Behavioral Anchoring in Product Management
What factors affects our decisions? Are we rational? And how easy is it really to change how we perceive any given product?
I frequently seek out new podcasts within the tech/business/process sphere. My latest hit has been subscribing to the Freakonomics podcast by Levitt and Dubner. Through slightly odd topics such as parenting, family firms, suicide rates and the value of quitting, these guys has a very inspiring and thought provoking angle on economics and how we behave.
There is hardly any breaking news in the statement that a lot of the stuff (other) people say and do does not make a lot of sense. Nevertheless most of us are raised on a doctrine of rationality. We raise our kids with principles of fairness, optimal decision making trying to achieve the highest possible outcome of utility for everybody (ideally).
I have found behavioral economics and the art of making irrational decisions very intriguing and a field from which I assume we can harvest much wisdom into the art of product management and many other aspects of life that requires us, or somebody else to make a decision. In the months (years?) to come, I plan to blog on some very interesting subtopics in this field.
One example is the concept of anchoring, which is a psychological tool which can be used to influence our perception of the object, or the objects value. Carefully exposing the object in a given setting will shape how we think about it. Sort like first-impressions that last (yes that applies to a wider range of problems than figuring out what to wear at the party..). Basically it makes no sense that I would be affected by what I would be willing to pay for a nice dinner This is defined as ‘arbitrary coherence’:
The basic idea of arbitrary coherence is this: although initial prices are ‘arbitrary’, once those prices are established in our minds, they will shape not only the present prices, but also future prices.Dan Ariely
Dan Ariely ran experiments to test this assumption, and found that any question, _any_ kind of question, would have created the anchor. Although this does seem kind of odd in general, and I suspect that it does matter who probes you with the initial question. What does matter is when we put what ever topic or product we have been primed in, into relation with something similar(ish). Thus actually anchoring takes place, not upon exposure, but upon relating and comparing.
So to successfully anchor anybody…you need to provide something to compare the anchoring to. In a purchase flow, the anchoring might take place on the entry page where you are presented with a set of ‘offers’, but when viewing a given (discount) hammer at a seemingly good price point, and then in parallel being presented with another hammer, of a better brand and only slightly more expense…so attractive, must buy…you’ve been anchored.
As a product manager who deals with a very engaged crowd of voluntary community moderators, I pay attention to how I present ideas and new features (well…who doesn’t?). Realizing that any new part may both be compared to existing anchors, but also actually establish new anchor points. Essentially it becomes very difficult to ever isolate and completely understand feedback on any given feature point, as the anchor chain may be incomprehensible. Instead we may want to work more with expectations. Thus I’ve begun drafting a post on how we can prime the power of expectations, and how this can relate to anchoring, stay tuned
(BTW I recommend Dan Arielys book Predictably Irrational, and the Freakonomics podcast!)
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