#16 Framing Effect: Why we like our milk fat-free and our luxury cars full price

Would you enjoy your beef more if it was 75% lean or 25% fat? That’s weird. In this episode, Mel and Dan explore the framing effect - and how what we’re presented with is far less important than how it’s packaged.

Dan: 00:00 And then this, why do you keep hiding my Lamborghini card, alright it’s only a matter of time before we start irritating each other.

Mel: 00:28 Hi. And welcome to Bad Decisions.

Dan: 00:30 The podcast that helps us understand why we choose what we choose,

Mel: 00:33 Why we think, what we think,

Dan: 00:34 And how to exploit this stuff for fun and commercial gain.

Mel: 00:36 I'm Dr Mel Weinberg. I am a performance psychologist.

Dan: 00:39 And I'm Dan Monheit, co-founder of Hardhat a creative agency built for today.

Mel: 00:42 Play the music.

Dan: 00:50 Alright, Mel I want to offer you a deal. Okay. So I've got this amazing new piece of technology I've been working on. It's quite the revolution.

What this technology is gonna do is it's going to improve our quality of life in a way that you would not believe.

Mel: 01:05 Sounds great.

Dan: 01:05 It's going to make us more efficient, more productive, more fun. It's basically going to make us more everything.

Mel: 01:10 Yeah.

Mel: 01:11 And I'm going to offer you this technology, but I have one condition. Alright so it’s going to do all these amazing things, but once a year I need to turn up and randomly kill 1,200 people.

Mel: 1:21 [laughter]

Dan: 1:23 What? What do you reckon?

Mel: 01:25 Look it sounds good, but I don't think I'm in.

Dan: 01:30 So no?

Mel: 01:32 What why would you do that? 1,200 people at random.

Dan: 01:36 Well sucked in. You already bought it. My innovation is called the car. Yeah. So, why that's just in Australia. 1,200 people die a year from car accidents and probably two times that are actually seriously injured or become disabled as a result, which is kind of morbid way to start the show. But it does illustrate something particularly interesting.

Mel: 01:55 Yeah. That we shouldn't be driving cars.

Dan: 01:57 Well yes, we should not be driving cars. Bring on the autonomous vehicles, but also.

Mel: 02:01 But also what you've talked about and what you've mentioned is something called the framing effect.

Dan: 02:05 That is correct.

Mel: 02:06 Yes. See you're introducing the one?

Dan: 02:08 Yes.

Mel: 02:08 You know the heuristic this time.

Dan: 02:09 I'll give you this one.

Mel: 02:11 So the framing effect is pretty basic when it comes to heuristics.

Dan: 02:13 Well, sorry for bringing a basic heuristic with me today. We can't all be doctors.

Mel: 02:17 No, but it's important because it does signify a pretty bad decision. The framing effect is the idea that our brain makes decisions not based on the raw information, not based on what information is presented, but on how that information is presented.

Dan: 02:30 Yeah. And look, let's be honest, not only is it just like a basic heuristic, but this really cuts into the core of marketing and advertising and positioning.

Mel: 02:39 I mean, it's all about context.

Dan: 02:40 Exactly. How are we gonna tell our story.

Mel: 02:42 So look, by now it's probably no surprise to our listeners to hear that the framing effect was originally brought to our attention by Kahneman and Tversky back in 1981.

Dan: 02:51 Those guys.

Mel: 02:52 Yeah, it was a really good paper. But some other researchers, did us a favour. More recently in 1998. This is Levin, Schneider and Gaeth where they provided us with a typology of framing effects and what that does for us, is it nicely frames the way that we're going to lay out this episode.

Dan: 03:13 That's very meta. It's framing the way we talk about framing?

Mel: 03:16 Yeah.

Dan: 03:17 Wow.

Mel: 03:17 Wow. So here we go. So there were three types of framing. The first is called risky choice framing-

Dan: 03:22 Can I just ask? There's always three, do you reckon they find two, and they're like “there must be one more here somewhere.”

Mel: 03:27 I think if we've learned anything with regard to how to pitch an idea, get three of it.

Dan: 03:31 There's always three. If you found two keep looking there's always a third one there and if you four, one of them is probably bullshit.

Mel: 03:37 So the first one is risky choice. So I'll give you an example. All right, so let me ask you. There is about to be ... Let's say you're the health minister, there's about to be an outbreak-

Dan: 03:47 I feel like I'm wearing a bad suit.

Mel: 03:48 Yeah, you are.

Dan: 03:50 Or a good suit compared to other health ministers.

Mel: 03:52 It's all about the confidence.

Dan: 03:52 See what I did there?

Mel: 03:54 So there's about to be an outbreak of a deadly disease and 600 people are going to die. We've looked around and we've asked all these professionals about how we’re going to combat this and you've got two options.

The two best options have been presented to you. Here they are.

Dan: 04:06 Hit me.

Mel: 04:07 Okay. The first treatment A, you're going to save 200 lives, 200 lives will be saved if we implement treatment A.

Dan: 04:13 Okay that's good.

Mel: 04:15 Treatment B, there's a 33 percent chance that everybody's going to be saved and there's a 66 percent chance that no one will be saved.

Dan: 04:27 So hang on. We’ve got 600 people affected by this. Option A, 200 people definitely gonna live. Option B, 33 percent chance people are going to live.

Mel: 04:34 33 percent chance that everyone will live.

Dan: 04:35 Everyone lives, 66 percent chance that everyone dies. 66 percent chance everyone dies is enough for me to say no thank you. I'm going to go with option A.

Mel: 04:43 Okay? And that's what the majority of people in fact, 72 percent of people presenting with this problem would say.

Dan: 04:49 What's wrong with the other 28 percent of people?

Mel: 04:52 Well maybe they're realising that actually the two instances are pretty much the same. If I'm telling you that a third of people are going to be saved. So you're saving a third of people, 200 people. The difference is that I could also tell you, and I could pitch that to you in a totally different way. What if I say to you, if you do treatment A 400 people are going to die all of a sudden it doesn't sound like a great option, does it? It's been reframed.

Dan: 05:19 And I guess when you have the misfortune of being in hospital and the doctor comes up to you and says, "oh, we've got to do some surgery on you" They're much more likely to tell you “look, this has got a 95 percent chance of success” than saying, “well there's a 5 percent chance this is actually gonna be complete waste of all of our time”.

Mel: 05:31 Correct. So, that's risky choice. The next type of framing is when we frame the attributes of something. So you know, when you go to the supermarket and you've got your beef options and you've got the choice of beef that’s 75 percent lean beef, would you rather that? Or would you rather the 25 percent fat beef?

Dan: 05:52 Well I mean if we just accept just for a moment, and this probably relates to the previous example as well, that basic statistics and probability is beyond most of us in our day to day lives, we're just looking for the quickest answer. And so clearly looking at something 75 percent good is a far better outcome than looking at something that's 25 percent bad.

Mel: 06:09 Well, it's framed more positively for you if you're after the leanest meat and you're going to get 75 percent lean meat, well that sounds great. Here's the kicker with this one is that when we frame the attributes in this way, even though what we're actually evaluating and the attributes of it are being presented, are exactly the same. What actually happens is that people will rate their enjoyment of the 75 percent lean meat higher than the 25 percent fat meat even though it’s the same meat.

Dan: 06:35 That makes sense. I guess like buying the most expensive wine on a wine list, will probably make you think that wine was more enjoyable than if you bought that same wine at a better restaurant and it was kind of somewhere down the bottom of the list.

Mel: 06:47 So it's about the context.

Dan: 06:48 And frame differently. If we stay in the supermarket aisle, I mean telling we see in Australia is that most dairy products are promoted as fat free. So 98 percent fat free, 99 percent fat free, 95 percent fat free, which kind of makes sense. That's what people want to know about. I always find it interesting when you go overseas, especially when you go to Europe. I think maybe even the States have it as well and they'll have like two percent fat milk. It's like, even though two is a very small number, it's still like you're telling people that there’s fat in there.

Mel: 07:14 Yeah. You could flip the whole dairy industry on its head if you went to the northern hemisphere.

Dan: 07:19 Yeah, it's like they rolled out the whole industry before anybody had a chance to go ”wait, no no no, don't do that. Don't make the industry standards talk about how much fat …”

Mel: 07:27 You could just say that it's 98 percent fat free.

Dan: 07:29 How much not fat. That is far more exciting-

Mel: 07:32 And everybody will be will be like two percent.

Dan: 07:33 This actually makes me think of another example, something that happened not long after the GFC, which I remember at the time thinking, wow, that's really clever how they've done this. And in the same way, it's taking the same information but presenting it completely differently. So this was something with super luxury car dealers. I think maybe I'm just going to talk about Lamborghinis as an example. I can't remember if it was them, but let's just assume it was. And let's say these guys are selling $400,000 cars and at the best of times selling a $400,000 car is difficult. Selling it off the back of the GFC is like really almost impossible. So what these guys are doing is they're sitting on stock of cars. They've got new models come in. They have to get these things out.

And in the normal law of supply and demands and normal economic theory, if you have a $400,000 thing that you want to sell more of, what do you do? Reduce the price. Right? Price goes down, demand goes up.

So I mean you can imagine going up to a Lamborghini dealership and seeing like 25 percent off stickers plastered everywhere. Like it was JB Hi-Fi or something. Clearly not going to happen, but they still have to move the car. So what these guys ended up doing was reframing the discount so instead of marking a $400,000 car down to a $300,000 car, they managed to keep the price at $400,000, but we basically overpay people $100,000 for their trade ins. So you turn up with a whatever, $100,000 car to trade in. They say “no no no, the Lambo is a $400,000 car and we never discount the $400,000 car, but you know what, instead of giving you $100,000 for your BMW you've brought in, we're going to give you a $200,000 allowance for that car because it's a good one.”

Mel: 09:06 So it's really interesting what they've done there because they're actually retaining the perceived value of the Lamborghini.

Dan: 09:11 Exactly. So what they've done here is a really cool job of reframing because what they've done is they've left the $400,000 Lambo as a $400,000 Lambo, but instead of giving you $100,000 discount off the retail price, they've given you $100,000 bonus on your trade-in car and at the end of the day you've given your car in for the same amount of money and walked out with a $400,000 automobile.

Mel: 09:29 Very clever

Dan: 09:30 Win, win, win.

Mel: 09:31 The third type of framing effect is when you frame the goal of something or more like the outcome. Okay. So think about it in terms of if you needed to pay a registration fee for something. And an example is that when people are presented with a registration fee and there's a penalty for paying late, 93 percent of people paid on time.

Dan: 09:57 Okay, that's pretty good. It turns out late fees work.

Mel: 09:59 The flip side is that when you're presented with a discount for early registration, how many people will pay it early, and you only get 67 percent.

Dan: 10:08 Which is interesting, right?

Mel: 10:09 Yeah, I mean that's why I said it.

Dan: 10:12 Well, I mean it's interesting because I think in a previous episode we talked about this idea of loss aversion and so maybe we perceived the fine as an extra loss and we’re far more motivated to avoid loss than we are to get a gain, which would be why more people would want to avoid the loss than to get the gain of paying early.

Mel: 10:27 Right. That's perfectly consistent with loss of vision.

Dan: 10:29 Yeah. Which is actually kind of weird though because when I look at how energy bills come, we know it's more effective to charge people a late fee. But most energy bills, and certainly my energy bills, don’t have late fees but they have discount fees if you pay early, which according to the research I guess you were just talking about is a less effective way.

Mel: 10:49 So here's the thing, it's effective in terms of compliance, yes. So if you want people to pay their bills, pay their fines on time, instituting a late fee or a penalty for not paying it on time is going to be effective. But here's the thing, if you are a brand who wants to maintain an ongoing relationship with the customer, well how much are they really going to like you if you keep slugging them with late fees?

Dan: 11:09 So it's like slightly worse in the short term, but far better in the long term for the energy provider.

Mel: 11:09 Right.

Dan: 11:09 So, in a discount.

Mel: 11:14 That's right. The energy provider wants to be your preferred provider. And if they keep slugging you with late fees, at some point you're going to say, ah, you've got a choice in the market and you're probably going to shift to something else.

Dan: 11:24 So good take out here is if you're in a government sanctioned monopoly, just slap people with late fees because what are you going to do? Go “I hate this council. I'm taking my house somewhere else” obviously not an option. So they don't really care if they get hated. Unless you're listening to us from a council and I'm sure everybody loves you.

Mel: 11:39 Love you.

Dan: 11:40 Love you. Please don’t give me parking tickets. People don't have a choice so they just got to put up with it. Whereas if you're in a competitive market, whether it's telecommunications or gas, electricity, whatever, that long term relationship is more important, so we're better off giving a discount than offering a late fee.

Mel: 11:53 So it's a trade off. Yeah, that you've got to trade off. You got to understand that if you are going to push compliance and if you're gonna push compliance in a way that's going to make it most effective, it's going to come with a compromise of your ongoing relationship and your customer satisfaction.

Dan: 12:05 There's another thing, just maybe tangential to that, but there's a weird ... look at me I want to know about the psychology. There's a weird thing that happens in my head where I think if I didn't pay early and end up paying on time, so I missed the discount. It's like, oh, that's my bad. I'm an idiot.

Whereas if I was about to pay on time and I kind of got distracted and I ended up paying a day later and they slugged me with a late fee. I'm like,” these guys are assholes”

Mel: 12:26 So it's an attribution as well about who's actually taking the blame, who's taking the responsibility for it.

Dan: 12:31 Yeah. I'm responsible for good things in my life. Other people are responsible for bad things in my life. Completely normal.

Mel: 12:37 Yes, you are. So we're going to shift gear for a moment and look at an ad that has given us a really good example of the framing effect in action.

Dan: 12:45 I love ads let's look at more ads. It's very hard in the auditory format, not a lot of good radio ads, but we're going to describe a TV ad, right?

Mel: 12:52 Right. And it's an ad from the transport accident commission. The TAC.

Dan: 12:55 So for those of you not from around here, TAC are the guys in charge of making sure we’re getting home safely and nobody dies on our roads. And this was brought out as part of a big sort of repositioning or reframing from them.

So a number of years ago they actually adopted a road safety system or philosophy out of Scandinavia, out of Sweden. And it's the idea of moving towards zero where there's this inherent sort of understanding in things like terminology, like road toll that some number of deaths on the road are just inevitable, like road toll, there is a toll you have to pay for having roads as a society. And maybe even at a deeper level, if you heard about someone who was drunk behind the wheel wrapping themselves around a pole, people would think, well then they probably deserve to die anyway. They weren't really doing the right thing. They were breaking the law. But it is harsh, but probably what a lot of people think.

This new philosophy says, well look, humans aren't perfect, so we have to wrap a whole system around them. If we really believed that zero deaths is the only acceptable number of deaths on the road. So anyway, it's a very interesting way of reframing what they're about-

Mel: 13:58 They're in a tight position, like you say.

Dan: 14:00 Exactly. And I think this guy sad that you're about to talk about is a wonderful illustration of that.

Speaker 3: 14:05 “In 2016, 291 people died on our roads. What do you think would be a more acceptable number?”

Speaker 4: 14:13 “Uhhh - acceptable? 70 maybe? Probably 70.”

Dan: 14:13 70?

Mel: 14:13 70.

Dan: 14:18 70 would be good.

Mel: 14:21 Compared to 291 deaths. Hey, 70 sounds like a win. 70 is pretty good.

Dan: 14:25 Imagine if we could have 220-somethin- one less deaths on our road this year. Wouldn't that be amazing?

Mel: 14:34 Sounds like a massive win for road safety. Yes. Here's the reason the ad’s effective and here's what happens next.

Speaker 3: 14:39 “Can you save 70?”

Speaker 5: 14:43 “Actually this is what 70 people looks like.”

Mel: 14:47 All sudden what happens is this conception of 70 abstract people who I don't know and who I can’t put faces to and have nothing to do with me dying on our roads, yeah I'll wear that. All of a sudden you've put faces and names and persons. Literally real people. People who are close to this man in the view. And you've presented 70 of them and you've said to him “you still think 70 is acceptable?”

Speaker 3: 15:15 “Now what do you think would be a more acceptable number?”

Speaker 4: 15:24 “Zero. Zero.”

Dan: 15:27 “Well, actually I don't really like my second cousin who you’ve brought out …” No, he says zero. I guess to highlight what you're saying, I mean they've reframed a reduction in 291 anonymous people to 70, reframed from that zero people you know, to 70 people you know.

Mel: 15:43 Exactly. It's completely reframing something and first of all, in the first instance, it's seen as a gain from 291 down to 70 massive wins. But when you've got 70 loved ones lost, all of a sudden that's about the biggest loss that you can get to lose your entire family, including your 8th cousins. That's a lot of loss.

Dan: 16:01 So I'm not sure what you meant to do as a result of seeing the ad, other than believing that it is a worthwhile positioning for the organisation to be going after. But a beautiful illustration of literally seeing framing unfold before your eyes.

Mel: 16:12 Yeah. And what makes it more powerful is that what they've done is they've primed this guy. They've pretty much set him up to give that answer. Because they started with 291 people died in on our roads, last year.

Dan: 16:24 Which kind of harks back to the idea of anchoring that we've spoken about in a previous episode as well, where you give somebody a number first and then get them to guess and their guess is always sort of relative or pegged on that first number that they hear.

Mel: 16:36 Yeah. So priming pretty much provides people context by setting themselves up by giving them information on which they can base their next response or statement.

Dan: 16:44 Exactly. And I think priming if we talk about the framing effect as being the how something is presented, not the what is being presented, priming has a huge role to play in that because priming is almost a thing that happens almost immediately before the observed behaviour. Which is why I really like have no faith in most survey results that are published in things like newspapers because you don't know what the one or two or 10 questions they asked before the question they’ve actually reported back on.

So if you're going to do a thing on gun control as just a random example, and you wanted to publish whether people thought we should have tougher gun control laws. If the proceeding five questions were about ... “did you know that x number of people were killed in the last 12 months because of our current gun laws? Do you know that you know more than 70 percent of these people with children and did you know that ... “ Whatever. And then you just ask the question, “do you think we should have tighter gun control laws?” You think that that's going to prime people to say yes, as opposed to if you started your line of questioning about “did you know that our freedom of rights and freedom of speech are now more suppressed now than they've ever been in any time …”

Mel: 17:45 So you're saying you don't have faith in the research that’s published in newspapers.

Dan: 17:48 Correct.

Mel: 17:48 Here's the difference. Just like to fight back for research, when research is done in science and printed in proper scientific journals we actually-

Dan: 17:56 Proper scientific journals.

Mel: 17:58 Real as opposed to the newspaper. Researchers are actually aware of these sorts of things. We call them item order effects. And so whenever I ask people questions, even if it's research study or whether I've got a client in my office and I want to know how they feel, I’m first of all not going to ask them, “how much pain did you feel today? How uncomfortable are you right now?” I'm not going to prime them to think of other things before I say, “and by the way, how wonderful is your life right now?”

Dan: 18:23 Yes. I guess if you said to me “give me a list of all the things that are upsetting you at the moment” and then said “so how are you?” I've probably just primed myself into saying I'm not very good.

Mel: 18:32 So we're aware of these things and there are contingencies that can be made in terms of the planning of surveys to ensure that people are not primed prior to entering questions

Dan: 18:40 But is not priming even a possibility?

Mel: 18:42 Well, what we know is that there are examples where you can deliberately prime people to think a certain thing. And there are things that can happen that can precede a question that will automatically prime somebody to think something. So what we can do is do our best to reduce any effects of priming. At least any effects of deliberate priming.

Dan: 18:59 Yeah, but I guess you can't control where someone had a great morning. You know, somebody got stuck in traffic trying to get to their appointment with you or trying to get to the place where they're going to complete the survey and they bumped their toe walking in and their phones just cracked the screen or whether they just got a call from some lost relative telling them that they'd like to write them a check for $2,000,000.

Mel: 19:19 It's true. But I can get a pretty good indication by the look on their face as to whether they've just busted their toe and broken their phone or whether somebodies just given them $2,000,000. So I can incorporate that into my interpretation of their answers.

Dan: 19:31 And by that you mean just throw their answer in the bin.

Mel: 19:33 I mean, if it's not an accurate representation of their general state or general mood, then yeah. So to summarise where we've come to so far, so in terms of framing effects, we've talked about the three different types of framing effect. We talked about risky choice, we talked about attributes and we talked about goal, then we throw in a bit of priming information. So now that we know all of this and now that our listeners are so much wiser to all of this, what do we do with it?

Dan: 19:56 So it's a good question because a lot of this sounds really fundamental. When you look at the first two ways that framing works. A lot of It is just to do with putting your best foot forward.

We don't need to tell people that if you have a product that's got a 85 percent chance of succeeding and a 15 percent chance of failing, we're better off telling people that it's an 85 percent chance of success.

Mel: 20:14 I think people get that.

Dan: 20:15 People get that. But I mean this really cuts to the core of branding and positioning of businesses. So some of the things we might talk about is, I don't know if you pick a beverage, pick a vodka. Do you want to be the best vodka from New Zealand? So you're the best of all the vodkas to come out of New Zealand. This is the number one.

Mel: 20:36 New Zealand big for vodka, hey?

Dan: 20:37 Well yeah, or do you want to be the most New Zealand vodka in the world? So like where are you setting your frame, are you looking at the global stage and how you going to do that? Or are you looking at a smaller local stage? Similarly, one of the things we'll often ask about a new product or service is, is this product more like a paracetamol? Like is this the thing designed to take pain away and we're going to frame it all around all of the pain that you're currently suffering, how this product's going to fix it? Or is this product more like a multivitamin and it's gonna not take you from negative to neutral, but it's going to take you from neutral to amazing, wonderful, skipping through the fields in the sunshine.

Mel: 21:09 Got it. So that's what we can do with brands. From a consumer perspective, it's really simple. We know that our brain is making decisions based on how information is presented. Your job is to try to neglect as best you can, all this information that is distracting you and make the good decision by focusing on actually what information is being presented.

Dan: 21:28 So if you're a consumer on the receiving end of the vodka example I gave before, just try and work out if it’s good vodka.

Mel: 21:34 And do you want vodka?

Dan: 21:35 Well let’s assume you do, right. Goes with most things. Great breakfast, drink. Don't drink vodka for breakfast.

Mel: 21:40 Not always.

Dan: 21:42 But just focus on, is it a good product?

Mel: 21:45 Do you actually enjoy it?

Dan: 21:46 But don't do that too much because then I won’t have a job.

Mel: 21:48 All right, so that's pretty much a wrap on the framing effect.

Dan: 21:51 That is true after listening to this podcast. If pain persists, please contact Dr. Mel, you’re all over the internet Dr Mel Weinberg.

Mel: 21:58 @DrMelW.

Dan: 21:59 @DrMelW, and I'm also in some parts of the internet @Danmonheit.

Mel: 22:04 See you next time.

Dan: 22:05 Yeah see you next time. When is next time Mel?

Mel: 22:09 You know, I think will do for a little bit of a break actually.

Dan: 22:10 We have been working pretty hard.

Mel: 22:11 And we've pretty much exhausted all of Kahneman and Tversky’s 1981 paper.

Dan: 22:15 You are going to need to get back to your research, we're going to take a little break. We've got some side projects we're working on here, but we will be back.

Mel: 22:21 We'll be back soon.

Dan: 22:22 More bad decisions.

Mel: 22:23 There were definitely more bad decisions to be made.

Dan: 22:25 Thanks for listening.