Inaction Inertia Effect
Missing an offer means you're less likely to buy in the future
Foregoing a very attractive opportunity decreases our willingness to go for subsequent opportunities.
van Putten, M et al. (2013) How consumers deal with missed discounts: Transaction decoupling, action orientation and inaction inertia
We humans are unique in having the capacity to reflect upon the past. Such thinking can provide insight as to how to best prepare for future decisions. This then provides the basis for a phenomenon known as ‘counterfactual thinking‘ (otherwise known as ‘what-if’ thinking), where we look back on our decisions and choices throughout life and imagine how things would have turned out differently if other decisions had been taken (Kray et al., 2010).
In the example above regarding a missed opportunity, regret (McCrea, 2008) and counterfactual thinking play out in full effect, rendering us unwilling to grab that same product after we miss the discount. The discount has reduced the perceived value of the product, and our expectation over its value is set at a new, lower baseline. Knowing this info and faced with the choice of buying it at full price, the study shows it’s highly unlikely that we’ll bite.
Takeaways for Decision-Makers
- Think carefully about your price and discounting strategy, especially during short-term price wars. You risk consumers setting a new, inflexible expectation regarding too great a bargain (Arkesa, Kung & Hutzel, 2002).
- Think about the appropriate duration and ability to obtain the discount. Moreover, think carefully about how to encourage latter-stage uptake of the opportunity - the risk of not doing so is high.
- You may want to avoid product price comparison by changing the product characteristics accordingly (size, seasonal etc).
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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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