We place disproportionately-high value on self-made products.
Two groups were given IKEA boxes, with one group given fully-assembled versions, and the other given unassembled boxes, which they were told to put together. This second group were willing to pay much more for their box during the subsequent bidding process than those with pre-assembled boxes.
Norton, Mochon & Ariely (2012) The IKEA effect: When labor leads to love. Journal of Consumer Psychology.
So we humans will pay more (and not less) for something that we’ve put labour into than for something bought ready-made. The study above looked at other scenarios, using origami and lego, and found the same results.
Interestingly, the research suggests that our efforts lead to increased valuation only when we successfully complete tasks. When participants built and then destroyed their creations, or failed to complete them, the IKEA effect dissipated.
By extension, consumers are also willing to pay a premium for products that they have customized to their idiosyncratic preferences (Franke and Piller 2004; Schreier 2006).
Takeaways for Decision-Makers
Look at how you can add in an aspect of customer-owned creation into your existing product or service.
Ensure that you market these changes as a value-added experience decision, and not a labour-cost-saving exercise. To some extent, the perception of this may depend on your brand.
Provide personalisation options early on in your user flow to engender a sense of ownership and significantly reduce conversion drop-off later in the order process.
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Aspirational membership schemes and belonging The category size bias provides a credible explanation for why we human beings tend to associate with large groups that are viewed favourably by society. Being part of a large and “desirable” social group can make others believe that we also possess the many qualities of its members. For small businesses, it suggests that forming or being a part of a consortium or large and high quality networking group can dramatically elevate your brand image.
Communicating category sizes to nudge effectively Highlighting the differences between the large and small categories is highly likely to enhance the effect of the Category Size Bias. For instance, for software companies, stating that there are 10 features in the premium version versus 4 in the free version will help nudge a decision towards the premium version
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The findings from this braingem can nudge better healthcare choices, encourage consumption of a given product, and lead to more confident consumer decisions.
We mistakenly believe that items in larger categories have a higher probability of being picked than ones in smaller categories, despite all items having an equal chance of being picked.
We’ll spend or gamble more money on items put in larger categories.
We’re more likely to take action from tasks when they’re in a bigger list, over a smaller list.
We once we put something into a group, we perceive it to adopt all the characteristics of that group. This suggests that small companies should foster alliances with similarly-principled, more established companies.