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A key principle for persuasive decision interfaces is immediacy. The autopilot is strongly biased by the present, by what it perceives in the moment. Hence future consequences that are not yet perceivable have much less impact on our decisions. Value and costs are discounted by distance. For example, seeing a tiger far away triggers different responses compared with when it is close to us. In an experiment in 2010, neuro-economist Antonio Rangel from Caltech showed that people paid up to 60 per cent more for an item of fast food if the item was actually physically present compared with a visual or textual presentation. The study also found that if the item was presented behind Plexiglas, rather than being available for someone to simply grab, the willingness to pay was reduced. The shorter the distance, the higher the perceived value and the lower the perceived barriers to obtain it.
This holds true for distance in time as well. Getting ill in 20 years is not as threatening as having a headache tomorrow. We usually prefer smaller, more immediate payoffs to larger, more distant ones. The offer of £100 today may be preferred to the promise of one of £120 next year. Behavioural economists refer to this as 'hyperbolic discounting': we have a very high discount rate for the future compared with the here and now. This is why we discount the future very heavily when sacrifices are required in the present, such as stopping smoking or exercising more often. We recognize this from our own experience: we all know that we should adopt a healthier lifestyle in order to prevent illness in the future, but this consequence is not currently perceivable to us and, this allows us to opt for the cigarette and the beer because their value is available to us right now. This future discounting is the reason why we tend to spend more when using credit cards - the pain of paying is deferred to some future moment.
How can we make use of this in marketing? The automotive category is a good example where car manufacturers regularly create special offers - most of them are discount mechanisms. Fiat, for example, in 2012 addressed the future discounting of the autopilot very overtly. Their offer is that customers pay half of the purchase price now and then pay the second half in two years' time. In their TV ads they highlight the first payment (^5,900), thereby making the tangible cost low. The second cost is mentally discounted by the customer due to the time distance in the future.
A similar innovation called the 'gym pact' was created by behavioural economists at Harvard. They were addressing a well-known barrier: going to the gym regularly. Here, again, the benefit is future based, but we face behavioural and monetary costs in the present. The 'gym pact' changes the game. Members commit to a certain number of workouts per week. If they meet this commitment they have to pay a certain amount, but can also earn money back if they stick to their commitments, and they pay more if they miss them. So, if members don't behave as they intended then they increase their own costs today and, in so doing, also make the negative consequences, that were previously associated with the future, tangible today. Applying the basic principle of adding value and reducing cost by applying the 'immediacy' principle in this way to the membership mechanic works brilliantly.
If you think of promotions such as free prize draws, applying this principle can explain differences in responses.
DECODED: THE SCIENCE BEHIND WHY WE BUY
AUTHOR: Phil Barden
PUBLISHER: Wiley
PRICE: Rs 1,788
ISBN: 9781118345603
Reprinted by permission of publisher. Copyright Wiley India. All rights reserved.
