Present Bias
What we want now is not what we aspire to in the future
An online grocery shopping study suggests that as the days go down prior to delivery of an order, the % made up of essentials decreases and the % made up of desirables increases. The closer to the present moment, the less less rational we become (though only up to a point!).
Milkman, Rogers & Bazerman (2009). Ice cream soon and vegetables later: A study of online grocery purchases and order lead time.
As aspirational creatures, our intentions are clearly always good. I kid you not. We all want to spend less, save more, and choose products that we should consume, as opposed to want to consume. However, time has a curious effect on the quality of our decisions…
Research has shown that we make drastically different choices for the near-future in relation to those made for the more distant future. For instance, customers are found to spend less, the further in advance of delivery they complete their online grocery order. We also tend to buy less unhealthy ‘want’ groceries, and more ‘should’ groceries with each additional day between ordering and receiving our order, especially for order times of between 2-5 days. Putting this another way, we behave more impulsively, the sooner our decisions will take effect.
Fascinatingly though, the study found a fascinating discovery: that the proportion of healthy ‘should’ product choices actually increased the day before delivery. It’s thought this is because, at this point, we’re in a mindset of meal-planning, rather than mere pantry-stocking, so we visualise and make more real the idea of a planned meal. Research has shown that such visualisations tend to fall by the wayside as time increases, and we start to conveniently abstract the curious features of chocolate, burgers etc (Trope & Liberman, 2003).
Takeaways for Decision-Makers
- Retailers can improve their demand forecasting by taking into account the fact that their customers may be likely to spend more in the near future than in the more distant future.
- Retailers could encourage shoppers to order their groceries up to 5 days in advance of delivery. This will lead to healthier choices. This is also known as “future lock-in”, and can be used for all types of ‘should’ decisions beyond groceries that will end up benefiting the consumer.
- On the flip-side, given that customers are found to spend more and make more ‘should’ decisions as time to delivery decreases (especially at the 2-day sweet-spot), retailers could adapt the product recommendations to fit, offering naughty treats on severely-time-restricted special offer.
- However, given that customers will order a higher percentage of want goods and a lower percentage of should goods for delivery as time goes down, there’s a great second opportunity to encourage healthier customer choices by recommending more ‘should’ products in the day prior to order completion.
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- Aspirational membership schemes and belonging The category size bias provides a credible explanation for why we human beings tend to associate with large groups that are viewed favourably by society. Being part of a large and “desirable” social group can make others believe that we also possess the many qualities of its members. For small businesses, it suggests that forming or being a part of a consortium or large and high quality networking group can dramatically elevate your brand image.
- Communicating category sizes to nudge effectively Highlighting the differences between the large and small categories is highly likely to enhance the effect of the Category Size Bias. For instance, for software companies, stating that there are 10 features in the premium version versus 4 in the free version will help nudge a decision towards the premium version
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- The findings from this braingem can nudge better healthcare choices, encourage consumption of a given product, and lead to more confident consumer decisions.
- We mistakenly believe that items in larger categories have a higher probability of being picked than ones in smaller categories, despite all items having an equal chance of being picked.
- We’ll spend or gamble more money on items put in larger categories.
- We’re more likely to take action from tasks when they’re in a bigger list, over a smaller list.
- We once we put something into a group, we perceive it to adopt all the characteristics of that group. This suggests that small companies should foster alliances with similarly-principled, more established companies.
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