What is the Ambiguity Effect and how is it hurting your business?

The comfort in control

Whether we are making purchases, or personal choices about the right person to date or the right college to attend, as humans we strive to make sound, rational decisions. We do our research, consult family and friends, and make pro and con lists; all for the sake of ensuring that we make the best possible choice.

The sense of control we feel from understanding our options is perhaps what leads to the Ambiguity Effect. When choosing between multiple options, people are most likely to steer clear of the choice they know the least about. If option one is unknown, it’s difficult to compare it to options two and three. For that reason, people often avoid option one altogether in an attempt to mitigate their risk.

Ambiguity in everyday choices

For example, consider choosing between two new cars of similar price. One car has great safety ratings advertised online, but no ratings are supplied for the second car. The buyer is likely to choose the car that has known safety ratings rather than risk buying a car with poor credentials. Had the buyer purchased the un-rated car, it may actually have been the safer choice.

Another great example is the classic break-up. When relationships go downhill, we often tighten our hold on the failing romance because our known relationship still seems better than the scary unknowns of single life. But by no means is this always the right decision!

Similarly, the chance of failure often causes people to avoid business ventures and entrepreneurial risks. As business owners, managers, and leaders, ambiguity is a consistent aspect of your job. Your business is constantly affected by a wide array of unpredictable forces, like changing trends, new regulations, and even the weather! It’s important to recognize the ambiguity effect in our own business decisions, and in those made by employees, clients, and customers.

Fight the Ambiguity Effect – here’s how:

But how can we fight the affects of the ambiguity effect on our business? To get both our employees and our customers to embrace a new action, try using one of these three techniques.

Use metaphors

Try comparing an unknown action to something that is widely understood as positive. For example, if you want to convince a couple to purchase a fixer-upper home, you may tell them not to “judge a book by its cover,” and that “a neglected plant can’t grow.” Introducing familiar scenarios adds a level of comfort to the decision.

Use statistics

Giving statistics can help people understand an option that seems risky and ambiguous. If you are trying to convince your client to invest money in your stocks, you may explain that the risk is worth the reward by giving statistics from other people who have profited.

Give a guarantee

Assert your confidence in an unknown product or action by taking on some of the risk yourself. Offer customers a money back guarantee if a product is unsatisfactory. You may have to refund a few unhappy customers, but many others may purchase the product and go on to tell their friends about it.

Clear up what’s foggy

Implementing these techniques into marketing strategies, sales pitches, and daily conversations will help you overcome the negative impact of the ambiguity effect on your sales. An increased awareness of our natural tendency to avoid the unknown can also help guide you in business decisions and the management of others.

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