#12 Peak-End Rule: Why we all love a lolly bag

We’d like to think it’s all about the journey, but our brain prefers to remember the outcome. In this episode, Mel and Dan discuss the peak-end rule, and how neglecting to pay attention to the end could be costing you dearly.

Mel: 00:19 Hi and welcome to Bad Decisions.

Dan: 00:21 The podcast that helps us understand why we chose what we chose.

Mel: 00:24 Why we think what we think.

Dan: 00:25 And how to exploit this stuff for fun and commercial gain.

Mel: 00:28 I'm Dr. Mel Weinberg, I'm a performance psychologist.

Dan: 00:31 And I'm Dan Monheit, co-founder of Hardhat, a creative agency built for today.

Mel: 00:42 So, ordinarily it'd be time for one of us to present some sort of personal story about a bad decision that we've made. And it would just coincidentally represent a heuristic.

Dan: 00:53 Yeah, we usually put a lot of work into that part of the episode.

Mel: 00:56 We do, but the heuristic that we're gonna talk about today basically tells us that it's a waste of time.

Dan: 01:01 Yeah we are gonna stop doing that, it's complete bullshit.

Mel: 01:03 We are gonna hack ourselves, it’s fun.

Dan: 01:04 Yeah, cause what you're gonna learn today, if you don't have the 17 or 18 minutes to listen to the whole show, and I must admit the best bits are at the end. What you're gonna learn is that having the best bits at the end is really important.

Mel: 01:16 In fact, it's pretty much all that matters.

Dan: 01:18 Yeah, this could be complete horse shit for the next 15 minutes as long as you guys stick with us and get to the goal of the end you are gonna remember this show as being unbelievable.

Mel: 01:27 Alternatively, if you only want a 3 or 4 minutes podcast just fast forward right through to the good stuff.

Dan: 01:31 Exactly.

Mel: 01:31 Or don't though.

Dan: 01:33 Also don't, I'm confused. Anyway, what are we doing today? What is today's heuristic Dr. Mel?

Mel: 01:38 So today we are gonna talk about the peak-end rule.

Dan: 01:41 Peak-end rule.

Mel: 01:42 Yeah, which is basically the idea that when it comes to us judging or evaluating an experience, we don't base that judgement on a calculated average of the enjoyment of every moment of the experience. Which I guess, you know, in a rational mathematical brain that's what we would do, take the emotional experience of every single moment and average it out. But that's not what we do, because there are some parts of the experience that has a disproportionate impact on our memory. For example, the peak of the experience, or the most emotionally intense experience, and the end of it.

Dan: 02:18 So the really good bits, the really bad bits, and what happens in the end.

Mel: 02:21 Pretty much everybody forgets what happens in the middle anyway.

Dan: 02:23 Well the middle's bullshit.

Mel: 02:24 So part of the reason that this peak-end rule is such a powerful heuristic has to do with the way our brain processes information. How we store memories, right? So most people are familiar with the idea of the recency effect.

Dan: 02:37 Yep, I've heard of that.

Mel: 02:38 So the recency effect basically explains that if I were to give you a random list of words to record. A bunch of words that mean absolutely nothing to you, you would be more likely to recall the words that I said at the end of the list, followed by the words at the beginning, and you know if you got a really good memory you might remember the ones in the middle. But pretty much the ones at the end are gonna stand out.

Dan: 03:01 Right, cause the middle is bullshit. I think that's what we are learning today.

Mel: 03:04 Yeah don't worry about the middle right? And a happy ending makes everything better.

Dan: 03:08 Well, now what happens? That's awkward. So speaking of happy endings, or not speaking of happy endings at all. I guess one of the places that this seems to come to the fore, is when you think about holidays. Where it doesn't really seem to matter whether we've been away for a week or two weeks, if somebody asks us for a little snapshot of what our holiday was at the end of the holiday, I am probably going to remember it based on something really good that happened, or something really bad that happened, and how everything kinda wrapped up. And that story probably wouldn't change if we were away for 4 days or 3 weeks.

Mel: 03:39 So you know I've got some research to support the idea of a peak-end rule.

Dan: 03:43 No you don't.

Mel: 03:43 Would you believe.

Dan: 03:43 I thought you were just making this shit up.

Mel: 03:45 Nah, I've actually got some research.

Dan: 03:46 Okay.

Mel: 03:46 So let me tell you about a little bit of research. Can we just get some research music please. So in a 1993 study from Kahneman and some of his colleagues, what they did was they exposed participants, the same participants with two different conditions, and both of them involved an unpleasant experience where they had to submerge a hand in cold water. So it was like 14 degrees Celsius, which is I think what it was, and they had to submerge it, the hand in that water bucket of ice water whatever it is for 60 seconds.

Dan: 04:22 Yeah

Mel: 04:22 Clearly not a fun thing to do.

Dan: 04:24 Not fun at all, but science is hard.

Mel: 04:26 Alright look, sometimes you gotta sacrifice for the sake of science. But in the first trial, the participants kept their hand in the water for 60 seconds and at the end the experiment, the trial was over. Okay? In the second trial the same participants kept their hand in the water for an additional 30 seconds after that 60 second period. But in that additional 30 seconds, the temperature rose by 1 degree celsius. Providing some much needed relief from that unpleasant experience.

Dan: 04:55 Right so the difference was in 15 and 14, is enough for it to feel good?

Mel: 04:59 It was enough to change the participant's overall memory of the experiment. So then what happened was, when they asked participants when they basically said to participants afterwords, "Alright, you're gonna do this again. Which trial would you like to do again? Would you like to do the 60 second one, or would you like to do the 90 second one?" A stupid amount of people said they would like to repeat the 90 second version of the experiment. So they are going to totally discount the length and the time that the experiment took and they're going to be more likely to want to do that 90 second study because they get that last 30 seconds where they get that little bit of relief. Which influences the overall memory of the enjoyment of the experience.

Dan: 05:39 So, like a little bit of a happier ending can overcome a far worse experience.

Mel: 05:44 One degree celsius is enough.

Dan: 05:45 Is all it takes.

Mel: 05:46 Yeah, and going back to what you were talking about with holidays, it doesn't matter how long the holiday is, in that sense, because we have what's called duration neglect. We literally will neglect the duration of an experience in favour of how emotionally intense that ending was.

Dan: 06:02 Right so, I guess once you know that people care way more about the highs and the lows of how something ends, it just makes you realise how many industries get this kind of right, and how many industries get this diabolically wrong.

Mel: 06:17 Give me an example.

Dan: 06:17 Yeah so I mean we are talking about a holiday's right? So you think about all the sorts of things that happen on a holiday, one of the obvious ones is around car rentals. And, you know, there's not a lot of great car rental stories out there in the world, I wouldn't think. But of all of the experience that happens with interaction with a car rental company, most of it comes down to what happens in that last 15 minutes, right? And so you've hired a car, you've probably forgotten what you've paid for it, you've just had it for a few days or a week or two, you've driven around, you've had a lovely holiday.

Mel: 06:46 Yeah, what do you have to do before you return it?

Dan: 06:48 And then you go like 15 minutes, because you are probably running late to the airport. You are then driving around trying to work out, should I drive around the industrial business park that surrounds this airport and try and find somewhere to fill up the petrol tank? Or do I roll the dice and return it 7/8ths full and get stung 4 bucks a litre or whatever they are going to charge me to fill it up? Once I drop it off, are they gonna find some chip or scratch or scrape that I absolutely didn't do, but like who knows? And even in neutral experience, when none of those things happen, you're basically just dumping the car in an empty lot and then running off the make your flight.

Mel: 07:24 Cause you're always late.

Dan: 07:24 Cause you're always late. So, at best, car rental experiences end neutral, though usually end pretty badly.

Mel: 07:30 Well, I mean from the stuff you're describing the end of the experience with a car rental company is associated with a whole lot of panic, worry...

Dan: 07:30 Anxiety.

Mel: 07:39 Anxiety around whether or not you are gonna be busted for something you didn't do. It sounds pretty awful. Talk about neutral.

Dan: 07:44 It's terrible, and the thing is, you get used to having to pay for an experience at the end, which kinda sucks as we've learned about this peak-end theory. Paying at the end sucks, but add onto that the anxiety of not knowing exactly how much you're going to have to pay, it's just enough to ruin the whole thing.

Mel: 08:00 Yeah, car rental companies, get your shit together.

Dan: 08:02 Get your shit together. Similarly, if you think about hotels, who invest so heavily in the check-in and the welcome process, and you get there and you get some drinks on arrival, and they guide you around, and they show you around the place, even if you don't really want them to. They really insist on doing that. And you contrast that with what happens at the end, where you basically get a slot to put your key into and then you're just off on your way. And how much more important the ending of that experience is, and how you recall the whole, the whole time you spend at the hotel.

Mel: 08:32 So I'm starting to the get the picture that there are sometimes there are little things that we can do, or things that we can not do, that's actually gonna make the ending of an experience, which is the most memorable part of it. We can actually improve the quality of that experience for the customer.

Dan: 08:46 Absolutely, so yeah for hotels maybe champagne on departure not champagne on arrival. Or maybe it's both. We couldn't do an episode without talking about restaurants, and it's a thing we all know and love and indulge in. And I just think about how many otherwise great restaurant experiences are ruined by the last 3 minutes. You know, when the person comes out to give you a bill, and they want to be difficult about the credit card payments, you know they don't want to split it between 4 people, they have some arbitrary number like "we can only split a bill between 3". And you're out there as 4 couples, and it’s like what the actual fuck guys, it doesn't cost you anything more. Or when you go to places, like your normal café, and they have minimum EFTPOS spends.

Mel: 09:27 I hate that.

Dan: 09:27 Hate it. You know what guys, come on, I'm here everyday.

Mel: 09:30 Yeah.

Dan: 09:31 It doesn't cost you anymore.

Mel: 09:32 No and they also say like the minimum must spend, is $10 dollars, and like where coffees don't add to 10 dollars.

Dan: 09:38 No, no.

Mel: 09:38 Multiples of coffees don't add up to 10 dollars, so you end up having to get 3 coffees just so you can make that maximum, or minimum.

Dan: 09:42 Yeah, I'm not buying a coffee and two muffins just so you don't have to give me the privilege of swiping my card with this machine that is just sitting there idly by while I try and give you money.

Mel: 09:51 Yeah, just process the payment, do you want my money or not?

Dan: 09:54 Process the payment, and instead we've gone from a good or at least a neutral experience to something that is kind of annoying and like begrudging which just seems like a huge missed opportunity.

Mel: 10:03 Yeah.

Dan: 10:04 So it's also interesting when you look at restaurant review sites, like Yelp, like what huge proportion of the reviews actually talk a lot about things that happen in those last few minutes of an interaction. So it is a lot of people bitching and moaning about split bills and EFTPOS fees, and that sort of stuff, but also some really wonderful stories about somebody leaving their keys or their wallet or something at the restaurant, and a matradee or a waiter or waitress running out after them to make sure they didn't leave without it and what an amazing uplifting thing that can do for the whole experience.

Mel: 10:32 Something as simple as giving a mint at the end of the meal, or putting a couple after-dinner mints with you know, with the bill.

Dan: 10:39 Yeah or putting a smiley face on the bill.

Mel: 10:41 It's just a nice little touch.

Dan: 10:41 Which often can attract tips.

Mel: 10:44 It changes the emotional tone at the end of the experience.

Dan: 10:46 Yeah now the guys who do this really well, there's a, you know, a hoity toity fancy restaurant in Melbourne called Vue de monde, and I'm not sure if these guys still do it, but I assume they do, I have young kids now, I'm not eating at Vue de monde these days. But if I did, I would imagine this would still happen. So what happens is you go to this incredible restaurant you have some sort of 7 or 15 course degustation meal, you get to the end of the meal, you’re feeling pretty great about it. The bill comes out, you’re feel slightly less great about it cause you just spent like two weeks wages on a great dining experience. But then, as you go to leave, they present you with this little breakfast bag which has got a couple of eggs, and I think some brioche buns in there...

Mel: 10:46 Delicious.

Dan: 11:25 ...And some little instructions about how to make some wonderful scrambled eggs or something in the morning. And you know, it probably costs them 4 bucks on a scheme of a $1000 dollar dinner.

Mel: 11:33 What's a couple of eggs?

Dan: 11:34 Yeah, a couple of eggs, seriously. But the last thing you remember is not the bill, the last thing you remember is, and they gave me this little bag with like this little card and the things I need to continue the experience all the way into the next morning, which is wonderful!

Mel: 11:49 You should be familiar with this experience, because like you said you have young kids. You're going to kids parties, you're getting lolly bags at the end!

Dan: 11:55 You know what, you are absolutely right.

Mel: 11:57 Vue de monde is giving you a lolly bag!

Dan: 12:01 Giving me a lolly bag. Thankfully, they don't have those bubble blowing things, those bubble sticks in there, drive me crazy. But you're right, I mean, kids know this, kids understand inherently the peak-end rule is a real thing.

Mel: 12:12 Yeah and they figure out, was that a good party? I don't remember but hey I got this awesome lolly bag.

Dan: 12:15 And it's got a bouncy ball in it!

Mel: 12:17 I love parties!

Dan: 12:20 Best party ever!

Mel: 12:20 So, getting back to the idea that we are actually willing to endure a whole lot of pain, so long as we get some relief, or some pleasant emotion at the end of it. Let's talk about endurance events.

Dan: 12:31 Absolutely, what do you want to talk about? This show? This show right now? So what we know is people seem to fall into one of two camps from entering either marathons or iron man. People will just do one and they are like a bucket list athlete, and they just need to get it done. But there are people that just go over and over and over again. And when these people think about the experience of completing a marathon or completing an iron man, we very, very quickly forget the pain and the suffering and the grit and the gruelling and sucking down your 35th GU gel, you know, as you're trying to get through the last 10K's of the run. And what we remember is the elation, the endorphins of crossing the finish line or hearing your name, "Dan Monheit, you are an iron man", which I have never heard but I will hear one day. And it's no coincidence that a lot of these events will ask you to sign up for the next event...

Mel: 13:25 Immediately after?

Dan: 13:26 Literally as you are crossing the finish line. "Here's your ribbon and here's a form to sign up for next time."

Mel: 13:31 I wouldn't know I've never run further than about 10K, but anyway. If we're talking endurance events, it would be completely remiss of us to not mention the ultimate endurance event, childbirth.

Dan: 13:41 Right.

Mel: 13:42 And if the peak-end rule didn't exist, nobody would ever have more than one child.

Dan: 13:45 I gotta say, I've never done it. Seen it, didn't look that much fun. And you know what, right at the other end of our life as well, the peak-end rule seems to kick in. Where when, you know, think about how people describe elderly relatives or people who have passed. We tend to talk about how they were at the end, how dignified they were and how inspiring they were, and how together they all look, all the way until the end. And you know, we just kind of gloss over the bullshit bit in the middle, the 75, 80 years that they actually did cool stuff. It's how they were in that hospital bed in the last couple days.

Mel: 14:14 That's what really defines a person.

Dan: 14:16 Yeah.

Mel: 14:17 So, because of the peak-end rule there are things that people have figured out to do that makes the end stand out more.

Dan: 14:24 Yeah, it's kind of like this self fulfilling thing, ay? So like we know that the ends are going to stand out more, so we try and do things that try to make the ends better. So, one of the ways that we do this, we were talking about marathons before, I mean what's crazy is that you are something like 2 or 3 times more likely to run a marathon...

Mel: 14:40 I love the way that you talk about research. Go on..

Dan: 14:42 What?

Mel: 14:43 Nothing, I'm sure it's completely legitimate.

Dan: 14:44 You are 2 or 3 times..

Mel: 14:45 Go on. Just don't play the research music yet, so we know it's not real.

Dan: 14:48 Well, its real! It's just I haven't googled it, but it's basically true. Look I saw somebody else present the research okay?

Mel: 14:53 Case and point.

Dan: 14:53 Daniel Pink, he is very smart. Alright? Thank you Mr. Pink. So he talked about how you are 2 or 3 times more likely to run a marathon at the age of 29 compared to the age of 28 or 30. And it's a very similar thing at the age of 39 versus 38 or 40.

Mel: 15:09 So the idea is that you're coming towards the end of a decade, a period of your life.

Dan: 15:13 Yeah and physiologically you really not in a significantly better or worse shape, 28, 29, 30, 38, 39, 40. But mentally, we are coming to the end of a thing, and I want a good ending and I'm going to remember my 30 as the year that I did my first marathon and so that's what we seem to do.

Mel: 15:29 Right so, we put a highlight at the end of that period.

Dan: 15:32 Exactly.

Mel: 15:33 So we can, there's another example with regard to chocolates, yeah?

Dan: 15:37 So yes, actually in the same presentation there was a conversation around Hershey's kisses, which I'm just gonna say, they kind of suck as a chocolate let’s be honest.

Mel: 15:47 I mean I have no affinity towards it, no.

Dan: 15:47 They are like cut small, and not that delicious.

Mel: 15:49 I think, isn't it that the point? They're like bite size?

Dan: 15:51 I don't know. Anyway, whatever. They did this experiment where they gave two groups of people 5 Hershey's kisses. So to the first group, they said "here's a chocolate, here's a chocolate, here's a chocolate, here's a chocolate, here's a chocolate." And after eating each chocolate people rated the overall pleasure of eating that chocolate. The second group, they said "here's one, and here's another one, and here's another one, and here's another one, and now this is the last one I'm gonna give you, here you go."

Mel: 16:18 Oh, that last special chocolate.

Dan: 16:19 And what do you know, just knowing that it was the last one, people rated that shit through the roof. It was like twice as enjoyable for these people as every other chocolate that they've consumed. Just because I knew it was going to be the last one, I guess they knew that the last one was going to stand out so I'm gonna hack myself into making this delicious.

Mel: 16:38 So there's a big message here for brands right?

Dan: 16:40 Absolutely.

Mel: 16:40 In terms of focusing on the end of the experience.

Dan: 16:40 Exactly.

Mel: 16:43 I mean as we come towards the end of this episode, I think it's really important that we remember that we need to make this good.

Dan: 16:49 Yeah so, let’s give some real punchy takeaways here.

Mel: 16:51 Yeah let's do it.

Dan: 16:52 I mean I think for brands we often think a lot about the start of an experience, we think about how we're gonna attract clients, we think about how we are gonna onboard clients and get them into our system and get them moving as quickly as possible. But we don't think very much about how things are gonna end.

Mel: 17:08 And its important that we do. It's super important that we do think about when the relationship with the customer ends, because actually what we want is for that relationship to continue. And sometimes there is no end point.

Dan: 17:20 Exactly, so you know in some business-customer transactions there is a definity of endpoints, so you drive out of the dealership with the car, or you walk out of the store with your bag with your new jeans and your whatever it is. And so we need to think about how do you make that as interesting and as memorable and as emotionally charged as possible. But similarly, in like professional services, often there is no natural end point. And I think it would be really worth exploring ways to add sort of like artificial end points, whether it's a post-campaign celebration or you divide a year up into quarters, like we used to do in school, like school we knew its...

Mel: 17:53 Kids had this figured out, lolly bags in school terms.

Dan: 17:55 It's true, like you know your springing to the end of a term and you get to the end and its awesome and it's fun, you have a little class party.

Mel: 18:01 End of term party.

Dan: 18:01 Yeah and you're on to the next one.

Mel: 18:02 And then you get lolly bags!

Dan: 18:03 Lolly bags, I think the answer to everything is lolly bags.

Mel: 18:06 Lolly bags.

Dan: 18:06 Yeah, so I mean we spoken quite a bit about end. I mean I think peak is kind of, maybe just worth touching on quickly. Where we do have industries where a long term relationship with the client is defined by some peak experiences.

And so if we think about say an insurance company, alright? Well you might have a relationship with an insurance company for 5 years. And when somebody asks you, "Ah how is insurance company XYZ to deal with?" You're gonna search around in your head and you’re not gonna give an average answer, an answer that is the average of the total 5 year experience. You are going to think about that one moment when you needed to call them, because you had a car crash or you needed a hip replacement or whatever it was given the type of insurance.

And so, while it is important to have, again, great onboarding experiences for consumers it may be good end experiences for consumers, knowing that that peak moment, that moment of crisis that is gonna turn into a moment of joy or a moment of despair, is really the only thing to worry about, everything else is kind of bullshit. We really have to figure out how we can make that a 5 star, 7 star, best in class experience, knowing that's what's going to pay the dividends.

Mel: 19:15 It's so important, I think there are so many things that can be taken away from this idea, because it is one of those things that I think we've seen the research shows that its a thing, and I just don't think people pay enough attention to it.

Dan: 19:24 Yep, so I think we have paid a lot of attention to the end of this episode.

Mel: 19:28 Yeah.

Dan: 19:28 Feels like it was good, it was value.

Mel: 19:30 I think this was a fantastic end to the episode.

Dan: 19:32 Yeah, I mean the stuff in the middle is kind of rubbish but this...

Mel: 19:35 This is it right? Yeah.

Dan: 19:37 You know what would be even better?

Mel: 19:38 If we had lolly bags?

Dan: 19:39 Yes, and also if you told people what your social media handles were and then how they can get in touch with us. People love that shit.

Mel: 19:45 Oh my god, I know they do. Alright. Please, please find us on social media; LinkedIn, Twitter, Instagram, any other things. What do you usually say? Google?

Dan: 19:54 Yeah, whatever.

Mel: 19:55 You know what? Google Scholar, you can find some research articles on there.

Dan: 19:58 Oh from you?

Mel: 19:59 Some, well the ones that I've published.

Dan: 20:01 Really?

Mel: 20:01 Yeah!

Dan: 20:02 Nothing from me.

Mel: 20:03 Anyway you can find me @DrMelW.

Dan: 20:05 And yeah I'm @DanMonheit. Across a bunch of the internet, we are not going to talk about the doctor thing. Right?

Mel: 20:11 No.

Dan: 20:11 Good. Cool alright well hey thanks for listening to Bad Decisions. Hey probably worth noting, we are on Spotify now as well.

Mel: 20:17 Yeah, good call.

Dan: 20:18 Yeah, so that's like platform agnostics, so that's good tell your friends.

Mel: 20:21 I think that's it!

Dan: 20:22 Alright, we out.

Mel: 20:23 Let's go to Vue de monde.

Dan: 20:24 Let's.