Designing Choice: The Default, Anchoring, and Loss Aversion

In Designing Choice: Hick’s Law, the article covers designing choice as it applied to Hick’s Law, meaning the number of choices that are presented. However, when it comes to “choice architecture,” the number of choices is not the only aspect to be concerned about.

What is Choice Architecture?

Richard Thaler and Cass Sunstein introduced the term “choice architecture” in 2008 to describe the different ways in which choices can be presented in terms of decision-making. Choice architecture involves: the number of choices presented and the manner in which they are described, presentation order, the presence of a default choice, and many other factors. Essentially, if you influence the way in which people choose, then you are a choice architect.

User experience designers are responsible for the choices presented online. Website or web app decisions can include things as whether to sign up for a service, which menu item to select, which product to buy, what settings to use, and so on. The decisions of these choices can be influenced by design choices such as color, size, order, and layout. Although we would like to think there is a neutral way to present choices, the fact of the matter is any way in which a choice is presented will influence the way a decision-maker chooses.

Thaler and Sunstein are also credited with Nudge Theory which is concerns the design of choices and involves indirect encouragement instead of direct enforcement. An example of this type of thinking is improving the availability and visibility of trash cans on a street instead of signs saying “no littering” and warnings of fines. Each decision a user makes on an interface is an interaction; thus making choice architecture an important aspect of designing for the web.

The Default

An important and powerful tool which choice architects commonly use is the default. Defaults are choices and/or settings which are presented to individuals who must make deliberate actions to change them. Research in this area shows that people are most likely to use the default options presented due to the fear of change, especially of uncertain nature. Since defaults are so powerful, they can be used as hidden persuaders for users to make specific predefined choices. This raises the issue of ethics and awareness of using defaults. For example, online retailers may have a more expensive product as a default so they can make more money as opposed to allowing the customer to choose their desired selection. Also, some websites may have a pre-checked box in a registration form to opt-in to marketing emails; in these cases, defaults can be considered as a nudge, as described by Thaler and Sunstein.

A good rule to follow in the area of defaults is to set the default to the choice which most users will select given time and absence of a default are not factors. In digital design, this can be seen as a pre-checked box on a form in which users will select most of the time. These are considered “smart defaults” and an example can be seen here. Smart defaults can save time and reduce cognitive load for users. The point here is to focus on the audience and make things easy for them. It is also worth noting that when using checkboxes, there is always a default state: either checked or unchecked. Radio buttons do not require a default for the available options. In the example below, we see that you can set a default radio button as a smart default as Google does for their Chrome browser. However, there are times when you do not want to do this. For example, Facebook’s sign up form does not want to pre-select the gender choice.

Having smart defaults vs no defaults

Anchoring

Another interesting and important concept involved in making decisions is anchoring. Anchoring is a cognitive bias which we experience that describes a tendency to rely too heavily on the first piece of information available when making a decision. Once the first choice (the anchor) is presented, all options afterwards are compared against it and adjusting typically happens. This is another example of a nudge. Car dealers may use this tactic when selling a car, for example. In the start of negotiations they will state the price of a car. This initial price becomes the anchor in which the customer will compare to, and adjust from there. Due to the initial anchor, any price lower than the anchor seems like a good deal, even if the initial price was higher than the actual worth.

When choices are offered to users on websites and web apps, anchoring should be taken into account. The choice which has been listed as the default may also become the anchor. Sometimes designers may want to nudge the user into easy progress through a website or app; sometimes they may want to try and make all options equal. At other times, they may want to influence a specific choice. In the example below, the Starbucks app uses default reload amounts as anchors to influence users to submit a large reload amount. In order to select $10, $15, or $20, the user has to select the “Other” choice to find these hidden options.

Starbucks uses anchoring to influence a higher reload amount

However, it can be difficult to avoid anchoring. In a study about anchoring, researchers found that even when an anchor was presented which was obviously wrong, it still affected people’s decisions. The researchers asked two groups of people how old Mahatma Gandhi was when he died. The first group was asked if it was after he was 9 years old, while the second group was asked if it was before he was 140. Both groups started with the first piece of information they were presented with, used it as the anchor, and adjusted from there. The first group gave an average age of 50 years old while the second group gave an average age of 67 years old.

Loss Aversion

People generally tend to find more value in an object when they possess it, rather than if they do not. Studies show that losing something affects humans emotionally twice as much as gaining something of the same value. The concept of people making decisions to avoid loss is called loss aversion. Loss aversion also ties into the concepts of the default selection and anchoring. One of the reasons that people are most likely to select the default is because they feel as if they may lose out on something if they do not. Of course, loss aversion can be used deliberately to influence choice, which can be seen by online retailers. In the example below, Groupon uses methods of loss aversion to influence people to purchase products by showing warning text stating “Limited time remaining!”; thus making the user feel as if they will miss out or lose the deal unless they make a purchase immediately.

Using loss aversion to increase sales

As previously stated, the concepts of choice architecture, (including the default, anchoring, and loss aversion) should be used on the web in an ethical way. However, it is up to designers to take advantage of these cognitive biases which can guide users through interfaces with ease, while also meeting business goals.

(Originally published for Saggezza: http://ux.saggezza.com/articles/designing-choice-the-default-and-anchoring/)