#9 Licensing Effect: Why we order Diet Coke with our large Big Mac meals

Ever gone shopping for someone else and decided you deserved a gift too? In this episode, Mel and Dan explore the dark side of altruism, and how the decisions we make are often guided by a desire to balance out our emotional states.

Dan: 00:16 Hey, welcome to Bad Decisions. The show that helps us understand why we choose what we choose.

Mel: 00:20 Why we think what we think.

Dan: 00:21 And how to exploit this stuff for fun and commercial gain.

Mel: 00:24 I'm Dr. Mel Weinberg. I'm a performance psychologist.

Dan: 00:26 And I'm Dan Monheit, co-founder of Hardhat, a creative agency built for today.

Mel: 00:30 Kops, can you please play the best theme music ever?

Dan: 00:34 We do get a lot of feedback on how good the theme music is.

Mel: 00:43 Hit it.

So, okay, I'm taking it back for this one to a couple of weeks ago. It was a conversation that you and I had out of the studio. It happened after I submitted a report that I'd been working on for quite a while. To be fair, I was pretty proud of myself. It was a big report. I thought I did a good job.

Dan: 00:59 Just like a uni assignment. Are you still doing uni assignments?

Mel: 01:03 No, not anymore. I did do them for a long time, so it's a fair question. But it was actually a report that I was paid to do as a consultant. Paid to prepare and submit. Anyway, I felt so good about myself that I thought that I really deserved to go out and spend $400 ... Not a barbecue this time.

Dan: 01:21 No barbecue. You already had the barbecue.

Mel: 01:21 This time it was cycling gear.

Dan: 01:25 Oh, good. Wait. Do you cycle?

Mel: 01:27 I do.

Dan: 01:27 Oh, that's not quite as bad as it could have been.

Mel: 01:30 So, yeah. I just felt like I really deserved it, so I went out and I spent $400,  and then I felt better.

Dan: 01:34 Yeah. Well, I mean, that makes sense. You did some work and then you bought some lycra.

Mel: 01:37 Right. Everyone does that.

Dan: 01:40 Everyone does that. The people that I know who do this ... This reminds me. Back in the day ... Even pre Hardhat, pre Nike Life, I spent four years working at Maccas, which I actually loved, by the way. One of the things that always used to trip me out a bit was when I would work on drive thru. The proportion of people that would come through ordering Big Mac meals or quarter pounder meals, these massive, calorie-laden meals with a diet Coke.

Mel: 02:06 Because that makes it healthier.

Dan: 02:07 Makes it healthy. You all can't just be enjoying the taste of watered down diet Coke more than regular Coke. There must be something else at play here.

Mel: 02:17 I actually do prefer diet Coke, but that's a side issue.

Dan: 02:19 Right. You and everybody else.

Mel: 02:21 What we're talking about here is this idea of licensing. This idea that we give ourselves the licence to do something indulgent or immoral following a good act.

Dan: 02:32 Just for those playing at home. Wait. Is licensing our heuristic for the day?

Mel: 02:35 Welcome, licensing.

From a psychological perspective, we are inherently motivated to alleviate negative emotions. There's a theory called the Negative State Relief Theory, which basically says exactly that. That when we feel negative for any reason, we're motivated to reduce that state. Motivated to relieve that negative state by doing something that will return us back or balance us out to a more positive emotional state.

Dan: 03:09 That's a much better way to go about your day. Feeling neutral or positive instead of negative.

Mel: 03:14 I mean, you'd think so.

Dan: 03:15 You would think so. As a marketing guy and also just as an observer of human behaviour, it would appear that of all of the heuristics that we have covered and will cover, that licensing is the single greatest contributor to what will inevitably be the downfall of mankind.

Mel: 03:30 Tell me more.

Dan: 03:32 Any situation we find ourselves in where we tell ourselves that we deserve to do something, because I've done A, I deserve to get B, it's usually ending badly. One of my favourite examples of this is some studies that have been done about wanting to lose weight. It turns out that one of the worst things you can do if you want to lose weight is to start exercising. Right. Because we start exercising ...

Mel: 03:55 I feel like there are a lot of people who are gonna come at us for this. Carry on.

Dan: 03:59 Well, this is what can happen. Right? Is you're like, "I wanna lose weight. First thing I need to do is I need to start exercising." We go and exercise and we feel really good about it.

Mel: 04:04 Wait. Let's just destroy the whole fitness industry.

Dan: 04:06 Yeah. But, well, it's actually what keeps the whole fitness industry going. Because you go out, you do your workout, you smash out your F45. Whatever it is you've just done. Then you feel so good about doing that, “that I deserve a hamburger for lunch.” What often happens is that I don't just get the hamburger. If I'm gonna do it, I gotta do it properly, so I'll get all of the indulgent toppings in there and I'll get the fries. You can't fries without the aioli. This is the whole package deal. Get the diet Coke, of course. But because of our optimistic inclinations, it would seem that we overestimate the calories we're burning from doing the exercise and underestimate the calories in the meals that we treat ourselves with to return back to neutral after exercising. We basically just undo the whole thing.

Mel: 04:47 That's a really good observation, perhaps unsurprisingly. There's some research to back this up.

Dan: 04:53 Research. Cue the research music.

Mel: 04:54 This is actually real research. Like all good research, it actually sums up what people pretty much already know, which is the licensing effect. An example is with people who take multivitamins. The study showed that people who take multivitamins give themselves a perception of being healthy and being a good human being. They are then more likely to engage in behaviours that are not ideal in terms of their wellbeing. If you take multivitamins, you're more likely to smoke, you're more likely to eat more unhealthy foods, and to do less exercise. But it's okay because you're taking a multivitamin once a day.

Dan: 05:37 Yeah. I mean, what impact can heroine really have on you if you've had a multivitamin before breakfast?

Mel: 05:42 Speaking of heroine and other undesirable things. There's another study that was a 2008 study that basically gave people a opportunity to voice their endorsement for Barack Obama in the presidential campaign. What they found was that people who were able to endorse him as a candidate, then acted more prejudice in a subsequent experiment. They were basically saying, "I support Barack Obama and that gives me the right to go and be racist."

Dan: 06:17 Yeah. This is a classic. "I'm not racist, but..."

Mel: 06:19 All the time, we hear it.

Dan: 06:21 "Some of my best friends are black people, but I will say about them..." That thing has a name.

Mel: 06:27 Now that we've covered racism and heroine in this podcast, where can we go next?

Dan: 06:32 Well, I think the only logical place to go to that is home electronics and home appliances.

Mel: 06:37 Okay.

Dan: 06:37 Yeah.

Mel: 06:38 That sounds completely logical.

Dan: 06:38 Yeah, yeah, yeah. It's a similar, funny like, "Oh, wow. Aren't humans idiots?" type research shows that people who have gone and bought energy efficient washing machines tend to wash 6% more often than people that haven't bought those machines, more than offsetting the benefits that they're getting. Same thing that happens with people that buy energy efficient lights. They tend to leave the lights on because they have the licence to leave the lights on because they're done the right thing by buying energy efficient lights. They leave them on more than people that don't have energy efficient lights, more than offsetting the benefit that they're getting. I guess there's even talk about how things like buying a Toyota Prius makes you feel good because you're not buying petrol as often. Even though the net environment impact of a Prius, because it takes a billion years for the battery and all the other components to disintegrate ...

Mel: 07:27 Licensing justifies every virtuous ... Or basically makes every virtuous activity that we do completely negated.

Dan: 07:35 Yeah. As it turns out, as soon as we try and do something good, we're gonna end up just offsetting it. We exercise, we go and eat a burger. We support Barack Obama, then we go and make racist remarks. We buy energy efficient lights and then we leave them on all day.

Mel: 07:48 The interesting thing about the licensing effect, or one of the interesting things because there are many, is that you don't even have to engage in one of those behaviours in order to justify the other. Thinking is powerful enough to elicit the licensing effect. Okay. Now, here, we're going real psychological and real in your head.

Dan: 08:03 In the brains.

Mel: 08:04 But what we know is that licensing effects happen even when people think about past positive behaviours. Just thinking about a past positive behaviour actually gives you the licence to then engage in something, perhaps, that's more indulgent or rewarding. There's an example from another research study where what they did was they split people into two groups and they gave people a list of words. Okay. Some people were given morally positive words like kind, compassionate, generous. Other people were given negatively moral words. Morally negative words, I should say. Things like selfish, unkind, mean, et cetera. The two groups were then asked to write a short story about themselves using the words that they were given.

Dan: 08:51 So, given nine horrible words, please use them to write a story about yourself.

Mel: 08:51 Basically what happened was that the people who had the positive words ... People who wrote, "I'm a kind, compassionate, generous, loving, giving person" ... At the end of the experiment, when they were paid for their time, they were told actually, "Here's $20 for your time. Would you like to donate $10 of it to a charity or keep it all for yourself?" The people who wrote the positive stories about themselves were less likely to donate the money and more likely to keep it for themselves. They hadn't even done anything except the study had elicited this sense of "I'm a good person, which then gives me the right - hang on, I’m taking my money."

Dan: 09:27 Yeah. Taking my money. I'm already kind and generous. I just wrote a story about it.

Mel: 09:31 The thing is that the other people who actually wrote the negative stories about themselves actually became more motivated to obviously give the money, which was the manipulating factor in that experiment. But it was this idea of moral cleansing, which is the idea that if we've just written something or just thought or just engaged in an activity that makes us feel morally bad, we then, through the Negative State Relief Theory, are motivated to actually do something more prosocial and more virtuous in order to recover that balanced state of emotions.

Dan: 10:04 Right. Now, I promised in the setup for this that I would not talk about religion at all. But I'm just gonna say, hypothetically, if you were to organise some sort of an organisation that would maybe be religious or maybe not, and part of what you wanted to do was raise money as part of that organisation, wouldn't it be a wonderful idea to put a whole bunch of people in a room on a regular, let's say, weekly basis and remind them of what horribly, morally corrupt people they are just before handing out a way for those people to make donations? Hypothetically.

The other thing that this makes me think of is there's a lot of stuff about daily mantras, and positive psychology, and all those sorts of things at the moment. Just off the back of that study you've just described, telling people to wake up every morning, and stand in the mirror, and look at themselves and say, "You are amazing. You are strong. You are brilliant. You are awesome" is probably setting them up to be complete assholes for the rest of the day. Maybe what we should tell people to do is wake up, and look in the mirror, and say, "You are a pathetic, morally bankrupt individual. Go and fix it today."

Mel: 11:02 I actually stand in front of the mirror in the morning and say, "You're an awful person. You are terrible."

Dan: 11:06 Yeah. That's why you're always so lovely when I see you.

Mel: 11:06 See? You see?

Dan: 11:10 Can you lend me $20? I need to buy some cycling kit.

Mel: 11:13 I also think I need to boost up my self esteem, but that's another episode.

Dan: 11:16 Not too much though. It'll just turn you into an asshole.

Mel: 11:19 Well, it is an interesting thing because we do live in this society where people are doing these sorts of things all the time. People are being ... All this stuff to push people to be more kind, and more generous, and more grateful, and more wonderful as a human being is actually setting them up to do some potentially really immoral things afterwards.

Dan: 11:35 Yeah. If you want to do the right thing for society, go out and tell somebody they're a selfish asshole, knowing that the licensing effect will make them want to prove you wrong.

Mel: 11:42 And that's the message of this episode.

Dan: 11:43 Is it?

Mel: 11:44 Everyone's an asshole.

Dan: 11:45 Yeah. So, hey. If we switch gears a little bit into where we see this play out commercially and we think about selling objectively indulgent product, it's hard to go past things like luxury cars. If you imagine ... I don't know why my mind always goes to print ads for luxury cars or billboards and you think about seeing ads in the financial review or the financial sections of other newspapers. When you see ads for luxury cars, there's almost always a theme or a feeling about them that it's like, "Isn't it time?" Or, "You deserve this." Or, "It's time to stop dreaming." Basically inferring that you have been working your ass off in a job that you probably don't like to pay for a house, and school fees, and everything else. And you deserve it. You deserve to drive this incredible, but obscenely overpriced European sports car.

Mel: 12:36 This got me thinking. I want to take us back if I can to our earlier example because I'm still trying to justify the fact that I spent $400 on cycling gear a couple of weeks ago. But what was interesting about that was that ... So, I was feeling really proud of myself. I was feeling this really strong sense of achievement. Totally setting myself up for a licensing effect. And so I went a bought a little bit of lycra and I spent $200.

Dan: 12:58 Who doesn't feel better buying a bit of lycra? That's not weird.

Mel: 13:02 Anyway. That's another story, and a very visual one at that. But I spent $200. And yet, I still felt that I needed to spend more. I felt that the $200 wasn't enough to offset how much I actually put into that report.

Dan: 13:15 Must have been a big report.

Mel: 13:16 I went a spent another $200. And only then, did I actually feel like I'd come out neutral. It made me think about how we go about neutralising our negative emotions. Remember in an earlier episode, we talked about loss aversion. We talked about how when people lose $10, it actually takes a gain of $20 to come out emotionally neutral. It made me think about that. I was wondering about the cost of offsetting different emotions. How much do you have to pay out to overcome feeling guilty?

Dan: 13:49 Yeah. If you got paid $200 to do this report, then $400 was absolutely the right amount to spend on Lycra to feel good about it.

Mel: 13:55 Well, apparently, according to that model ... I went about looking for some research to see if anybody ... Because there's a whole range of negative emotions, so there's a whole range of states that we would seek to balance out. I wondered if anybody had actually tried to quantify it or if it was indeed possible. Guess what I found.

Dan: 14:10 What did you find?

Mel: 14:10 Researchers following the Bad Decisions podcast. I found that there wasn't any.

Dan: 14:14 None.

Mel: 14:15 I'm doing a shout out. I'm doing a call out to anybody that wants to collaborate on some potentially unethical research. It wouldn't be unethical. Maybe that's why there's not much because inducing negative emotions into people is not something that is often looked upon as ... It's perhaps not the done thing. Nevertheless, if anybody's interested in inducing different emotions into people and finding out how much they're willing to pay to offset it, count me in.

Dan: 14:38 Yeah. You basically want to find out how much you have to pay to make a bad feeling go away.

Mel: 14:42 Yeah. That's a cool research question, right?

Dan: 14:45 Yeah.

Mel: 14:46 You love research.

Dan: 14:46 Yeah.

Mel: 14:46 You're in.

Dan: 14:48 Yeah.

Mel: 14:48 I have one co-researcher.

Dan: 14:50 Yeah. I definitely have the qualifications necessary for this. All right. So, hey. What do we do about this as marketers? We talked a little bit about luxury cars, but I think it's the same thing for any indulgent product. If you're selling any luxury goods or holidays, it would be really good advertise or promote those things in environments where people are probably feeling like they deserve it. Advertising for holidays in those horrible digital screens in lifts in big office buildings would make sense. In Gmail. You can run ads in Gmail as well. So, maybe, during the working day would be a good time to put ads in Gmail telling people that they probably should think about planning their next holiday.

Mel: 15:31 What we're saying here is that if you want to encourage people to make an indulgent decision, you wanna associate that with something where they feel like they've worked hard, and they've achieved something really good, and they've got a sense of pride about it.

Dan: 15:42 They deserve it.

Mel: 15:43 They really do deserve it.

Dan: 15:43 I deserve it.

Mel: 15:44 They deserve it. They deserve it. What about if you want to encourage people to make a virtuous decision or a prosocial decision, like a charitable donation? Besides the house of worship explanation earlier.

Dan: 15:56 Yes. This is a great question. It's funny because we were thinking about this in the setup for today and saying, "Oh, well, maybe when people are doing things like Christmas shopping and they're being really indulgent because they're spending all of this money. Maybe that would be a good time to ask them for some donations." But as we dug into that a bit further, we thought, well, people actually are probably more likely to think they're doing something virtuous when they're doing Christmas shopping because they're buying all this stuff for other people. It's probably actually a really bad time to asking them to make charitable donations and a good time to tell them to buy something for themselves.

Mel: 16:25 Which, actually, people often do end up doing.

Dan: 16:27 Yeah. It's like, "I went to do all of my Christmas or festive season shopping and I came home with some junk for everybody else. And a new pair of jeans for myself! I deserved that, I'd been shopping for others." But where we do see this work is if we think about places where people are undeniably having indulgent experiences. That might be in checking out of a great hotel or finishing up a meal at a great restaurant. Often times, you'll find on the bill that comes to you in the hotel or in the restaurant, that they've included or suggested a $5 donation or a roundup donation to the charity of somebody's choice. Because we're sitting there saying, "God, I've just spent $180 on a meal, yeah, $10 would probably be sufficient to make me not feel so indulgent about that." That's a great place for those sorts of messages.

Mel: 17:10 Basically leveraging people's emotional states in order to convince them to make a decision or encourage them to make a decision that is in our favour. Another example like that, is if you think about what happens when you're on flights and you might be coming home from a lovely holiday, and they're coming around with the tin and saying, "Put all your spare coins, anything that you've got leftover in this bag or in this tin." Basically, you've just had a wonderful, indulgent experience. You're feeling pretty good about yourself right now. Here's something that you can do to actually offset that. Help somebody else.

Dan: 17:41 Yeah. Go and spend 25 grand on a holiday and then put $1.60 in a little container and you're gonna be morally neutral. Sound good? All right. That's licensing in a nutshell. As brands, what we need to do is we need to think about, if we're indulgent, where can we find people that can be told that they deserve to indulge? And if we're pious and righteous, we gotta find places where people feel undeniably that they have just been indulging and need to offset that. My question, though, is as consumers, as mere humans, is it all useless? Is there any point in even trying to go and do rightful, socially positive things knowing that we're just gonna go and leave the lights on for longer anyway?

Mel: 18:21 From a psychological human perspective, if I go back to my story where I spent $400 in an attempt to neutralise my state of feeling pride and achievement. A better thing I could have done to actually neutralise my emotions would actually have been to go for a run or actually do some exercise rather than buying the gear to do the exercise. There are cheaper ways to neutralise emotions than going out and spending money on things. If I'm a responsible and rational consumer, what I'm actually doing is finding different ways to manage my emotions and regulate my emotions, and still have $400 in my bank account at the end of the day.

Dan: 19:00 Right. What we're saying is next time you feel like you deserve it, what you really want is some endorphins and you can get them by spending money, but you could also get them by doing some exercise.

Mel: 19:08 You want adrenaline. You want dopamine. There are better ways to get it, and cheaper ways than the ones we've described here.

Dan: 19:13 Yeah. You go and run on the freeway. You'll get both.

Mel: 19:15 Careful.

Dan: 19:16 Good. Okay. That is not a suggestion or recommendation from us. It's just an idea of how you could spike your own adrenaline levels.

Mel: 19:21 I think it's a good ending point. But I think that ... Just a reminder that if you want to ... If you have any feedback for us, if you have any questions, if you want to join us in any research expeditions, please find us on social media. You can find me on Twitter, Instagram, LinkedIn. #BadDecisions. Also find me @DrMelW.

Dan: 19:39 Awesome. And I'm @DrDanMonheit on all the usual social networks.

Mel: 19:44 Wait. Hold up a second. Did you just give yourself an honorary doctorate title? @DrDanMonheit?

Dan: 19:48 Did I just do that? We're gonna have to go back. Can we go back to tapes, Kops?

“Awesome. And I'm @DrDanMonheit on all the usual social networks.”

Mel: 20:01 Yup. That happened. You know that happened.

Dan: 20:03 Okay. Well, you can get me at that or you can get me at any of my actual handles, which is just @DanMonheit. I'm gonna have to speak to some universities just to see if I can get that honorary doctorate.

Mel: 20:14 I'll see if I can help you out.

Dan: 20:14 Organise. We should also give a special shout out to Kops, the main man who that is on the wheels of steel, producing all of the shows. And we literally couldn't do this without you, Kops. We'd just be two people sitting in a room talking.

Mel: 20:26 Love you.

Dan: 20:27 Love you.

Mel: 20:51 All right. Off to Maccas.

Dan: 20:42 Yep.