Revealed VS Stated Preferences

January 7, 2010          Comments (6)

yinyang

Why do we do certain things even though they are against our desires? Even though they are against what we said we’d do? Ah the human condition. How it never ceases to fascinate me.

Why do we continue to believe money is the key to happiness yet research proves relationships are?

(According to Harvard psychologist, Daniel Gilbert, it’s $40,000.Yet, most of us will continue to strive for more and more. We’d be better off working on teaching ourselves how to look at our money with a different eye.)

The “hedonic treadmill” describes our amazing ability to adapt quickly to changed circumstances.

The reason why the treadmill never ends is because our amazing ability to adapt also makes novelty wear off very quickly. If our circumstances improve, we soon become accustomed to those new comforts.

Let’s say you treat yourself to the plasma TV you’ve wanted for so long. Sure, it’ll be really cool once you get it, but not long after you do, it’ll be old news.

As Aldous Huxley said, “Habit converts luxurious enjoyments into dull and daily necessities.”

How about the “arrival fallacy”? The arrival fallacy is a fallacy because, though you may anticipate great happiness in arrival, arriving rarely makes you as happy as you anticipate.

By the time you’ve arrived at your goal (whatever it may be), you’re expecting to reach it, so it has already been incorporated into your happiness.

The trick is to learn to enjoy the process of reaching that destination. (Something I really work hard on with my clients. Because when the journey is the reward in itself, it’s a lot easier to stick with it.)

We’re incredibly good at rationalizing behaviors. We can justify any behavior we engage in; even if we feel bad afterward.

That’s why it’s so important to look at what people do. And not what they say. Or read. Or watch.

That’s why it’s so interesting to look at people’s revealed preferences versus their stated preferences.

I’m constantly asking my clients what they want.

However, many clients have said they wanted a feature and didn’t wind up using it during testing. Others have said they wouldn’t use a feature and wound up loving it.

Who do you listen to?

Here’s a perfect example of stated versus revealed preferences stated and revealed by a McDonald’s executive.

“Our customers want mediocre food cheap. Every time we release a higher priced but higher quality product, the people who said they would pay for it never do.

You say you want more fruits, salads, organic, all natural, etc. Well then start buying that stuff and stop buying double cheeseburgers. Our best selling stuff is always whatever we can make taste good, at rock bottom prices.

We’ve actually learned not to listen to our customers when it comes to a lot of things. Health nuts won’t come into McDonald’s to eat even when we give them what they want.”

The funny thing is I’ve always wondered why McDonald’s didn’t offer super nutritious foods at higher prices. “I’d go there! I’d pay for it” I used to think. But I don’t. And when I rarely do, it’s not for health food.

It always comes back to watching what people do.

Not what they say.

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This goes hand in hand with my “How to tell what someone really cares about” post.



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6 Comments »

  1. Adam – This is such a brilliant post though I don’t expect anything less since you’re a brilliant young man. Never really thought about it in terms of revealed vs stated preferences but now it makes perfect sense to me, naturally. Thanks for being so generous with your wisdom.

    Please keep the posts coming in ’10!

    R.

    Comment by Rick Lafferty — January 7, 2010 @ 1:59 pm

  2. Great post.

    I’ve read several happiness studies and wondered about the comparisons between long term happiness and lots of short term happiness (like a constant stream of short term happiness).

    E.g. how much happier is someone who has a great partner/soul-mate/relationship and is described as “happy long term” but doesn’t experience much “short term happiness”, whether that’s buying things, going for a day/night out, holidays or has a lot of bad luck (e.g. car breaks down, loses things etc.), compared to someone who is single who knows lots of people (but no great long term friends), doesn’t want any children but has lots of short term happiness (e.g. is lucky and wins competitions, always has the latest fashion trends, has fun in the evenings and weekends, lives in a beautiful house, short commute to work etc.).

    My example might be a bit extreme but I find it interesting as both appear to be happy (they are just different people), so who’s to say one type of happiness is better than the other.

    Comment by Kat — January 8, 2010 @ 5:54 am

  3. @ Rick – You’re too kind but thank you!

    @ Kat – Everyone has their own path right? Gotta follow your own heart. Have to do what makes you happy. Not other people happy. Thanks for your comment!

    Comment by Adam Gilbert — January 9, 2010 @ 12:08 pm

  4. It takes a very self-aware individual to consistently connect their words and their actions. Many of us don’t realize how we feel until we analyze our behaviors. Hence, “actions speak louder than words.” Since it’s difficult for us to work through our emotions or figure out why they are there, we simply ignore or suppress them and coast along. When someone can truly “walk the talk” in all areas of their life, that level of self-fulfillment certainly brings a state of happiness.

    Comment by Janine — February 18, 2010 @ 10:42 am

  5. What about externalities? Are you able to assess them all with revealed preferences? I don’t think so.

    Comment by Sergio Giaccaria — November 11, 2010 @ 9:22 am

  6. […] Observing what people say and actually do is fascinating. In this post I explore the difference between our revealed and stated […]

    Pingback by Guru Gilbert » My Most Popular Blog Posts of 2010 — December 29, 2010 @ 9:39 am

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