Fifteen cognitive biases that market researchers need to know

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on Monday, 04 March 2013 in Market Research

 

The human brain is arguably the most complex object in the known universe. We have evolved brains that are superbly adapted to deal with complex environmental situations. But that doesn't mean that our brains don’t have limitations. For a start we are not particularly quick; try doing complex sums faster than a calculator; and our ability to remember large amounts of factual information is often hopeless; do you remember the last number you dialled?

Moreover, we are subject to certain cognitive biases; those really peculiar inconsistencies in thinking that cause us to make irrational decisions and take questionable actions. Here are several of the most common cognitive biases that anyone who measures customer feedback should know and consider when evaluating what customers have said or done.

Before doing this let’s first distinguish between cognitive biases and logic errors. A logic error is a fault in logical reasoning, for example, by basing an argument on factors that are not really related as one assumes. A cognitive bias on the other hand, is a genuine deficiency or limitation in thinking, for example, a flaw in judgment based on mistaken personal frames of reference.

Psychologists have long wondered why cognitive biases exist. Some believe these help us process information more efficiently, especially in dangerous situations. The argument is that you don’t need to consider all factors when escaping from danger; only the most familiar ones or those which the brain decides will lead to the quickest escape.

Still, cognitive biases in other situations lead us to make big mistakes in non life-threatening situations. We may all be prone to such errors in judgment, but at least if we are aware of them we can take them into account when understanding others. Here are some important ones to keep in mind.

Confirmation Bias

People love to agree with people who agree with them. It’s why they tend to associate with others who hold similar views and tastes. We tend to dislike individuals, groups, and situations that make us feel uncomfortable or insecure about our views – a feature labelled as cognitive dissonance. This mode of behaviour results in confirmation bias – the often unconscious act of referring only to those perspectives that fuel our pre-existing views, while at the same time ignoring or dismissing opinions — no matter how valid — that threaten our own view.

In-group Bias

Somewhat similar to the confirmation bias is the In-group bias – an expression of our inborn tribalistic tendencies. It means that we prefer to form tighter bonds with people in our own group and makes us suspicious, fearful and even hostile to others. Ultimately, the In-group bias causes us to overestimate the abilities and value of our immediate circle at the expense of people we don’t really know, who may actually be better able to help.

Gambler’s Fallacy

It’s called a fallacy, but it’s really an error in our thinking. People tend to put a lot of weight on past events, believing that they will somehow influence future outcomes. The classic example is coin-tossing. After flipping five heads in a row, our tendency is to predict an increase in the odds that the next toss will be tails. But in reality, the odds are still 50/50. As statisticians know, the outcomes in different tosses are statistically independent and the probability of any outcome is still 50%.

Positive Expectation Bias

This is closely related to Gambler’s fallacy and seems to fuel many gambling addictions. It’s the sense that our luck has to eventually change and that good fortune is on the way. It also contributes to the “hot hand” misconception, namely, that the next hand of dealt cards will be the winning one. Similarly, it’s the same feeling we get when we start a new relationship that leads us to believe it will be better than the last one.



Post-Purchase Rationalization

Do you remember the time you bought something totally unnecessary or expensive and then you rationalised the purchase so much that you convinced yourself it was a great buy all along. That’s post-purchase rationalization in action — a mechanism that makes people feel better after they make poor decisions; especially at the checkout. It is also known as Buyer’s Stockholm Syndrome.

Probability Neglect

Very few people worry about getting into a car but many of us experience great fear about boarding an airplane. Flying, quite obviously, is an unnatural and seemingly dangerous activity. Yet virtually all of us know that the probability of dying in a car accident is much higher than getting killed in a plane crash — but our brains won’t release us from this unnatural logic. Probability neglect leads us to overstate the risks of relatively harmless activities, while forcing us to overrate more dangerous ones.

Observational Selection Bias

This is the common event of suddenly noticing things we didn’t notice before — making us wrongly believe that the frequency has increased. The classic example of this is after we buy a new car. Suddenly we start to see the same car virtually everywhere. A similar effect happens to women who suddenly notice a lot of other women wearing the same dress as them.  It’s not that these things are happening more frequently, it’s that we have registered the item in our mind, and in turn, are noticing it more often. The problem is that people don’t recognize this as a bias and actually believe these items or events are happening with greater frequency. It also leads to the feeling that the appearance of certain things or events couldn’t possibly be a coincidence, even though it is.

Status-Quo Bias

Most people tend to be wary of change, which often leads us to make choices that guarantee that things remain the same, or change as little as possible. This has important consequences in everything from politics to shopping. We like to stick to our routines, political parties, things we buy and our favourite meals at restaurants. Part of the negative impact of this bias is the false assumption that another choice will be inferior or make things worse. This is one of the main reasons why change in society is so slow to happen.

Negativity Bias

People pay more attention to bad news or events — and it’s not just because we are naturally pessimistic. Sociologists speculate that it’s because we have selective attention and that, given the choice, we perceive negative news as being more important, interesting or newsworthy. We also tend to give more credibility to bad news, perhaps because we’re suspicious of claims to the contrary. Unfortunately we run the risk of dwelling on negativity at the expense of genuinely good news. Consequently even though crime, violence, disease, war and other injustices are generally declining in the world today; most people still argue that things are getting worse.

Bandwagon Effect

People love to go with the crowd. When the masses start to pick up on something our individual minds seem to shut down and enter into a kind of “groupthink” mentality. But it doesn’t have to be a large crowd or a whole nation; it can be very small groups, like a family or even a small group of office workers. The bandwagon effect is what causes certain (sometimes strangely odd) behaviours or norms to propagate among groups of individuals — regardless of their sense or implication. Much of this bias stems from our integral desire to fit in, conform and obtain the approval of others.



Projection Bias

As individuals it is very difficult for us to look outside of our own consciousness, preferences and experience. We tend to assume that most people think just like us — though there may be no reason for it. This bias often leads to a related effect known as the false consensus bias where we tend to believe that people not only think like us, but that they also agree with us. It’s a bias where we overestimate how typical and normal we are, and assume that a consensus exists when there may be none. Moreover, it can also create the effect where the members of a radical or fringe group assume that more people on the outside agree with them than is the case.

The Current Moment Bias

People have a really hard time imagining themselves in the future and altering their behaviours and expectations accordingly. Most of us would rather experience pleasure now, whilst deferring the unpleasant for later. This bias is of particular concern to economists in the current financial climate, typified by our unwillingness to spend money now and saving for later. But if e don’t spend how can we stimulate the economy? Another example is food. In a study looking at food choices for the coming week, 74% of participants chose fruit. But when the food choice was for the current day, 70% chose chocolate.

Anchoring Effect

This is a tendency to compare and contrast only a limited set of items. It’s called the anchoring effect because we tend to fixate on a value or number that in turn gets compared to everything else. The classic example is a sale item in store; we tend to see (and value) the difference in price, but not the overall price itself. This is why some restaurant menus feature very expensive entrees, while also including more (apparently) reasonably priced ones. It’s also why, when given a choice, we tend to pick the middle option — not too expensive, and not too cheap.

Decision Event Bias

People find it really difficult to imagine when they may do something that is not routine or urgent or when they haven’t already committed to doing it. Thus asking them what they might do and when they might do it, nearly always lead to the wrong answer. An example is asking someone if they are likely to buy a new car and how likely they are to buy it in the next three, six or twelve months. Unless the person is already considering this action and is actively engaged in the decision-making process they will usually underestimate the length of time, pointing to an earlier demand where there is none.

Social Desirability Bias

This is the tendency of people to respond to questions in manner they think will make them more acceptable or pleasing to others. It can take the form of over-reporting "good behaviours" or under-reporting "bad" or undesirable behaviours; especially in the context of what they believe are socially acceptable norms. An example of this is sexual or stimulant-taking activity. Whereas men tend to inflate the numbers, women tend to underestimate theirs. In either case, the results from both groups are likely to be highly distorted by this bias.

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