We buy what we buy and do what we do because it is easy

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Business Matter

By Manish Shah

Say you are shopping for a cell phone plan and you are presented with several alternatives. After mulling over your options, you decide to go with an unlimited plan even though it is more expensive. Why is that? This is because in a Psychologist’s terms the unlimited plan is cognitively fluent. Cognitive fluency is the tendency of humans to favor things that are easy to comprehend and are familiar.

Fast food restaurants use cognitive fluency  to their advantage. They make it easy for a customer to order pre-configured meals which are numbered. A customer can walk in and order Number 2 instead of going through the trouble of ordering the items ala carte.

Adam Alter and Daniel Oppenheimer did a study on how processing fluency influences decisions about investing in initial public offerings.  They found that companies with easy to pronounce ticker symbols performed better than companies with difficult to pronounce ticker symbols. Investors were favorably inclined towards stocks with easy to pronounce ticker symbols because they perceived them to be less risky.

Cognitive fluency has far reaching implications in the world of business. Customers put a very high value on safety when it comes to products such as food and insurance. Marketers should assign easy to pronounce names to these products so that they are perceived to be safe. Also, the product information should be provided in an easy to understand way. On the flip side, bungee jumping derives its value from being risky. Vendors offering bungee jumping should use a difficult to pronounce name for their business to generate excitement around it.

Anything that is an obstacle to processing information can profoundly influence people’s decisions. In order to favorably influence people we should get away from the habit of using fancy unreadable fonts, fine undecipherable print and cryptic flowery language.

Manish Shah is the former president of Midwest Law Printing in Chicago. He also worked at Intel, PwC and Motorola. He has an MBA from Kellogg Graduate School of Management, and a MS in Computer Science from Illinois Institute of Technology. He can be reached at manishshahus@yahoo.com.

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