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We've all probably encountered this situation when shopping at the supermarket: you might have originally intended to buy just a bottle of seasoning, but ended up being drawn to the dazzling array of discounted items in the sale section, ending up with a bunch of things you didn't plan to buy. Thinking about it, this doesn't seem like the first time, right? We're easily attracted by the word "discount" or hastily make decisions because of "limited-time offers." Behind this seemingly insignificant behavior lies an innate human cognitive characteristic: cognitive bias. Every day, in the countless decisions we make, big and small, cognitive bias silently plays a role, influencing our judgment. Sometimes it leads us to make irrational choices, and sometimes it can lead to significant decision-making errors. Even more interestingly, even when we realize we may be under the influence of cognitive bias, completely escaping its influence remains quite difficult. How exactly does this deeply ingrained thought pattern form? And why does it have such a profound impact on our lives?
Cognitive bias is not a defect, but rather a mental shortcut developed by the human brain during its long evolutionary process. In today's information-saturated society, our brains process tens of thousands of messages and decisions every day. To react quickly, our thinking system has developed a mechanism for rapid judgment, which psychologists call "quick thinking." This intuitive way of thinking helps us make quick decisions in daily life, but it can also easily lead us into cognitive pitfalls.
Classic cognitive bias
Confirm deviation
Xiaoming firmly believed that a certain tech stock would rise, and even though the company's recent financial report was poor, he only focused on positive news, such as new product launches or market expansion plans. He ignored or offered excuses for negative news such as declining revenue or changes in senior management. As a result, he missed the opportunity to cut his losses and ultimately suffered even greater losses. This concept of "as long as I hold on, I should break even" is a typical example of sunk costs. You are "locked in" by your invested funds, instead of rationally assessing future risks and returns.
Brand loyalty is a classic example of confirmation bias in marketing. iPhone users may pay particular attention to the shortcomings of Android phones, such as app incompatibility or system update issues. However, they are more accepting of the limitations of the iPhone itself, such as fast battery drain or limited storage. This preference also influences their interpretation of the news; they tend to be less trusting of negative reports about their favorite brands.
Confirmation bias reveals our tendency to seek out evidence that supports our own views and ignore opposing information. This phenomenon permeates our lives, appearing everywhere from political media manipulation and investment to interpersonal relationships, workplace evaluations, and education.
Anchoring effect
The anchoring effect explains why people often over-rely on the first piece of information they encounter when making decisions. This explains why stores often display more expensive items first, "anchoring" customers' psychological price point at a high level, making the cheaper items appear more worthwhile later. Similarly, in negotiations, whoever proposes the first figure often becomes the benchmark for subsequent discussions.
When Apple launches a new iPhone, it typically offers multiple storage options, such as 128GB for NT$32,900, 256GB for NT$36,900, and 512GB for NT$44,900. While the most expensive version doesn't sell well, its existence makes the mid-range versions seem more valuable, encouraging consumers to choose the 256GB version over the most basic model.
The most common example is during salary negotiations in an interview. Who brings up a salary figure first often influences the final outcome. If the job seeker initially states an expectation of 80,000 yuan per month, subsequent discussions will likely fluctuate around that number, making it difficult to negotiate above 100,000 yuan. Conversely, if they start by asking for 100,000 yuan, the chances of settling on 90,000 yuan increase significantly.
Therefore, the first number or message that appears will strongly influence people's subsequent judgment criteria. This influence is so great that even professionals find it difficult to completely escape it.
Loss aversion
Recent soaring housing prices, despite a sluggish market, have kept prices high. A major reason for this is that when the real estate market declines or consolidates, many homeowners prefer to leave their properties vacant rather than lower prices to sell. Lowering prices is tantamount to acknowledging investment losses. This mentality leads to a sharp contraction in transaction volume during market downturns, making it difficult for the market to recover and for prices to fluctuate. Therefore, a significant drop in housing prices is unlikely.
This theory can also be used for indirect marketing. When we go to a mobile phone store to buy a new phone, the salesperson will recommend that we purchase a 980 yuan insurance package. Even if you think you rarely drop your phone, the thought of spending tens of thousands of yuan to repair it if it breaks might make you end up buying the insurance anyway. This reflects that people are willing to spend a little more money to avoid potential losses.
Loss aversion theory, proposed by behavioral economists Kahneman and Tversky, states that people experience far more pain from losing something than the joy of gaining something of equal value. This psychological characteristic often leads us to make irrational decisions, taking on greater risks to avoid smaller losses.
Gambler's Fallacy
This bias often arises in probabilistic judgments. For example, in a coin toss game, after five consecutive heads, some might think, "Tails are more likely to come next." However, the probability of a coin landing heads or tails each time is always 50/100 (TP/T). This flawed intuition can lead us to over-rely on past trends in gambling or investing, ignoring the nature of individual events.
The gambler's fallacy stems from the expectation that probabilities will "self-correct," believing that good and bad luck should "balance." However, in independent events, the probabilities are entirely new each time, unrelated to past outcomes. This misconception often leads to irrational decisions, particularly in areas like investing and gambling.
herd mentality
Social media behavior is most notably influenced by the bandwagon effect. A certain filter suddenly becomes a hit on Instagram, and everyone is taking photos in the same style. Xiaomei initially thought the filter's color tone was a bit strange, but seeing her friends using it, she downloaded it and started using it too, fearing her photos would look out of place.
The bandwagon effect reflects the human tendency to follow the crowd. When we see a long line outside a restaurant, we assume it must be delicious; when we see highly rated products, we are more inclined to buy them. This effect is particularly pronounced in the age of social media, where "following the trend" has become a widespread phenomenon. Therefore, both media and marketing heavily utilize the bandwagon effect to enhance promotional efforts.
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Further Reading :Game Thinking – The Winning Formula for Life
Precision Marketing Based on AI and Big Data
Real-time analysis and response
The immediacy of big data and AI computing enables businesses to quickly capture user behavior, including subtle actions such as mouse movement patterns and dwell time, product comparison order and frequency, patterns of adding items to the cart but not checking out, browsing preferences within price ranges, patterns of returning to view items repeatedly, and time series of page switching. These are all bases for AI to interpret user information, and AI can use this data to push specific information to users in real time to improve conversion rates. For example, when a user browses a product for a long time but does not place an order, AI can recommend similar but lower-priced products to encourage a sale.
Therefore, companies often use big data and AI technologies, combined with cognitive bias theory from behavioral economics, to achieve precision marketing and further improve consumer conversion rates and brand loyalty.
Analyze consumer behavior and create personalized anchors
Businesses use big data analytics to analyze each user's browsing, purchasing, and clicking history to identify consumer preferences for price or product features, and design personalized marketing strategies to strengthen the anchoring effect.
E-commerce platforms can dynamically set "original price" and "discount price" based on users' purchasing history. For example, for users who frequently purchase high-end goods, the anchor point may be set higher to make the discount more attractive.
Using recommendation systems to guide the confirmation of deviations
AI recommendation systems use machine learning to recommend relevant products or content based on user preferences, thereby mitigating confirmation bias and increasing consumer trust in their choices.
Platforms like Netflix or Spotify recommend similar movies or music based on users' past viewing or listening history, increasing users' trust in the platform's algorithm.
Strengthening scarcity and loss aversion
Scarcity and loss aversion are key biases in behavioral economics that influence consumer behavior. Businesses use data analytics and AI models to create a sense of scarcity or emphasize the threat of loss in real time, prompting consumers to make rapid purchasing decisions.
AI analyzes users' hesitation patterns to develop dynamic pricing, displaying warnings that "prices may increase" when users are indecisive. For example, airline ticketing systems might display messages like "Only one ticket left at this price" or "This is the lowest price in the past 30 days," reinforcing the anxiety of potentially missing out on a deal.
E-commerce platforms typically set up automatic inventory level displays, triggering a "Only X items left" message when quantities drop to a certain threshold. More advanced systems might even display "Y people are currently viewing this product" or "N items have been sold in the last Z minutes," creating a sense of urgency. For example, hotel booking websites often display messages like "Only 2 rooms left at this price" or "8 people have already booked this room type for today."
How to distinguish deviation
With the advancement of technology, AI can more easily and imperceptibly introduce a large number of cognitive biases into our lives. We will be less likely to escape cognitive traps than in the past, and we may even need to rely on this big data to make decisions.
Therefore, returning to the essence and establishing a self-worth system becomes even more important. Faced with these cognitive traps, how can we protect ourselves? First, establish a 24-hour cooling-off period for important decisions to avoid impulsive choices. Second, cultivate the habit of gathering information from multiple sources, and don't just focus on information that supports your own viewpoint. In investment and financial management, set clear budget limits and stop-loss points in advance to avoid allowing losses to escalate due to loss aversion. For promotional information, be especially wary of marketing tactics such as "limited-time offers" and "last chances," and rationally assess the value of the product itself.
Most importantly, we must understand that cognitive bias is part of human nature, and we cannot completely escape its influence. The key is to be vigilant and build protective mechanisms. When facing important decisions, we can consult others, especially those with different viewpoints, to help us see a more complete picture. Through these methods, we can reduce the negative impact of cognitive bias and make more informed choices in the complexities of modern society.
