Ambiguity Aversion

I have seriously said "Ambiguity Aversion" so many times when standing up for the Bixly brand, or when designing some type of product.  This concept is foundational to creating and maintaining a clear path in your customers and employees minds, towards awesome. I think this term should invade every area of your organization, like it has mine.

Research has shown that we certainly possess risk aversion. Ambiguity aversion should be considered its hidden twin in the proliferate duo that is worth understanding for your business. An awareness of this principle is certainly important enough to add to my Basic Tenets.

Ambiguity Aversion is our tendancy to make a decision that is simplest to understand, rather than logically the smartest. See, you can have a two or more choices in front of you with greater/lesser/equal worth. You will most likely choose the one which requires the smallest amount of thinking. The one that needs no further probing to understand what you are in for.  Please check out the video that inspired this post. What a neat show! Further:

Frisch and Baron (1988) emphasized that the subjective experience of missing information relevant to a prediction may lead to ambiguity aversion.

This has so many implications for business and brands. A great example of popular usage and profit from Ambiguity Aversion is the show Deal Or No Deal . Forward to the middle of a show and the decision usually looks like this: Take $300,000 right now, or possibly get $800,000. It’s silly really to choose the $800,000 because the chances are still 1 in 5 or 1 in 10. Since we are averse to ambiguity, it’s easier to calculate “hmmm, I want more money, and this could work”.

This opens up a whole new field of Neuroeconomics to us, which is definitively worth further brain some point.

Interestingly, ambiguity aversion in pairs of users actually gets worse!

The majority of the dyads exhibited a cautious shift in the face of ambiguity, stating a smaller willingness-to-pay than the two individuals’ average. Our study thus confirms the persistence of ambiguity aversion in a group setting and demonstrates the predominance of cautious shifts for dyads.

Have you every read about the Jam Study (Iyengar and Lepper)? They set out Jams in a Menlo Park grocery story. On table had 24 types of jam, while the other had 6. While a bit less people stopped at the table with 6 brands, that smaller selection yielded a TUN more sales. 6x the sales of the other, larger selection table. This is why Fresh And Easy is doing so well. They only have one to three brand options, usually, for any given item.  And, that's right on. I simply don't need 6 types of yellow mustard to choose from.  

So, it's not some hard and fast and always true rule. But the point is that so many business owners just ignore it. Bixly does one thing: Django programming. It's been one of the determining factors of our success, and allows customers to relax, make one simple decision, and move on. 


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