Do you know of a family that returns to the same vacation spot each year despite the fact that there is nothing new or different to experience after their first visit there? Do you know of a person who is unhappy in his current job but is too hesitant to look for a new job opportunity despite a booming market? Why is it that people prefer their current status despite an opportunity of improving their utility by trying out something different?
Psychologists call this preference the status quo bias. In most real-world decisions, the choice is not simply between two or more alternative courses of action, but also with the alternative of doing nothing.
Faced with these options, people tend to stick with the status quo alternative.
A classic example of this phenomenon relates to a strip-mining project in Germany where a small town affected by the mining had to be relocated. The government offered to relocate the town to a nearby valley. At no expense to the residents of the town, the government officials suggested dozens of town planning options to pick from.
Despite the fact that the old town layout had evolved over centuries without any conscious planning or reason, the residents still chose a serpentine layout quite similar to that of the old town! Even though the residents had the option of switching to a more streamlined layout, they stuck with what was familiar to them.
The status quo bias operates not only at the individual but also at the societal levels. In the US, people continue to use the non-metric system of measurement despite the known advantages and simplicity of the metric system.
Similarly, people worldwide continue to use the “QWERTY” keyboard despite the proven superiority of other configurations. The “QWERTY” keyboard was designed to minimize the likelihood of type-bars clashing with each other on a mechanical typewriter.
For today’s computers, that’s obviously a non-issue, but still we refuse to adopt the more efficient configurations.
Coca-Cola learned the operation of the status quo bias the hard way when it introduced the new Coke. In blind taste tests, loyal Coke drinkers preferred the sweeter taste of the new Coke over that of the old one by a significant margin. However, when the company released the new product and made people consciously pick the new Coke over the status quo product, it realized that they preferred the status quo to an extent that it had to bring back the old product as Coke Classic.
So why do people prefer the status quo? Several explanations have been offered by researchers studying this phenomenon. Status quo may be preferred because of habit, custom or inertia.
People may also stick with the status quo because they want to avoid processing additional information that may be needed to evaluate other alternatives. Sometimes, it may simply be a function of the fear of the unknown or intrinsic conservatism.
While it is reasonable to expect people to prefer an option if the cost of switching to a new option is very high, the interesting thing about this bias is that people sometimes prefer to stick with what they know even if it costs them nothing to switch to a better option. Some years ago, citizens of two neighbouring states in the US were given the option of choosing between two insurance plans.
Surprisingly, citizens of one state overwhelmingly preferred one plan while citizens of the neighbouring state overwhelmingly preferred the other. The only difference? In one state, the first plan was the “current” plan, while in the other, the second plan was what they currently had. The citizens generally overwhelmingly chose to stay with what they had.
The status quo bias is particularly visible in people’s decision-making when it comes to stocks and other investments. Consistently, people tend to stick with losers far too long and hold on to winners long after their prime.
While this “short cut” to decision-making may prove less effortful in the short run, it can be quite costly in the long run. The impact of this bias can be felt on individuals’ acceptance of reforms not only at the organizational level but also at the national level.
Research has shown that whenever there is some uncertainty about gains or losses of a plan in the future, people overwhelmingly choose the status quo. Since there is risk inherent in any option, actually making reforms is exceptionally difficult.
Since this uncertainty is at the heart of the status quo bias, the secret to overcoming the bias is to reduce uncertainty as much as possible.
If you’re a manager, try and engage key individuals to support the reform effort, confidently extol its value, demonstrate the positive effects of small steps made towards the reform, show the effectiveness of similar previous reforms, and generate data that confirm the benefits of the reform.
Praveen Aggarwal is an associate professor of marketing at the Labowitz School of Business & Economics at the University of Minnesota Duluth and Rajiv Vaidyanathan is a professor of marketing and director of MBA programmes at the University of Minnesota Duluth.
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