We humans often fool ourselves, both in business and in our personal lives. If we are aware of thinking traps, we are less likely to fall into them.
One thinking trap is the "Framing Effect".
ℹ️ The way information is presented or “framed” influences our decisions.
Given two options with identical meaning, people tend to choose the option that has been framed more positively. ✅
🧀 Example - Association
🍴 Food labels:
◽ A - 90% fat free
◽ B - contains 10% fat
🔎 People tend to choose A as it is associated with being fat-free, while B is associated with containing fat.
⚠️ Framing Effect
💵 Example - Success and Failure Framing
📈 Broker A tells us the share portfolio has a 70% success rate
📉 Broker B tells us the share portfolio has a 30% failure rate
🔎 People tend to choose A as it is associated with success, while B is associated with failure.
⚠️ Framing Effect
🐷 Example - Avoiding Loss
💲 Frame A: "The insurance will cost $1000"
💲 Frame B: "The insurance will prevent a loss of $20,000"
🔎 People tend to choose B to avoid the big loss.
⚠️ Framing Effect
📝 Example - Opt Out vs Opt In
☑️ Option A - tick this box to receive our newsletter
☑️ Option B - tick this box if you don’t want to receive our newsletter
🔎 People tend to choose B to remain with the status quo. They are less likely to opt out than to opt in.
❓ Questions to Ask Yourself:
🔸 What is the difference between options? What are the risks and rewards?
🔸 How is this offer similar to other offers?
🔸 How is this offer better or worse than others?
🔸 What is the risk with accepting this deal/offer?
❓ More Questions to Ask Yourself:
🔸 What is option B or option C if this option is not successful?
🔸 Do I understand all of the benefits and risks involved?
🔸 Have I looked closely at other options?
