less-is-better-effect

Less-Is-Better Effect In A Nutshell

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.

Understanding the less-is-better effect

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.

Connected Heuristics In Business

heuristic
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.
recognition-heuristic
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.
representativeness-heuristic
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.
take-the-best-heuristic
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.
biases
The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman since 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.
bundling-bias
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.
barnum-effect
The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

Read Next: Mental ModelsBiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon Effect.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"