Be Onpoint Consulting Ltd

Status quo bias

The position we’re at in any given moment, be it in life, in an investment fund or at the receiving end of a marketing email we forgot to opt out of, is the status quo. We use this reference point to judge our decisions. Of course it’s possible to move from the status quo but it’s a decision that involves uncertainty. Is it worth it to change? We’ll need some way of judging if the effort of moving is worth it. And how we judge this worth depends on many things, including the context and the audience.

Firstly we need to know that an alternative option exists. It also needs to be easy to move to and, not appear risky. Using the example of opting out of a marketing email; it should be as easy as hitting the unsubscribe button, but even that requires some action. Is the pain of that action worth the reward of not receiving that marketing email. What if we miss out on a great promotion just as we unsubscribe? So, we remain with the status quo.

That fear of the unknown risk weighed against the unknown reward increases as the risk increases, when there’s emotion involved or the impact may only be felt in years to come. All three of these are usually present when dealing with savings decisions for later life and to a large degree when looking after your financial wellbeing in general.

Intention action gap

Have you ever said you wanted to do something and then just don’t do it? Even though you say you really want to? Just think of all those new year’s resolutions you’ve made and broken over the years. What we want to do and what we end up doing are often two very different things. Savers do the same. They may have every intention to save more or change their investments but a number of things may stop them from crossing the bridge from intention to action.

Understanding what those obstacles are for your audience will help you design products or processes to help them achieve the outcomes their own biases are preventing them from achieving.

What to do?

Recognise that decisions are influenced by the environment they are made in. How risky is that decision? How easy is to move from the status quo? What is the context? How confident are people about their own abilities?

Do you know what these are for savers, employees or your customers? In what context are people making decisions?

It’s not a quick fix. It’s a slow task of analysing all the various decision points along the journey. You need to decide which behaviour you want to focus on. Then, identify the biases which are facilitating that behaviour and enabling the status quo. How could you change the environment to make a good decision easier to make? Design an intervention and then test it. But most importantly, don’t be afraid to fail. What worked in one context may not work in another. Are you ready to move from your status quo?