs, does it?

Hidden features, hidden perks, hidden… gorillas?

Back in 1999, psychologists Daniel Simons and Christopher Chabris ran an experiment to test the extent to which we are unaware of environmental details.10 They showed participants a video where two groups of people, one in white shirts and one in black shirts, are moving around and throwing basketballs back and forth. They asked volunteers to count the number of times the people in white shirts passed the ball. The task demands a high level of attention, in order to avoid being distracted by the players in black shirts. Try it for yourself:

Did you notice the trick? In the middle of the experiment, a person in a gorilla suit walks across the scene. If you missed it, you’re not alone: although most people could provide the right number of ball passes, almost half of the participants did not notice the gorilla.

This paper demonstrates that we often do not detect large changes to objects and scenes—what Simons & Chabris called “change blindness.” Furthermore, and as the authors stated, the “likelihood of noticing an unexpected object depends on the similarity of that object to other objects in the display and on how difficult the priming monitoring task is. Interestingly, the spatial proximity of the critical unattended object to attended locations does not appear to affect detection, suggesting that observers attend to objects and events, not spatial positions.”

In other words: even if something noteworthy is taking place around us, we may not process it if our attention is on something else. This is relevant as a lot of critical characteristics—and benefits—from the postal service can easily go unnoticed, even when they are clearly mentioned to us. As Daniel Kahneman once said, “What you see is all there is.”11

Other cognitive biases can further serve to distract us from important (but uninteresting) information. For example, the halo effect can often prevent us from thinking critically about other companies, brands, products, services, and other people. We form impressions based on a single aspect that is often unrelated to the main part of it—for example, when a product is aesthetically pleasing, we might also perceive it to be of higher quality, even if it isn’t really. Consequently, in places like the post office, spartan product design and an overall unengaging customer experience may lead us to a mistaken impression of this service as trivial and low-value.

Takeaways

Companies and brands can organize information and highlight aspects that will activate responses from one of our cognitive systems. Knowing which one of them to play to is a fundamental, though commonly unobserved, strategy to create value and guarantee it is perceived by customers. After all, this is not a self-evident aspect, especially if you are focusing your message on rational events alone.

Our example of the mail service could be improved by incorporating elements that grab our attention. In September 2020, for example, the Brazilian Post Service celebrated the day one of the country’s most famous writers, Clarice Lispector, would reach her centenary with a special stamp.12 Another interesting idea, this one associated with donation campaigns during Christmas time, was the creation of a mascot to promote a social service they have been running for the past thirty years, where thousands of kids from lower-income communities send letters to Santa Claus are converted in gifts that Santa himself takes to them.

One last example comes from Rory Sutherland’s popular TED Talk, when he recalls the British Post Office’s tremendous effort to improve their first-class mail success rate from 98% to 99%, an initiative that “almost broke the organization.”13 Sutherland points out that they could have achieved a better outcome by focusing on the perception average citizens had of the service: if you asked people on the street what percentage of first-class mail arrived the next day, most of them would likely give some number much lower than 98%. Raising the actual rate by 1% was probably much less effective than drawing people’s attention to the Post Office’s existing success.

In the age of countless stimuli vying for our attention, finding the right one to direct your customer’s focus towards represents one of the most important competitive advantages you can create.

Now, let me guess: you might be ready for a coffee.

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