Ambiguity aversion: the hidden barrier to sales

London, autumn 1940.

The Luftwaffe came in waves, laying waste to our nation’s capital. According to the Imperial War Museum, London was bombed for 57 consecutive nights.

The urban centre was the focus for the bombing: 90% of the raids were located here. The suburbs were hit, but far less regularly.

After the war, medics found something surprising. The number of stomach ulcers in the civilian population was dramatically higher in the suburbs than in central London. Why would a stress-related illness have a higher incidence in less affected areas?

The answer? People in central London knew what was coming. They changed their routines accordingly. By September 1940, about 150,000 were sleeping in Tube stations. Queues would form each day until 4pm when people were allowed to enter. Sleeping 25 metres underground meant the sounds of battle were muted.

In the suburbs, there was no consistent pattern. Every night people would lie awake listening to the sounds of battle, not knowing if tonight would be the night their neighbourhood would be affected. Living in such unpredictable circumstances exerted a severe mental strain.

This extreme example illustrates just how much people hate uncertainty.

A predictable environment allows us to plan and make decisions, and feel in control of our lives.

Human psychology

There is no domain in which this is more true than travel. It’s often the uncertainty, not the actual delay that is unsettling.

As Rory Sutherland says in Alchemy “the flight is delayed by 18 minutes” is a world away from “the flight is delayed.” The former removes the uncertainty, giving people a sense of control. The latter contains an information void which invites the passenger to catastrophise.

The map showing your Uber’s progress as you wait is another example of this.

Giving people even a fragment of information allows them to make decisions, plan, feel in control.

Buying decisions

The cognitive bias ambiguity aversion is our tendency to favour the known over the unknown. It is a factor in many buying decisions. People crave certainty so much that many will opt for an inferior option – as long as it removes the possibility of a worrisome negative outcome. People are willing to pay for the comfort of predictability.

Car buying is heavily influenced by financial predictability

Speaking to car buyers recently confirmed the significant psychological value of a predictable monthly payment. As it was put to me: “Knowing exactly how much the car is going to cost me is worth its weight in gold.”

Many people I spoke to on a recent project opted for a new car on PCP finance, despite their monthly payments being uncomfortably large. The important point was that the unpredictable costs of maintaining an older vehicle were avoided. A higher cost overall was a compromise worth making, if it meant no nasty repair bills along the way.

Range anxiety is toxic to EV adoption

The need for certainty significantly impacts EV adoption in the form of range anxiety (the fear of running out of battery before finding a charging station). Despite significant advances in battery technology, an expanding network of charging stations, and the fact the average person does relatively few long journeys each year, many remain hesitant to switch to EVs.

And to an extent, this hesitancy is justified. The industry has missed a trick on EV range data. “WLTP” range figures – whilst objective and comparable as they’re done on a rolling road – do not reflect real world conditions. Manufacturers consistently overclaim the range of their vehicles – by as much as 29%. This is toxic for adoption. The purchase decision is already held back by the friction of learning about the new category and changing existing habits.

Neutralise ambiguity to accelerate adoption

Consumers need reliable, comparable information, where at present they are taking a leap of faith.

  • Manufacturers should publish realistic real-world ranges for new EVs
  • Used EVs should have their batteries inspected – with prospective buyers given updated range guidance based on battery degradation
  • Depreciation guidance showing how battery degradation affects the value over the life of the vehicle (“book value”) would provide peace of mind

Try an ambiguity audit today

Put yourself in your customer’s shoes and do an ambiguity audit. Start by asking:

  • What are the points of certainty in your customer journey? Ask yourself what drives this certainty?
  • What are the points of ambiguity in your customer journey? Are facts or feelings driving this?
  • What points of ambiguity could you mitigate, and what could you neutralise completely? How?
  • Where would a nugget of information, streamlined choice architecture or illustrative example help?

Want to find out more? Get in touch with Trinity McQueen today and learn how we can help.