The less-is-better effect was first proposed by behavioral scientist Christopher Hsee in a 1998 study. He noted in the experiment that a person giving a $45 scarf as a gift was perceived to be more generous than someone giving a $55 coat. The less-is-better effect describes the consumer tendency to choose the worse of two options – provided that each option is presented separately.
Aspect
Explanation
Definition of Less-Is-Better Effect
The Less-Is-Better Effect is a cognitive bias or psychological phenomenon where individuals perceive products or services with fewer features or options as superior or more desirable than those with more features. This effect is in contrast to the common belief that more options represent better value. The Less-Is-Better Effect suggests that simplicity, minimalism, and ease of decision-making are valued by consumers. It often occurs when individuals become overwhelmed or stressed by too many choices, leading them to prefer simpler alternatives. This bias has significant implications for product design, marketing, and consumer behavior, as it highlights the importance of offering well-curated and streamlined options to cater to the preferences of consumers who favor simplicity over complexity.
Key Concepts
Several key concepts define the Less-Is-Better Effect:
– Simplicity and Minimalism
The Less-Is-Better Effect is rooted in the preference for simplicity and minimalism. It suggests that individuals are drawn to products or services that offer straightforward and uncomplicated solutions to their needs or desires. Simplicity and minimalism are central to this effect.
– Decision Fatigue
Decision fatigue refers to the mental exhaustion that individuals experience when faced with numerous choices or decisions. The Less-Is-Better Effect is often driven by a desire to avoid decision fatigue and make choices quickly and easily. Decision fatigue plays a significant role in this bias.
– Perceived Value
Perceived value in the Less-Is-Better Effect relates to how individuals perceive the quality and desirability of a product or service. It suggests that individuals may associate simplicity with higher quality or better value, even if the product or service lacks certain features. Perceived value is influenced by this effect.
Characteristics
The Less-Is-Better Effect exhibits the following characteristics:
– Simplicity Preference
The primary characteristic of this effect is a preference for simplicity and a bias against complexity. Consumers tend to gravitate toward options that require less cognitive effort and offer straightforward solutions. Simplicity preference is a defining characteristic.
– Decision Simplification
The Less-Is-Better Effect simplifies decision-making by reducing the number of choices individuals need to consider. It streamlines the decision process, making it more efficient and less stressful. Decision simplification is a prominent feature of this bias.
– Consumer Behavior Impact
This bias significantly influences consumer behavior, affecting choices related to products, services, and even content consumption. It can lead to the success of products or brands that embrace minimalism and simplicity in their offerings. Impact on consumer behavior is a key aspect.
– Marketing Implications
Businesses and marketers need to recognize and leverage the Less-Is-Better Effect in their product design, marketing strategies, and communication to appeal to consumers who value simplicity and minimalism. Marketing implications are significant.
Revenue Models
The Less-Is-Better Effect does not generate revenue directly but can impact revenue indirectly through its influence on consumer preferences and choices:
– Product Design
Companies can design and offer simplified versions of products or services, capitalizing on the Less-Is-Better Effect. These simpler options may attract consumers who prefer minimalism, potentially leading to increased sales and revenue.
– Pricing Strategies
By emphasizing the value and simplicity of certain product or service offerings, businesses can employ pricing strategies that align with the preferences of consumers influenced by the Less-Is-Better Effect. This can lead to higher perceived value and increased sales revenue.
– Market Positioning
Businesses can position themselves in the market as providers of straightforward, no-frills solutions that cater to individuals seeking simplicity. Effective market positioning can attract a niche segment of consumers, contributing to revenue generation.
– Content and User Experience
In content consumption and user experience design, organizations can apply the principles of minimalism and simplicity to engage and retain users who prefer streamlined interfaces and content. Enhanced user satisfaction can lead to higher engagement and potentially generate revenue through subscriptions, ad revenue, or user retention.
Advantages
The Less-Is-Better Effect offers several advantages in product design and marketing:
– Consumer Appeal
Recognizing and leveraging this effect can make products and services more appealing to consumers who value simplicity, resulting in increased sales and market share.
– Efficient Decision-Making
Simplified choices and options reduce decision-making time for consumers, enhancing their overall shopping or selection experience. This efficiency can lead to higher customer satisfaction and loyalty.
– Market Differentiation
Embracing minimalism and simplicity can set businesses apart from competitors who offer complex or overwhelming choices. This differentiation can attract a specific segment of consumers and lead to a competitive advantage.
– Reduced Return Rates
Simplified products or services are more likely to meet the expectations of consumers, potentially reducing return rates and associated costs for businesses.
The less-is-better effect was first proposed by behavioral scientist Christopher Hsee in a 1998 study.
In the study, Hsee noted that:
A person giving a $45 scarf as a gift was perceived to be more generous than someone giving a $55 coat.
Consumers were willing to pay more for a 7-ounce scoop of ice cream that was overfilled than they were an 8-ounce scoop that was underfilled.
A dinnerware set with 24 unbroken pieces was seen to be more favorable than a set with 31 unbroken pieces plus a few broken ones.
Results of the study indicated that the less-is-better effect only occurred when each option from the above examples was presented separately. When participants saw the two options together, the effect no longer applied.
Hsee noted that the less-is-better effect is explained by the evaluability hypothesis. In other words, a person who evaluates objects separately bases their evaluation on attributes that are easy to evaluate – and not on important attributes.
Implications for consumers and businesses
The most obvious implication for consumers is the higher likelihood that they will overpay for relatively low-quality items.
Conversely, they may devalue items that are more objectively valuable simply because of the context in which the products are presented. Assuming that the goal was to eat more ice cream, the larger ice cream scoop was objectively a better option. But when the larger scoop was served in a cup that it did not fill, the smaller scoop (filling a smaller cup) represented better value for money to consumers.
Marketing teams can use a lack of context to market product categories that only contain a single product. Usually, a consumer will evaluate the price or attributes of a product relative to the other products in the same range. Without this frame of reference, the business can charge a higher price and increase profit margins.
Avoiding the less-is-better effect
The less-is-better effect is a heuristic – or mental shortcut – so in avoiding it a consumer should spend more time thinking about their decisions.
This can be achieved by:
Digging deeper to determine the objective component of decision making as opposed to the subjective.
Not passing judgment (good or bad) on a product in isolation. Consumers should get into the habit of being comparison shoppers to make more balanced decisions.
Considering context. Wherever possible, do not dismiss products because of their perceived inferiority. In other words, does the larger ice cream scoop contain less ice cream even though it does not fill the cup?
Key takeaways
The less-is-better effect describes the irrational consumer preference for a lesser or smaller alternative when two options are presented separately.
The less-is-better effect causes consumers to devalue products that are objectively more valuable by failing to consider broader contexts.
The less-is-better effect can be avoided by slowing down the thinking process. Consumers should always strive for objectivity and resist the urge to pass positive or negative judgment on products in isolation.
Key Highlights
Origin: Proposed by behavioral scientist Christopher Hsee in 1998, the Less-Is-Better Effect explains consumer behavior where a lesser or smaller option is preferred when two options are presented separately.
Examples: Hsee’s study demonstrated instances where a $45 scarf was perceived as more generous than a $55 coat when given as a gift, and consumers preferred an overfilled 7-ounce ice cream scoop to an underfilled 8-ounce scoop.
Evaluability Hypothesis: The effect is explained by the evaluability hypothesis, where individuals evaluating objects separately focus on easily evaluable attributes rather than important ones.
Context Matters: The effect occurs when options are presented individually; it disappears when options are compared side by side.
Consumer Implications: Consumers might overpay for lower-quality items due to the effect and may undervalue objectively valuable items due to presentation context.
Business Strategy: Businesses can utilize the lack of context to market single-product categories, charging higher prices and increasing profit margins.
Avoiding the Effect: Consumers can avoid the effect by engaging in more thoughtful decision-making:
Delve deeper into objective components of decisions.
Avoid passing snap judgments on products in isolation.
Compare options to make balanced decisions.
Consider the context and broader aspects before making judgments.
Behavioral Bias: The less-is-better effect is a heuristic or mental shortcut, leading to irrational preferences that don’t align with objective value.
Related Framework
Description
When to Apply
Less-Is-Better Effect
The Less-Is-Better Effect, also known as the Minimalist Choice Effect, is a cognitive bias where individuals perceive simpler options as more attractive or valuable than complex ones. When faced with a choice between options of varying complexity, people tend to prefer the simpler option, even if it offers fewer features or benefits. This bias is rooted in the desire for ease of understanding, reduced cognitive effort, and avoidance of decision fatigue. Understanding the Less-Is-Better Effect can help organizations design products, services, or decision environments that emphasize simplicity, clarity, and minimalism to appeal to consumer preferences and enhance decision satisfaction.
When designing product offerings or organizing decision-making processes, addressing the Less-Is-Better Effect can improve customer satisfaction and enhance decision quality by streamlining options and emphasizing simplicity, thus attracting consumers and minimizing decision fatigue in marketing campaigns, product development, or user experience design, ultimately enhancing product appeal and optimizing decision outcomes through minimalist design and clear communication.
Behavioral Economics
Behavioral Economics is a field that combines insights from psychology and economics to understand how individuals make decisions in real-world contexts. It recognizes that people’s choices are influenced by cognitive biases, emotions, and social factors, often deviating from the rational model of economic decision-making. Behavioral economics offers frameworks such as nudges, defaults, and framing to help individuals overcome decision-making challenges, including the Less-Is-Better Effect. By understanding the underlying psychological mechanisms driving decision-making, organizations can design interventions that facilitate better choices and mitigate the negative effects of preferring less complex options.
When designing choice architectures or developing decision support tools, leveraging Behavioral Economics can improve decision outcomes and promote behavior change by addressing cognitive biases and aligning choices with desired outcomes, thus emphasizing simplicity and mitigating the Less-Is-Better Effect in consumer behavior research, public policy design, or organizational management, ultimately enhancing decision efficiency and promoting welfare through behavioral interventions and evidence-based strategies.
Decision Support Systems
Decision Support Systems (DSS) are computer-based tools or software applications designed to assist individuals or organizations in making complex decisions. DSS utilize data analytics, modeling techniques, and algorithms to provide insights, recommendations, or visualizations that aid decision-makers in evaluating alternatives and assessing outcomes. By leveraging DSS, organizations can streamline decision-making processes, reduce information overload, and present relevant options tailored to the user’s preferences or criteria. This can help mitigate the Less-Is-Better Effect by presenting information in a structured and digestible format, enabling decision-makers to navigate complex decision spaces more efficiently.
When implementing decision-making tools or managing information overload, utilizing Decision Support Systems can improve decision quality and enhance decision efficiency by providing relevant insights and presenting options, thus emphasizing simplicity and mitigating the Less-Is-Better Effect in business analytics, financial planning, or healthcare management, ultimately empowering decision-makers and facilitating data-driven decision-making through technology-enabled solutions and actionable insights.
Minimalism
Minimalism is a lifestyle or design philosophy characterized by simplicity, decluttering, and prioritizing essential elements while eliminating excess. In the context of the Less-Is-Better Effect, minimalism advocates for reducing options to essential or high-quality choices, eliminating unnecessary complexity, and focusing on what truly matters. By embracing minimalism, organizations can simplify product offerings, user interfaces, or decision-making frameworks, making it easier for individuals to navigate choices and avoid feeling overwhelmed by excessive options. This approach can help mitigate the Less-Is-Better Effect by promoting clarity, reducing decision fatigue, and enhancing user satisfaction.
When designing user interfaces or developing product lines, adopting Minimalism can improve user experience and reduce decision complexity by simplifying options and prioritizing essential features, thus addressing the Less-Is-Better Effect and enhancing user satisfaction in website design, product development, or brand management, ultimately streamlining decision processes and fostering user engagement through clear design principles and focused offerings.
Preference Elicitation
Preference Elicitation techniques are used to systematically gather and assess individuals’ preferences, values, or priorities to inform decision-making processes. These techniques may include surveys, conjoint analysis, or choice-based modeling, aiming to understand how individuals weigh different attributes or alternatives when making decisions. By eliciting preferences, organizations can tailor their offerings, recommendations, or interventions to align with users’ needs and preferences, reducing decision complexity and minimizing the likelihood of the Less-Is-Better Effect. Preference elicitation can help streamline decision-making processes, improve user satisfaction, and ensure that choices are aligned with individuals’ values and objectives.
When conducting market research or designing decision frameworks, leveraging Preference Elicitation can improve decision outcomes and enhance user satisfaction by understanding preferences and aligning choices with user needs, thus reducing decision complexity and addressing the Less-Is-Better Effect in product design, policy analysis, or personalized recommendations, ultimately improving decision efficiency and promoting customer engagement through user-centered approaches and tailored interventions.
Curation Strategies
Curation Strategies involve selecting, organizing, and presenting content or options in a deliberate manner to facilitate decision-making and enhance user experience. Through curation, organizations can filter out irrelevant or low-quality options, highlight relevant choices, and provide context or guidance to help users make informed decisions. By curating options, organizations can reduce decision complexity, mitigate the Less-Is-Better Effect, and guide users towards preferred or recommended choices. This approach can improve decision satisfaction, streamline decision-making processes, and foster trust and loyalty among users.
When presenting options or designing decision environments, employing Curation Strategies can improve decision outcomes and enhance user engagement by filtering content, providing guidance, and highlighting relevant choices, thus addressing the Less-Is-Better Effect and enhancing decision satisfaction in e-commerce platforms, content aggregation sites, or information portals, ultimately enhancing decision satisfaction and fostering user trust through curated experiences and personalized recommendations.
Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Where convergent thinking might work for larger, mature organizations where divergent thinking is more suited for startups and innovative companies.
The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.
Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.
Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.
Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.
The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.
Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.
The Lindy Effect is a theory about the ageing of non-perishable things, like technology or ideas. Popularized by author Nicholas Nassim Taleb, the Lindy Effect states that non-perishable things like technology age – linearly – in reverse. Therefore, the older an idea or a technology, the same will be its life expectancy.
Antifragility was first coined as a term by author, and options trader Nassim Nicholas Taleb. Antifragility is a characteristic of systems that thrive as a result of stressors, volatility, and randomness. Therefore, Antifragile is the opposite of fragile. Where a fragile thing breaks up to volatility; a robust thing resists volatility. An antifragile thing gets stronger from volatility (provided the level of stressors and randomness doesn’t pass a certain threshold).
Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.
Vertical thinking, on the other hand, is a problem-solving approach that favors a selective, analytical, structured, and sequential mindset. The focus of vertical thinking is to arrive at a reasoned, defined solution.
Maslow’s Hammer, otherwise known as the law of the instrument or the Einstellung effect, is a cognitive bias causing an over-reliance on a familiar tool. This can be expressed as the tendency to overuse a known tool (perhaps a hammer) to solve issues that might require a different tool. This problem is persistent in the business world where perhaps known tools or frameworks might be used in the wrong context (like business plans used as planning tools instead of only investors’ pitches).
The Peter Principle was first described by Canadian sociologist Lawrence J. Peter in his 1969 book The Peter Principle. The Peter Principle states that people are continually promoted within an organization until they reach their level of incompetence.
The straw man fallacy describes an argument that misrepresents an opponent’s stance to make rebuttal more convenient. The straw man fallacy is a type of informal logical fallacy, defined as a flaw in the structure of an argument that renders it invalid.
The Streisand Effect is a paradoxical phenomenon where the act of suppressing information to reduce visibility causes it to become more visible. In 2003, Streisand attempted to suppress aerial photographs of her Californian home by suing photographer Kenneth Adelman for an invasion of privacy. Adelman, who Streisand assumed was paparazzi, was instead taking photographs to document and study coastal erosion. In her quest for more privacy, Streisand’s efforts had the opposite effect.
As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.
The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.
The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.
The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.
The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.
The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.
First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.
The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.
Goodhart’s Law is named after British monetary policy theorist and economist Charles Goodhart. Speaking at a conference in Sydney in 1975, Goodhart said that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” Goodhart’s Law states that when a measure becomes a target, it ceases to be a good measure.
The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.
The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.
The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.
Moore’s law states that the number of transistors on a microchip doubles approximately every two years. This observation was made by Intel co-founder Gordon Moore in 1965 and it become a guiding principle for the semiconductor industry and has had far-reaching implications for technology as a whole.
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.
Value migration was first described by author Adrian Slywotzky in his 1996 book Value Migration – How to Think Several Moves Ahead of the Competition. Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.
The bye-now effect describes the tendency for consumers to think of the word “buy” when they read the word “bye”. In a study that tracked diners at a name-your-own-price restaurant, each diner was asked to read one of two phrases before ordering their meal. The first phrase, “so long”, resulted in diners paying an average of $32 per meal. But when diners recited the phrase “bye bye” before ordering, the average price per meal rose to $45.
Groupthink occurs when well-intentioned individuals make non-optimal or irrational decisions based on a belief that dissent is impossible or on a motivation to conform. Groupthink occurs when members of a group reach a consensus without critical reasoning or evaluation of the alternatives and their consequences.
A stereotype is a fixed and over-generalized belief about a particular group or class of people. These beliefs are based on the false assumption that certain characteristics are common to every individual residing in that group. Many stereotypes have a long and sometimes controversial history and are a direct consequence of various political, social, or economic events. Stereotyping is the process of making assumptions about a person or group of people based on various attributes, including gender, race, religion, or physical traits.
Murphy’s Law states that if anything can go wrong, it will go wrong. Murphy’s Law was named after aerospace engineer Edward A. Murphy. During his time working at Edwards Air Force Base in 1949, Murphy cursed a technician who had improperly wired an electrical component and said, “If there is any way to do it wrong, he’ll find it.”
The law of unintended consequences was first mentioned by British philosopher John Locke when writing to parliament about the unintended effects of interest rate rises. However, it was popularized in 1936 by American sociologist Robert K. Merton who looked at unexpected, unanticipated, and unintended consequences and their impact on society.
Fundamental attribution error is a bias people display when judging the behavior of others. The tendency is to over-emphasize personal characteristics and under-emphasize environmental and situational factors.
Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.
Hindsight bias is the tendency for people to perceive past events as more predictable than they actually were. The result of a presidential election, for example, seems more obvious when the winner is announced. The same can also be said for the avid sports fan who predicted the correct outcome of a match regardless of whether their team won or lost. Hindsight bias, therefore, is the tendency for an individual to convince themselves that they accurately predicted an event before it happened.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
