Zero Cost Effect
I had dinner with a colleague the other night. I inadvertently quoted something verbatim from Dan Pink’s book, Drive. My colleague said if I liked Dan Pink’s work, I should read something from Dan Ariely. So, I started on Predictably Irrational: The Hidden Forces That Shape Our Decisions. Wow, this book is crazy! I’m not going to go into any more details in the post other than a comparison of an experiment detailed in the book and something I’ve seen in the real world.
In the book, the author described an experiment on 34 Halloween trick-or-treaters. As soon as the children knocked on the door, they received 3 Hershey’s (each weighing about 0.16 oz.) and were asked to hold the Hershey’s they had just received in their open hand in front of them. Each child was then offered a choice between a small (1 oz.) and a large (2 oz.) Snickers bar, under a Cost Condition and under a Free Condition. In the Free Condition, they could simply get the small 1 oz. Snickers bar (for free) without giving up anything or they could exchange 1 of their 3 Hershey’s for the 1 large Snickers bar. In the Cost Condition, the children could exchange 1 of their .16 oz. Hershey’s for the small (1 oz.) Snickers bar or exchange 2 Hersheys for the large (2 oz.) Snickers bar. They could also choose to do nothing but all of the kids chose to make an exchange.
In the Free Condition, in which the small Snickers bar is free, demand for it increases substantially (relative to the Cost Condition). The results demonstrate the attractiveness of zero cost. People gravitate more toward options that do not require giving up anything.
Example of this on a project
At work, I’ve had a Product Owner (PO) who wanted to add items from the Backlog to the Sprint. During sprint planning, the team basically added a buffer, to account for unforeseen events. I know people are going to crucify me for this, but basically, the Product Owner always seemed to want to shift priorities of work mid-Sprint. Rather than killing the Sprint, we added a buffer. This would allow new work to be entertained without totally derailing the work already being completed. Yes, we could have used Kanban and all of this could have been avoided. But, Kanban wasn’t an option.
So, what happened? I offered the PO a deal. I could allow him to add a certain amount of work to the Sprint for free. When I did this, he usually asked for smaller deliverables (relative to other items on the backlog that were ready to work). But, when I said some work would have to come off the table to pay for the new work, he always went big. He would choose larger deliverables relative to other items on the backlog that were ready to work.
All I can say is we truly are predictably irrational.
Yes, the links to the books are affiliate links.