1. PCB M2 Cognitive Biases & Heuristics

Cognitive Biases & Heuristics

The mental shortcuts your audience is always running & how brands exploit (or build around them) these are the specific repeatable patterns or irrational thinking that run on top of that hardware

anchoring bias

the brain’s tendency to rely disproportionately on the first piece of information it receives when making subsequent judgements. The first #, word or image becomes the “anchor” & everything else gets evaluated relative to it

Anchor inch bias experiment

Kahneman & Tversky experiment: spun a wheel rigged to land on 10 or 65 & were asked how many countries there are in Africa. Those who landed on 65 guessed higher. The ANCHOR CONTAMINATED THE ESTIMATE

Pricing Anchors

setting ur reference point. Why the “original price” is crossed out and the discount is secondarily shown so the higher price is the anchor

Prestige anchors

lux brands putting the highest-end products in the front of the store or at the top of the website in order to recalibrate what feels like a normal price.

Menu Anchors

“Star” or “decoy” items to anchor. Wine lists do the same thing and forging goes to Santos’s the board

Anchoring in branding strategy

you want to control the anchor. Always allow “original price’ b4 discount if ur launching a new brand into a competetive market ur 1st impression is ur anchor.

The Framing Effect

ppl respond to identical info depending on how it’s presented the frame (context, wording, the comparison point changes the perceived meaning even when facts are the same. This has to do with somatic markers. It brain inflated relative to a reference point. Changing the reference point will change the reference point

Kahneman & the Framing Effect

”the surgery has a 90% survival rate” v ‘this surgery has a 10% mortality rate. System 1 responds to the emotional valence we of the frame b4 system 2 can do the math

Gain Frames v Loss Frames

gain frames work better for prevention-focused products & decisions where ppl feel optimistic. Loss frames work better for high-stakes decisions where ppl are already risk-aware. “Get whiter teeth” v “stop the decay b4 it’s too late” gain v loss.

Framing & Subscriptions

For less than a cup of coffee vs $5 a month ect. Spotify, Netflix, Saa

Framing in % v absolute #s

Pharma ads use relative risk reduction; drug safety studies use absolute #s eg: form 2 in 1000 to 1 in 1000 vs reduces risk by 50%

“Free to refuse” frame

Being given the perception of choice in the matter, actually increases compliance.

Brand positioning frames

“the last bag u will ever buy” for lux brands to justify expensive products, also Patagonia- > expensive becomes economical when framed against the cost of repeated cheap purchases.

Priming

exposure to 1 stimulus influences the response to a subsequent stimulus w/out the person being aware of the connection. (Pre-loading content)

Semantic activation spreading

brain is pattern-matching & prediction machine. Ever experience activates a web of associated concepts in memory & those associations stay slightly “warm” 4 a pd afterward making relalted concepts easier to access.

Priminng Experiment

mention words associated to age ands being elderly Dan ppl will walk down a hallway measurably slower due to priming.

Scent Priming

grocery stores pumping bakery scents & Abercrombie

Music Tempo Priming

Slow music = ppl browse longer & spend more; fast music = ppl move quicker & make more impulsive purchases

Color Priming

Red primes urgency & appetite (fast food). Blue primes trust & reliability (banks, tech, healthcare), green primes nature & health.

Website design priming

Showing a cozy couch-job a furniture website b4 product listings primes comfort-seeking which leads to increased purchasing of comfort related items. The visual context contaminates subsequent evaluation

Language Priming in Brand Copy

lux brands avoid cheapening and discount words and choose words like “accessible”, “entry point”, “thoughtfully priced”

Halo Effect

A (+) impression in one dimension of a person, brand, or product spreads to color impressions in all other dimensions, even unrelated ones.

Cognitive consistency in axn. It brain craves coherent, unified assessments. It’s cognitively expensive to hold nuanced, complex, dimension-specific evaluations of everything. It takes a strong first impression or a single salient attribute & uses it as a proxy for overall quality. (Ex: attractiveness)

Halo in B&M

Apple: iMac to all other products released in the time thereafter.

This only works when there’s some plausible fit between a celeb’s persona & the brand or there will be cognitive dissonance.

Packaging as a Halo

Studies show that better looking packaging leads customers to-order the produce higher in quality. Heavier wine bottles w/ premium label.

Store design Halos

Apple stores, Glossier flagships, Allbirds retail

Brands invested heavily in physical retail as a halo generator

Horn Effect

Halo in reverse. 1 (-) impression spreads & contaminates everything else

Review Halos

the volume of social validation creates a halo around even a slightly lower score

Mere Exposure Effect

• repeated exposure to a stimulus increases liking of that stimulus independent of any conscious evaluation or learning. Familiarity breeds preference

• Familiarity builds trust over time.

• Big brands running ad campaigns w/ no CTA are exploiting this

Exposure effect study

Exposure effect even works subliminally.

Showing ppl shapes so briefly they don’t notice will prefer those shapes

Exposure Effect with logos

mere exposure effect is how brand recognition becomes brand feeling (ex Nike swoosh reinforcing the association map)

Sonic Branding and Mere Exposure Effect

• Intel’s 4 chime

• Netflix “ta dum”

• McDonald’s ‘ba da ba ba ba”

• Auditory logos being built thru repetitive exposure triggers immediate brand association in System 1

• These sounds activate emotional memory centers

Retargeting Ads on Digital Platforms & Mere Exposure Effect

your consciousness may be creeped out but familiarity with the product that is slowly converted into preference

Retargeted ads convert 3-5x the rate of cold traffic

Downside of Mere Exposure Effect

MEE /\ liking up until a point the repetition induced boredom kicks in and liking \/

Social Proof

when uncertain about what to do, ppl look to the behavior of others as evidence of the correct axn. The more ppl are doing something, the more correct the thing appears to be

Book on Influence

Robert Cialdini

Identified social proof as 1 of the 6 fundamental principles of persuasion & it’s probably the most powerful of the 6 in the modern media environment.

Social Proof & uncertainty

• Social proof is is strongest when ppl don’t know what to do.

• Novelty, complexity, unfamiliar environments that spike social proof sensitivity.

• Every new product, brand & new category is fighting an uphill battle against the instinct to wait and see what other ppl do first

Exotic Social Proof

A credible authority validates the product. Perceived expertise transfers trust.

Celebrity Social Proof

aspirational figures using or enjoying a product operates as a halo transfer combined with the implicit logic that if someone successful chooses this, it’s probably a good choice

User Social Proof

reviews, ratings, testimonials from regular ppl. More persuasive than celeb endorsements for functional purchases because the relatability factor is higher.

Wisdom of crowds social proof

aggregate numbers. The crowd becomes the proof. Even if nobody verified its the users are happy, if the numbers of purchase ect are high enough, that’s perceived validation

wisdom of friends social proof

the most powerful variant

Amazon & Social Proof

its entire review architecture, customers also bought, frequently bought together

”bestseller” & “# 1” labels as social proof

Barnes & Noble’s bestseller shelf, Spotify’s “most streamed”, App Store “Editor’s Choice”

Social Proof w/ Waitlist & Launch queues

Ex: Robinhood.

Number of queue communicates demand = generating very demand and so forth

User-generated content social proof

costs the breach almost nothing to produce

Ex: Glossier building brand identity on real customer photos. Strategic and authentic

Empty restaurants v Full restaurants - social proof

Smart ones will place first tables by windows

Fake Social Proof

• Fake reviews, bought followers, inflated download #s

Brands do this because the mechanism works even if the proof is fabricated.

• The problem is 2fold:

  • It’s increasingly detectable

• When it gets exposed, the Horn Effect hits 2x as hard because it’s not a quality failure, it’s betrayal of trust

The short- term social proof gain almost never survives long-term discovery

Authority Bias

Ppl tend to follow the grasps credible, knowledgeable experts & to attribute greater accuracy to the opinions of perceived figures independent of actual expertise

Authority Bias & Stanley Milgram’s Experiment

Obedience experiment. In the 60s.

Ppl administered supposedly dangerous electric shocks to strangers under the instruction oof someone in a lab coat

Lab Coat Heuristic in Authority Bias

• ”clinically tested”

• “As seen in peer-reviewed research”

• This isn’t communicating scientific rigor, they’re triggering authority bias by borrowing the credibility of a trusted institution.

• The study doesn’t matter, the existence of it does.

Authority Bias in “as featured in” press logos

the bars of publication logos on creams websites are pure authority transfer

Authority Bias in LinkedIn

• titles, company pedigrees, years of experience fxn as authority signals that make ppl more receptive to fakers outreach, content, & pricing

• “Founder” v “consultant”

Authority Bias & thought leadership

• brands and individuals that consistently publish high—quality, genuinely useful content in their domain accumulate authority over time

• Demonstrating expertise

• Prove it enough times and you have built an authority signal that’s far more durable than any credential claim

Price as an Authority SIgnal

expensive is assumed to be expensive for a reason.

‘People who look like experts” trap

confident delivery, technical vocabulary, professional presentation

Cures authority even when substance doesn’t warrant it. Ba

Bandwagon Effect

• People adopt beliefs, behaviors, & purchases because urges are doing so. This is independent of their own assessment of the underlying merits. Popularity becomes self- reinforcing

• Social proof’s aggressive cousin

• Occurs without conditions of uncertainty.

• Pull of the crowd is strong enough to override existing preferences

• The mechanism is 1) partly informational (everyone’s doing it maybe I’m missing something) & 2) partly normative (i want to be part of the group)

• Normative dimension is important because it introduces social identity

Bandwagon Effect & Trending Sections

• Twittter trending topics

• TikTok’s FYP

• Spotify’s trending charts

• Google Trends

• Amazon’s ‘Movers & Shakers’

Bandwagon Effect & Limited Time Viral Moments

when something catches cultural fire, brands rush to align with it

Free distribution

Bandwagon Effect & ”everyone’s switching to [ ]”

The implicit social cost of being the person who didn’t switch

In-Group Bias

Ppl favor members of their own group over outsiders in evaluations, trust, resource allocation & purchasing decisions.

Henri Tajfel & In-Group Bias

• Social Identiy Theory (1970s)

• Experiment: Red team & blue team arbitrary grouping still showed in-group within minutes.

In-Group Bias in B&M

• Harley-Davidson

• Apple v PC

• FUBU

• Niche Communities work on this principle (Supreme, Yeti, Arc’teryx

• Political & values-based positioning (Patagonia)

• “Insider language” tactic (Starbucks, CrossFit)

Loss Aversion

The pain of losing something is psychologically approximately 2x as powerful as the pleasure of gaining something of equivalent value

Kahneman & Tversky Loss Aversion Experiment

flipping a coin betting $100 was only an accepted offer when the reward amounted to $200

Loss Averssion in B&M

• Free trials (start for free makes you feel like you already own it)

• “Don’t miss out” (insurance almost entirely operates this way) the gain frame is far weaker than the loss frame

• Loyalty Programs (loosing gold status ect. Popular with Airlines)

Endowment Effect

• People assign greater value to opportunities, objects, and experiences that are rare & becoming rare. Scarcity signals desirability & drives urgency

• 2 Mechanisms:

  • 1) informational: scarce because lots of people wanted it social proof (Cluster 1)

  • 2) loss aversion: a scarce thing that disappears is a loss of something u could have had

Scarcity Bias Cialdini Research

People valued same cookies more when there were 2 in the jar vs 10

Scarcity Bias in B&M

• “only 3 left in stock” Amazon ect (not even necessarily true)

• Limited edition drops: Supreme

• Limited-Time offers: scarcity applied to time instead of qty

Manufactured scarcity vs genuine scarcity

Kylie Lip Kit (whether engineered or not,, the effect = demand exceeded supply publicly, making product feel more desirable, dreives demand = justifying higher demand on resale market

Exclusivity as permanent scarcity

• lux brands don’t do sales

  • Birkins have waiting lists, relationship requirements with sales reps = perpetually rareS

Such Cost Fallacy

• Ppl continue investing in a failing course of axn because of the resources (time $, effort) already invested rather than evaluating future costs rationally

• loss aversion applied to past investments

• “How do i avoid feeling like all that past investments was wasted”

• Investment already gone is called sunk cost

Sunk Cost in B&M

• Subscriptions continuations- staying subscribed to services not being used since they’d ready paid (ex: the gym)

• Extended product ecosystems (apple)

• Free-to-pllay gaming (adds on a paid feature)

  • “You’ve come so far” loyalty messaging: brands that show your progress, your history, accumulated points & milestones

Status Quo Bias

• Ppl prefer the current state of affairs & tend to experience any change from it as a loss. Inertia is he default & the brain requires significant motivation to overcome it

  • This is loss aversion meeting uncertainty aversion

Status Quo Bias in B&M

• Default settings are of the most powerful and most studied application of SQB

• When organ donation was opt out rates climbed to 90% vs 15-20%

• Auto Renewal subscriptions

  • “Switching is a hassle” (Banks)

Challenger Brand Strategy & Status Quo Bias

• You’re asking them to overcome inertia

  • Challenger brands need a loss frame (you’re current solution is costing you $X ect)

Risk Compensation

• When ppl feel safer, they often take greater risks & effectiviely offsets the safety benefit

  • aka The Peltzman Effect

    • ABS brakes being installed in cars made them riskier drivers

Risk Compensation in B&M

• ”safe” Product framing enabling riskier decisions (diet labels)

• Free returns policies

• ‘No commitment’ messaging

  • Premium safety claims enabling premium pricing (Volvo)

The Decoy Effect

When a 3rd, clearly inferior option is added to a choice set, it changes the relative attractiveness of the other options, typically making them look better by comparison

Decoy Effect: the Economist

• behavioral econommist Dan Ariely

  • With the middle tier pricing (same as combined tier), 84% chose the combo & without, only 32% did

Decoy Effect in B&M

• 3 tier pricing(Basic/Pro/Enterprise, S/M/L). The bottom tier anchors the price floor (said 1st) the middle tier’s job is to make the top tier seem sensible & obvious

• Movie thruster popcorn - medium is 50 cents less and the small is $4 less

• Hotel Room tiers (the basic or unavailable room and the suite)

The Decoy Effect for Consulting Pricing

Three tier pricing structure where tier 2 is the target. It’s not priced against the competition, it’s priced against the other 2 options

The Compromise Effect

• When faced with multippe options, ppl tend to choose the middle option avoiding extremes in either direction.

• AKA Center-Stage Effect

• AKA extremeness aversion

The Compromise Effect in B&M.

• Wine lists. The 2nd cheapest is often the highest markup

• Product line architecture (Apple)

  • Bundle sizing (individual / duo / family plans)

Compromise Effect implication for Me

tthree is the minium for the compromise effect to work - lean them towards the broadly choice being obvious

Paradox of Choice

beyond a certain threshold, more options produce worse decisions, lower satisfaction & higher rates of non-decision. It means more cognitive load, more up-opportunity for regret & more paralysis

Paradox of Choice experiment

• Psychologist Bary Schwartz

• 2004 book: the Paradox of Choice

• Jam tasting table at grocery

  • 24 varieties got more attn at 1st, but only 6 varieties produced 10x the sales

Cognitive Load on B&M

• Google homepage v Yahoo

• Netflix’s Rec algo page (& YT)

• Menu Design in restaurants (only 7 items per section)

  • Apple’s SKU discipline

Mental Accounting

Ppl treat $ differently depending on its source, designated purpose & the mental ‘account’ its been assigned to weather than treating all $ fungibly =

Mental Accounting in B&M

• “found money”: tax refunds, bonuses, gambling winnings, gifts = all get spent differently than earned income. Some brands target for these times of year

• CCs vs cash (high ends restaurants and retailers sometimes do card only, also casinos w/ chips

• “It pays for itself” product generators savings or returns it moves from the thieves acct to the “investment” acct

• Bundling & unbundling: airlines discovers ppl were less resistant to everything being charged split up. Houseware comps bundling features into suites = mental account of discount

  • “Treat yourself” lux and indulgence brands help customers create acct for self-reward

Peak-End Rule

Ppl judge an experience almost entirely by how it felt at its most intense moment (the peak) and how it ended (end) not by the average of the experience overall. Duration in particular has almost no effect on the remembered satisfaction

Peak- End Kahneman

Documented what he calls the difference between the experiencing self and the remembering self.

ES: lives in real time

RSSL conditioned a story afterward and that story is dominated by the peak end rule

Peak-End Experiment

colposcopy was remembered as less of a bad experience when the procedure lasted longer and left the scope in but not moving

Duration Neglect

the finding that how long something lasts barely affects how its remembered

Peak-End in B&M

• unboxing as engineered peak

• Disney’s last impression strategy

  • Service recovery as peak creationT

The IKEA Effect

Ppl giant disproportionately higher value on things they’ve partially created themselves. Effort and participation inflates perceived value

IKEA origin

• Michael Norton, Daniel Mochon, Dan Ariely

• with actual ikea furniture

  • valued tthe item more even if it was worse quality

IKEA in B&M

• customization, personalization, Build ur own, COke with names, CH\hipotle, bespoke anything, Lays “do us a Flavor”

• Onboarding experiences designed around effort - building out profiles Duolingo, Spotify’s taste profile setup, LinkedIn’s profile completion %

• handmade & craft brand positioning: foregrounding human effort involved in productsm hours of construction, the craftperson’’s hands, IKEA by proxy (the value of how its made videos)

Effort Heristic

ppl use the amount of effort that went into something as a proxy for its quality and value. More effort signals more worth, independent of actual output quality

Effort Heuristic in B&M

• showing your work (mood boards, drafts, research hunch’s, iterations)

• Slow production as a brand value (aged 12 years, hand stitched)

• Waiting as an effort signal. Brands that Bally you wait communicate that the thing ur waiting for is worth waiting for (restaurants, Hermès waitlists, SUpreme) this is not trivially available, patience is a form of effort

  • The “fast trap” for consultants and creatives - fix by sowing the progress and effort