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By Root 1883 0

waiting for organ transplants in the United States in 1995 partly because only 28 percent of U.S. adults agreed to be organ donors upon their deaths. In other countries, large-scale advertising campaigns have had negligible effects. For example, in the Netherlands nearly all adults received a letter in 1998 asking them to agree to be organ donors upon their death; this failed to change the consent rate. Johnson and Goldstein showed that in seven European countries in which people had to take action to opt out of the organ-donor program, over 98 percent of the people were, in effect, consenting organ donors. In four countries in which people had to take action to be an organ donor, only 15 percent agreed to donate. Johnson (2008) discusses additional research on the importance of a default option.

In a natural field experiment, Johnson et al. (1993) reported that when Pennsylvania residents were given an opportunity to save money by rejecting the right to sue on their automobile insurance, 75 percent of them retained the right to sue. On the other hand, when New Jersey residents were given an option to pay more on their auto insurance policy to gain the right to sue in automobile accidents, only 20 percent chose the right to sue.

The status quo bias is powerful.

A pizza store is considering two in-store ad campaigns. One starts with a fully loaded pizza (at a higher price) and allows the customer to save money by removing toppings. The other starts with a basic cheese pizza (at a lower price) and allows customers to add toppings at price per topping. Which campaign would produce higher sales revenue, the scale-down or the build-up?

1.3.5. Inform committed customers that they can delete features, rather than add them

Note the condition, “committed customers.” If the ad is directed at people who have no prior intention to purchase, advertisers often reverse the principle. They try to draw in customers using a no-frills version at a low price, and then offer options.

Evidence on the effects of deleting versus adding features

Three lab experiments made offers of automobiles, computers, or treadmills to 529 subjects. Those subjects who were initially offered a product that included many options (with the ability to delete some) had higher intentions to purchase the options than did subjects given the stripped-down model (with an ability to add options). However, this occurred only for people who intended to make a purchase in that product category. It did not apply when the advertiser was trying to attract customers; in that case the low-price stripped-down option was more persuasive (Park, Jun, and MacInnis 2000).

Now consider the pizza problem posed above. This was tested in lab experiments in Italy and the United States. In each country, almost twice as many toppings were sold using the scale-down approach as with the build-up approach (Levin et al. 2002).

Which option would you prefer? ___ 1) $500 guaranteed or ___ 2) a 15 percent chance of winning $1,000,000 (but an 85 percent chance of receiving nothing)?

1.3.6. To reduce customer risk, use a product-satisfaction guarantee

In 1865, John Wanamaker offered cash refunds to unsatisfied customers of his department store. This innovation was so startling that many businessmen predicted an early bankruptcy for him. As it turned out, this guarantee drew so many customers that he soon had the largest department store in the country. Guarantees became so popular that Hopkins (1923) said “practically all merchandise sent by mail is subject to return [at no charge].”

This principle continues to be used widely. According to Sam Walton (1992), “The two most important words I ever wrote were on that first Wal-Mart sign, ‘Satisfaction Guaranteed.’” His stores have a no-questions-asked, money-back guarantee. Nearly everything in the store can be exchanged with a receipt within 90 days of purchase. Similarly, Gore-Tex™ guarantees that, “If you are not completely satisfied with the waterproofness, windproofness, or breathability of our GORE-TEX outerwear, then we will