Power of Defaults!

Defaults help businesses to profit from consumers, sometimes by prompting people to choose things that are not in their best interests. A primary example is when you pay your credit card bill, the default selection is MAD(minimum amount due). If you choose to pay the same, the balance is charged at exorbitant interest rates.

An area where this plays out is default apps on phones. For example, Google Maps is widely regarded as being better than Apple Maps on iOS, but Apple Maps comes pre-installed on iOS and is the default. Unsurprisingly, it is used almost 3x as often as Google Maps on the iPhone.

Also, users click the top search result not because it’s any better, but simply because it’s first.

Marketers & policymakers across use choice of defaults to attain desired outcomes by nudging people toward a particular decision.

Cambridge University published a study explaining the effectiveness of defaults & how it alters decision making. On average, defaults are a strong choice architecture tool, shifting decisions by 0.63 to 0.68 standard deviations.

On the contrary, there were also substantial differences in the effectiveness of defaults. In some studies, a default was far more effective than in other studies; and in others yet, defaults did not alter participants’ decisions. Hence, we should not blindly apply defaults to all situations, but instead, be more cognizant & careful in when and how they implement defaults.

Hence, defaults may not always be the most effective solution. They represent just one of many tools in the choice architect’s toolbox.

Also, defaults are not always evil, it can greatly help reduce transactional barriers for users.

Defaults work best where people are homogenous in their preferences and have relatively limited decision-making expertise. For example, while installing new software, most people tend to go with defaults as they feel that the manufacturer knows what’s best.

On the other hand, if people are more heterogeneous, any default is likely to be sub-optimal for a greater proportion of them as some participants may be worse off as a result of the default. Hence, trade-offs should be clearly communicated while enacting defaults.

Lastly, it is always prudent to conduct extensive qualitative research on the relevant population’s views of potential outcomes before practicing a default. One way is to not set a default & observe the choices of people & finalize.

Firms have the power and they choose how to use it. Ones that manage defaults strategically and ethically can expect to be paid back with loyalty and trust.