Article 1.2 - Berger (2020) Flashcards
Uncertainty Tax
The devaluaing of things uncertain.
When choosing between a sure and risky option, the risky option has to be much better to get chosen.
The more change or ambiguity around a product or service, it becomes less valuable and people feel less interested in changing
Example of uncertainty tax
Students had to imagine they had just taken a tough exam
They were asked if they would buy a holiday pack to Hawaii at a very low price, or if they wouldn’t buy it
The offer expires tomorrow or they could pay a 5$ fee to retain the right to buy the package tomorrow
Group 1 knew they had passed - they bought the pack
Group 2 knew they failed - they bought the pack
Group 3 did not know their results - outcome was uncertain so they waited
Trialability
How easy it is to try something new, the ease with which something can be tested or experimented with on a limited basis - lowers uncertainty
How to reduce uncertainty
- Harness freemium
- Reduce up-front costs
- Drive discovery
- Make it reversible
Freemium
Initial version is free of charge, but the experience is designed so that satisfied users will eventually pay to upgrade to a premium version
Example freemium
Dropbox allowed its users to sign up for free to use the app, as it gives users time to explore what the service has to offer, rather than making them pay a fee
Encourages upgrading without requiring it
Reducing up-front costs
Customers weren’t comfortable shopping online because they wanted to try shoes on
Customers did not want to pay for shipping as that meant uncertainty
Removing the shipping costs can create a mental picture of bringing the shoe store into your own home
It gives people the chance to experience something before committing to it and thus reduce uncertainty
Drive Discovery (Acura)
What if people don’t know you exist? Companies then resort to advertising
Buick struggled with a boring image, so they rebranded as Acura and shifted their strategy.
Instead of traditional advertising, they partnered with high-end hotels to offer free chauffeur rides in Acura cars.
Allowed people to experience the brand without any effort or cost. While not everyone who tried the cars became buyers, the campaign led to thousands of sales and was more cost-effective than a failed Super Bowl ad.
Acura succeeded by making it easy for people to discover and experience the brand firsthand.
Make it reversible
The last way to reduce uncertainty is to make it reversible.
Shelter with a 2-week trial for pet adoption.
Shelter wanted to make sure that if it wasn’t a good fit, the owner could bring the dog back home.
Up-front costs were not reduced, but uncertainty was reduced - it made the decision reversible
Lenient vs strict return policies
Strict policy group could only return defective or incorrect items.
Lenient policy group could return any product at any time.
Less restrictive policy increased profits.
Shrinking back-end friction encourages action.
Lenient returns help change minds because it reduces hesitation about trying something new
Taking advantage of inertia
Once someone has tried the product, they are faced with a different question - if they would keep paying to use it.
Before trying: People stick to the status quo because new choices feel overwhelming or costly. Free shipping or trials help overcome this.
After trying: Once they have the product, inertia shifts. They grow attached, and returning or canceling feels like extra effort, so they’re more likely to keep it.
Extended return periods: Longer return windows reduce returns as people feel ownership over time.
Businesses leverage this by reducing initial barriers and letting inertia encourage retention.
