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Less is more, it's a scientific fact

You may not have heard of the dilution effect – but you will doubtless have made decisions under its influence

By Niro Sivanathan and Hemant Kakkar 09 January 2019

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Take a moment to reflect on your previous week. What do you remember? Visualise it. Do you recall every detail from an important meeting? What about key takeaways from a speaker event? It’s likely that just a few salient points have stuck in your mind. Perhaps you scribbled them on a notepad – and then underlined them, in bold. As humans, we can’t compute everything. There is just too much information, so we filter much of it out: we are cognitive misers. Our brain uses a few simple tricks – quirks of the mind – to retain the information that we think we may need. One phenomenon that influences how we make decisions is the ‘argument-dilution effect’

Our recent study reported in Nature Human Behaviour offers a stark example of the phenomenon from the pharmaceutical industry. In the US, direct-to-consumer ads for prescription drugs are required to disclose the side effects of the drug being advertised, in line with Food and Drug Administration (FDA) guidelines. These stipulate that ads must show a fair balance between benefits and risks. Print and broadcast media airtime must sufficiently inform consumers of any reactions, both positive and negative, they may experience when taking the drug. (We have FDA regulations to thank for the ubiquitous 60-second TV ad that closes with a laundry list of potential side effects.)

The FDA is responsible for protecting public health, yet our series of experiments uncovered an unintended consequence. In regulating pharmaceutical ads, the FDA appears paradoxically to have increased the marketability of drugs. How so? When ads group severe side effects with lots of trivial ones (such as dry mouth), consumers find drugs more appealing and believe they are more effective – and are even willing to pay more for them. Instead of each warning adding to our cumulative sense of being at risk, each additional one dilutes our assessment.

The most robust psychological explanation for this seemingly odd behaviour is based on the averaging effect. In this model, each point of information is accorded a weighted score – but adding a weight to non-relevant information that is equal to the weight assigned to relevant information dilutes the overall score in people’s mental assessment.

Get to the point

Richard Thaler, the University of Chicago professor who won the 2017 Nobel Memorial Prize in Economic Sciences,  has been celebrated for helping shape  the way we think about human behaviour. He helped popularise the idea of ‘nudges’ influencing people through the manner in which information is presented to an audience to alter its behaviour; for instance, simply changing the wording of tax demands to increase tax payments.

Building awareness about the dilution effect is a nudge in itself. While regulators and compliance teams strive to share clear and fair information, you – as a consumer and a professional – can also help yourself.

Consider the implications for financial services. Transparency is a buzzword and it’s easy to understand why. After all, this year is the 10th anniversary of the global financial crisis, the worst downturn since the Great Depression. Surely, if work is conducted in plain view and communications are thorough, the industry is more likely to be held accountable, right? Problem is, complete transparency can be inadvertently counterproductive. In our studies, consumers’ reduced risk assessment (due to sharing exhaustive lists) meant they perceived products as less perilous and more attractive.

So, what can be done about it? In one of our studies, we found that how you present the information can mitigate the dilution effect. We suggest listing all the side effects but isolate and emphasise key information on packaging, as shown at left.

In this way, individuals can attach more weight to serious risk factors, while giving less weight to minor ones. For instance, you could separate major risks from minor concerns when it comes to complex financial products such as pensions, loans and mortgages by giving those greater emphasis (using a bold red font, for example). It appears that giving serious risk factors more spotlight, by optically ring fencing them, helps reduce the impact of the argument-dilution effect.

What if you’re doing the selling? The professional services industry offers a case in point. Partners of top firms are service-selling sages. Imagine observing a consultant who offers a laundry list of benefits in a breath. The best salespeople name just one or two major benefits. Having “knowledge of emerging markets and digital expertise” far outweighs “having knowledge of emerging markets, digital expertise, developed markets, a team of 12, an exclusive rewards programme and so much more”. So, if you’re trying to sell or influence, claim to do just one or two things really well rather than list multiple benefits.

Interestingly, this effect seems to apply to a broad spectrum of decisions. Consider the Brexit referendum. What sticks out in your mind? Perhaps the message that “the UK sends £350 million a week to the EU”? The statement was wrong – because it disregarded Britain’s rebate of £100 million, plus the amount the EU spends on the UK – but it was undiluted and sticky because it was not crowded out by several other messages of ‘benefits’ of leaving the EU.

Be careful what you list for

Back to the US$4.5-billion-a-year (£3.4 billion) pharmaceutical industry. Previous dilution-effect research has shown that irrelevant information saps the power of an argument. Now, we have evidence to show that it’s not just irrelevant details that you need to watch for – you even have to beware relevant but weak information.

You can probably guess which of the cigarette ads (shown left) is more influential in portraying the risk of smoking. Weak information (smoking can wrinkle your skin) stops more important messages (smoking can cause you cancer) getting through.

Make better, bolder decisions for greater leadership impact.

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