IN 1914, Ford Motor introduced a policy of making a car of “any color as long as it is black”—the Model T, the first mass-produced car affordable for the middle class. That was the time when founder Henry Ford required his factory managers to make only black-painted cars because of its durability and cheap cost.
Despite that limited choice, the Model T became a hit with consumers and was known as the world’s most influential car of the 20th century.
Fast-forward to the present. Today, imagine a world in which millions of discriminating customers talk and long for a variety of colors, not only in terms of cars but also the features of other consumer items as well. In fact, the focus of competition has gone beyond the choice of colors to a host of unimaginable product offerings, like those that come with the smartphones of Apple, Samsung and their copycat equivalents.
Going back to the auto industry, heightened competition has shifted from having an affordable, comfortable ride for big and small families to the demands of the future—sustainable fuel cell that emits only waste water and not smog brought about by the use of fossil fuel.
Regardless of product or service offering, fierce competition between and among industry players has brought us up to a new cloud level. If you don’t give in to the customer’s preference, 101 percent of the time, they will switch to your competitors, if not treat it as an opportunity to create a new product to destroy your inflexibility.
In psychology, this rigidity is called “default effect.” The customer has no choice but to buy a black Model T, because there are no other options available at the time that fits the budget of an ordinary consumer. Today, the same default effect happens if you do nothing to adjust the factory setting of your newly-bought smartphone.
It also happens when you buy another phone bundled with a charger. Even if you have ten more similar chargers at home, you have no choice but to pay for another charger because it’s part of the price. Try it. Negotiate a discount for a new phone without its accompanying charger and prepare to meet a quizzical look from a retail clerk.
Recently, I bought two additional SIMs for my PLDT landline. With that came two inexpensive Cherry Mobile™ wireless phones. I told the service clerk that I don’t need them because I have several spare phones with dual-SIM functions and that I was still going to buy the SIMs even without the free phones. I asked for a much lower rate to no avail. It’s part of the bundle. Take it or leave it at the same price of P250 monthly charge per SIM up to 24 months lock-in period.
The default effect is used by manufacturers or service providers to influence customer behavior. For instance, when you buy a car, dealers would offer free insurance, registration, and other freebies, like umbrella or t-shirt. Again, it’s a take it or leave it situation. Even if you refuse the free insurance and registration for whatever personal, foolish reason, still the price of the car would remain the same.
Last week, my experience with the default effect turned into a mildly pleasant experience when I bought a Woodspice™ body splash from Marks and Spencer. I refused the small beautiful bag being offered by the cashier, which is standard practice at any high-end shop at Greenbelt. After all, I got my hand-carried bag and the bottled scent perfectly fits into it. I don’t salivate about shopping bags, anyway. For that, I was given a P10 discount without me asking for it.
The default effect has been used thousands of times by marketers to control the buying behavior of consumers. The future of marketing has become bright. Imagine products or services being sold without any freebies. The default effect enables you to find potential customers quickly and easily and communicate with them with no-brainer add-on features.
It’s an age of paradox when we can buy products or services that come with features that we don’t need like, what you can imagine with junk food that costs more than real food. That’s what we do when we buy things we don’t need to impress people we don’t like.
Rey Elbo is a business consultant specializing on human resources and total quality management as a fused interest. Send feedback to email@example.com or follow him on Facebook, LinkedIn or Twitter for his random management thoughts.