Have you ever noticed how the way something is presented can really change your opinion about it? Welcome to framing effects, my friend.
These little persuasion tricks can have a huge influence on our economic choices and how we view different options.
A 101 guide to explore how framing effects work and look at examples.
What Are Framing Effects?
Image Credit - TheDecisionLab
Framing effects refer to the ways in which the presentation of options or information influences the choices people make.
In other words, the frame in which a decision is presented can affect the outcome.
For example, if I told you we could save 200 lives out of 600 by choosing option A, you’d likely favor that choice. But if I said we could lose 400 lives by not choosing option A, you might see it differently. It’s the same situation, just framed in different ways.
Our decisions are shaped by how options are presented. If you go to buy a new computer and see two options - one is a $2000 laptop or a $1000 desktop - you'll consider the features and specs to determine what will suit your needs best. But if the options are framed as a $2000 laptop or a $1000 'budget' desktop, the framing effect leads you to view the desktop more negatively.
Although the specs are the same, the label triggers assumptions.
Framing effects happen because our minds take shortcuts when processing information and making judgments. We rely on heuristics, it means mental rules of thumb.
The way information is presented triggers these heuristics which then shape our choices in predictable ways.
For example, we tend to avoid risk when options are framed as losses, but seek risk when the same options are framed as gains. This is known as loss aversion.
Marketers and politicians frequently use framing effects to influence us. They know how to frame messages and choices in ways that will nudge us in a particular direction. To make better decisions and avoid manipulation, we need to recognize framing effects.
Pay attention to how options or information are presented and determine how that presentation makes you feel and think. Try considering the opposite frame and how that changes your perspective.
Anchoring Bias: How First Impressions Skew Our Judgment
Have you ever found yourself swayed by a salesperson’s opening price, even though you know you can negotiate? That’s the anchoring effect in action.
Anchoring bias occurs when we rely too heavily on the first piece of information we receive—the “anchor”—and fail to sufficiently adjust our judgments away from that anchor.
The Power of First Offers
In salary negotiations, the first offer often anchors our counteroffer. Research shows that job candidates who make the first salary proposal in a negotiation get lower offers than those who let the employer make the first offer. The employer’s initial proposal acts as an anchor, and the candidate fails to adjust sufficiently upwards.
The same thing happens in retail settings. Studies show that people given an initial high price for a product will likely accept a lower offer, while those given a low anchor price will negotiate up.
The initial anchor, whether high or low, skews our perception of the product’s true value.
Fighting Anchoring Bias
The key to overcoming anchoring bias is awareness. Go into any negotiation or decision-making process aware of the potential for anchoring effects. When you receive new information, ask yourself whether your judgments are being unduly influenced by that initial anchor.
Try considering the issue from multiple angles, rather than centering your thoughts around one reference point.
Why Losing Hurts More Than Winning Feels Good
Image Credit - TheDecisionLab
When it comes to decision making, humans have an innate bias known as loss aversion—we feel the pain of losing much more strongly than we feel the joy of winning. In other words, losing $20 feels worse than finding $20 feels good.
This is because our brains are wired to emphasize avoiding threats over seeking rewards.
Example, imagine you have the chance to gamble by flipping a coin. If it lands on heads, you win $100. If it lands on tails, you lose $100.
Even though the potential gain and loss are equal, most people won't take that bet because the possibility of loss seems more significant. The pain of losing $100 outweighs the potential joy of winning $100.
Loss aversion also applies in situations where we have to choose between options that involve both gains and losses. For example, would you rather take a job that pays $80,000 with a possibility of a $20,000 bonus or one that pays $70,000 with a guaranteed $10,000 bonus? Although the expected value is the same ($90,000), most people choose the sure thing because a guaranteed bonus feels like less of a loss.
Politicians and marketers frequently take advantage of our loss aversion biases to influence our choices and opinions. Framing a policy in terms of losses rather than gains or using fear tactics are common strategies, even if the underlying facts remain the same.
Takeaway
Stay Skeptical. Stay Savvy.
fab insights!