Have you ever had a friend recommend a “good” restaurant, to which you go to it and realize it’s actually quite “bad”? Maybe you were just unlucky? Maybe the restaurant was just having a bad day.

Maybe you’re both comparing the experience to different points of reference?

Think about it. What is “good” in your mind? Good food, good staff, good atmosphere? But good compared to what? In order to judge if something is good or bad, we need a reference point that acts as a benchmark for our next experience.

Barry Schwartz, a Professor from Swarthmore College suggests that when people evaluate an experience, they are performing one or more of the following comparisons:

1. Comparing the experience to what they hoped it would be
2. Comparing the experience to what they expected it to be
3. Comparing the experience to other experiences they have had in the recent past
4. Comparing the experience to experiences that others have had

Each of these comparisons makes the evaluation of an experience relative, and this may diminish the experience or enhance it.

So when our friend recommends this restaurant, our expectations will be high. But because the experience is not as good as the last restaurant we went to, our expectations are shattered and we become dissatisfied.

The problem with comparison is that as our material and social circumstances improve we experience things of higher standards, which cause our benchmark of satisfaction to rise with it. This means that to our detriment, we experience more but are less satisfied.

One way to prevent this from happening is to make our benchmarks of comparison smaller, not larger.

A prime example of this is James Hong, cofounder of hotornot.com. Hong sold his Porsche Boxster and replaced it with a Toyota Prius. Hong was quoted in the New York Times saying “…I don’t want to live the life of a Boxster, because when you get a Boxster you wish you had a 911, and you know what people who have 911s wish they had? They wish they had a Ferrari.”

Where is your benchmark set?

Barry Schwartz, Behavioral Economics, benchmark, buying decisions, choice, consumer behavior, decision theory, Ferrari, hotornot.com, James Hong, New York Times, Porsche Boxster, relativity, satisfaction, Swarthmore College, Toyota Prius

I went to a restaurant last week that had a ridiculously big menu. It took me about 15 minutes to choose something. Once my meal came out I couldn’t enjoy it. It tasted good, but all I could think about was maybe I should have tried the salmon or the lamb or the pasta or the soup or the fish of the day… The satisfaction of my meal went down as the attractive features of the other meals went up.

Why did this happen? It happened because we don’t completely forget the options that we reject in order to make a decision. These rejected options stay in our mind and haunt us as we experience the item we chose.

There is a great little place in Melbourne called the Satay Bar, that one of my business partners introduced me to. It is the size of a shoe box, but because of its popularity it usually has a big line coming outside of it.

The reason it is so popular (apart from having an amazing taste) is that the experience is so simple. When you walk in to order you have 3 things to decide: 1)What size, 2)What meat, and 3)Rice or Salad.

Because there is restricted choice, not only is it much easier to choose what you want to order but you are much more satisfied when eating it because you are not considering any rejected alternatives.

Offering mass amounts of choice may seem like it gives you a competitive edge, but it actually diminishes the satisfaction of your customers and the chance that they will return. Remember choosing almost always involves giving up something else of value, why should we suffer for it?

Behavioral Economics, buying decisions, choice, consumer behavior, decision theory, Satay Bar