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.
Understanding the recognition heuristic
The heuristic makes inferences about a criterion not directly accessible to the decision-maker. Accessibility is reliant upon the ability to retrieve stored information from memory – provided that such information has relevance to an object (or alternative object) in question.
Indeed, for two alternative objects, Goldstein and Gigerenzer stated that:
“If one of two objects is recognized and the other is not, then infer that the recognized object has the higher value with respect to the criterion.”
The original recognition heuristic experiment
To demonstrate this heuristic, the researchers quizzed German and U.S. students on the populations of various German and U.S. cities. Students were given the names of two cities and asked to choose which city had a higher population.
Results showed that 92% of choices were based on city recognition and not on specific knowledge of population size.
Interestingly, German students fared better on U.S cities while U.S. students scored better on German cities. The results were attributed to the fact that cities with larger populations were more recognizable than cities with smaller populations.
This is also an example of the less-is-more effect because student decisions were more accurate in domains where they had little knowledge.
The recognition heuristic in marketing
In marketing and consumer psychology, the recognition heuristic is strongly linked to branding.
Businesses spend vast amounts of money advertising their products to increase brand awareness and ensure that their products remain top-of-mind for consumers.
The mechanisms for a consumer choosing one product over another are much the same as the original study on population size.
Consider these scenarios:
Publicly listed companies with recognizable names are more likely to attract shareholder investment than those companies that are less well known.
A brand of breakfast cereal with a catchy slogan and memorable mascot is likely to be purchased more often than a no-name supermarket brand with plain packaging.
Limitations to the recognition heuristic
Many researchers argue that purchasing decisions are often based on more than recognition alone. This contradicts the notion that the recognition heuristic is a non-compensatory model based on one cue even if other cues are available.
In a mechanism called “recognition plus evaluation”, the consumer may consider a range of cues such as:
The average review rating or the number of stars.
Perceived product desirability. For example, how much of a product is available on the shelf compared to a competitorproduct?
Negative association, where an individual may recognize a product but for the wrong reasons. For example, the product may be associated with animal cruelty or the business itself has a history of subverting consumer law.
Key takeaways
The recognition heuristic argues that recognized objects that satisfy certain criteria have more value than unrecognized objects that do not.
The recognition heuristic has significant implications for brandmarketing and awareness. Consumers choose products from brands they are more familiar with.
Some argue that the non-compensatory nature of the recognition heuristic is false. While recognition is an important factor in consumer choice, other cues such as the star rating of a product are assessed before a decision is made.
A Barbell strategy consists of making sure that 90% of your capital is safe, and using the remaining 10%, or on risky investments. Applied to business strategy, this means having a binary approach. On the one hand, extremely conservative. On the other, extremely aggressive, thus creating a potent mix.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the businessmodel. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
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.
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.
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.
Moonshot thinking is an approach to innovation, and it can be applied to business or any other discipline where you target at least 10X goals. That shifts the mindset, and it empowers a team of people to look for unconventional solutions, thus starting from first principles, by leveraging on fast-paced experimentation.
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.
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 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 is marketing can be associated with social proof.
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.
