What might not make sense at first glance is the strength of this tendency in human decision making.
An example is a study is which participants read either of two versions of a scouting report on a basketball player. The participants were to decide how much the player should be paid. One of the reports described the player as a veteran and gave his performance statistics for his last five years in the league. The other version described the player as a rookie and included the same performance statistics as in the report on the veteran. These statistics, however, were presented as predictions of how the rookie would perform during his first five seasons.
Study participants who read the report on the veteran said, on average, he should be paid $4.26 million. Those who read the report with the predicted stats said he should be paid $5.25 million. That’s 23% more.
When people are presented with a letter of recommendation, those who read about the job candidate’s high potential will be more impressed than those who read about the candidate’s equally high achievements.
The lesson for retailers is to play up your potential. Say what you can do for the customer today and tomorrow. Use as evidence your past performance, but figure that the consumer is operating according to the mutual fund disclaimer: “Past performance is no guarantee of future results.”
Why does the consumer believe this?
- As time goes by, superb performance gets worse. The basketball player five years into his career is more likely to have peaked than is the rookie who is younger. With this same logic, the retailer who has performed at the top has nowhere to go but down from the peak.
- Thinking about the future is more exciting than thinking about the past. The letter of recommendation talking about potential stimulates our interest because of the courage of the prediction. When the retailer makes promises for the future, that’s more interesting than the retailer who’s only bragging about past triumphs.
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