What is Contrast Effect? And why you should leave your super model friends at home
In his book Influence, Robert Cialdini tells the story of two brothers, Sid and Harry, who ran a clothing store in 1930s America. Sid was in charge of sales and Harry led the tailoring department. Whenever Sid noticed that the customers who stood before the mirror really liked their suits, he became a little hard of hearing. He would call to his brother:
‘Harry, how much for this suit?’
Harry would look up from his cutting table and shout back:
‘For that beautiful cotton suit, $42.’ (This was a completely inflated price at that time.)
Sid would pretend he hadn’t understood:
‘How much?’ Harry would yell again: ‘Forty-two dollars!’
Sid would then turn to his customer and report:
‘He says $22.’
At this point, the customer would have quickly put the money on the table and hastened from the store with the suit before poor Sid noticed his ‘mistake’.
Maybe you know the following experiment from your schooldays: take two buckets. Fill the first with lukewarm water and the second with ice water. Dip your right hand into the ice water for one minute. Then put both hands into the lukewarm water. What do you notice? The lukewarm water feels as it should to the left hand but piping hot to the right hand.
Both of these stories epitomise the contrast effect: we judge something to be beautiful, expensive or large if we have something ugly, cheap or small in front of us. We have difficulty with absolute judgements.
The contrast effect is a common misconception
You order leather seats for your new car because compared to the $60,000 price tag on the car, $3,000 seems a pittance. All industries that offer upgrade options exploit this illusion.
The contrast effect is at work in other places, too. Experiments show that people are willing to walk an extra ten minutes to save $10 on food. But those same people wouldn’t dream of walking ten minutes to save $10 on a thousand-dollar suit. An irrational move because ten minutes is ten minutes, and $10 is $10.
Logically, you should walk back in both cases or not at all.
Without the contrast effect, the discount business would be completely untenable
A product that has been reduced from $100 to $70 seems better value than a product that has always cost $70. The starting price should play no role. The other day an investor told me:
‘The share is a great value because it’s 50 percent below the peak price.’
I shook my head. A share price is never ‘low’ or ‘high’. It is what it is, and the only thing that matters is whether it goes up or down from that point.
We don’t notice small, gradual changes
When we encounter contrasts, we react like birds to a gunshot: we jump up and get moving.
Our weak spot: we don’t notice small, gradual changes.
A magician can make your watch vanish because, when he presses on one part of your body, you don’t notice the lighter touch on your wrist as he relieves you of your Rolex. Similarly, we fail to notice how our money disappears. It constantly loses its value, but we do not notice because inflation happens over time. If it were imposed on us in the form of a brutal tax (and basically that’s what it is), we would be outraged.
The contrast effect can ruin your whole life: a charming woman marries a fairly average man. But because her parents were awful people, the ordinary man appears to be a prince.
One final thought
Bombarded by advertisements featuring supermodels, we now perceive beautiful people as only moderately attractive. If you are seeking a partner, never go out in the company of your supermodel friends. People will find you less attractive than you really are. Go alone or, better yet, take two ugly friends.
Availability Bias – WHY WE PREFER A WRONG MAP TO NO MAP AT ALL
Endowment Effect – DON’T CLING TO THINGS
Halo Effect – EVERYONE IS BEAUTIFUL AT THE TOP
Social Comparison Bias – WHY WE TAKE AIM AT YOUNG GUNS
Regression to Mean – THE DUBIOUS EFFICACY OF DOCTORS, CONSULTANTS AND PSYCHOTHERAPISTS
Scarcity Error – WHY THE LAST COOKIE IN THE JAR MAKES YOUR MOUTH WATER
Framing – IT’S NOT WHAT YOU SAY, BUT HOW YOU SAY IT
Authority Bias – DON’T BOW TO AUTHORITY
The above article is from the book The Art of Thinking Clearly by Rolf Dobelli. The article is only for educational and informative purposes to explain and understand cognitive biases. It is a great book, definitely worth a read!