Business Psychology - Latest Findings

Article No. 85
Customer Psychology Findings, by James Larsen, Ph.D.

The Dirty House Problem

New research reveals a striking improvement in certain judgments if they are delayed.

Consider these situations: a Realtor showing a dirty house, a car dealer selling a model that Consumer Reports claims has serious deficiencies, and a middle manager presenting a proposal to executives that has serious, previously unrecognized flaws.

What do they have in common?

The house, car, and proposal have good and poor features; the poor features are serious enough to spoil the sale; and the person doing the selling has a vested interest in closing the sale or winning approval of the proposal.

So, should these people press for a decision in spite of the flaws?

The surprising answer to this question is "no." In this situation it is better to direct attention away from making a decision, and away from even forming a judgment, and allow a week to pass. After a week ask the person to recall the positive and negative attributes (don't supply them), next, ask for a judgment, and then try to reach an agreement.

Following this formula allows a newly discovered bias, called the positive reference point bias, to work for you. Pressing for an immediate sale causes it to work against you. Here's why:

People are moderately positive and optimistic, and this tendency influences their judgments and memory. The dirty house shown by the Realtor will be remembered as markedly cleaner a week later, but it will seem much dirtier than it actually is as people walk through the house. The actual dirt competes with a person's reference point for dirtiness; since this is moderately positive, as the memory of the dirt fades, this reference point replaces it. But people don't realize they're recalling their positive reference points rather than the actual dirt, so they form a biased opinion. The same process leads us to remember vacations as much more enjoyable than we actually experience them.

Yoav Ganzah, of Columbia University, and David Mazursky, of Hebrew University of Jerusalem, conducted a series of experiments exploring this reference point bias and made two discoveries that will help business people make use of it.

First, they discovered the bias only works if the product has a mixture of good and poor features. If the product is uniformly good or poor, the bias will not improve judgments by waiting a week.

Second, they discovered the bias only works if judgments are not made when first examining the product. If, after a week's delay, people merely recall judgments made when first examining the product, then the positive bias will not be experienced. But if they haven't formed a judgment, and are asked to recall product features, then their reference points will replace the worst features while they'll believe they're actually remembering these negative features. So their product estimates will be higher and judgments based on them will be much more positive than immediate judgments. The series of experiments Ganzach and Mazursky conducted demonstrated exactly this.

Ganzach and Mazursky invite anyone hoping to influence judgments who finds himself/herself in this situation to follow the formula they discovered, and they believe some people may already be using it. They believe positive reference point biases explain the success of a new selling technique currently gaining popularity. This technique places the salesperson in the role of a consultant who points out negative features. Customers are discouraged from forming an immediate judgment and the longer they delay, the more likely it becomes that positive reference points will replace memories of actual negative product features.

Ganzach and Mazursky also wish those whose products and services have recently been hit with a negative review to pay attention. Positive reference point biases are working for your benefit in your customers' minds, and negative information will be remembered much more positively with the passage of time and the failing of memories, so take heart.

Reference: Ganzach, Yoav and David Mazursky (1995). Time Dependent Biases in Consumer Multi-Attribute Judgment. Journal of Economic Psychology, 16 (1995), 331-349.

© Management Resources

See Also:
Closing, Closing, and Closing

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