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The Power of Defaults
A reminder that defaults matter a lot
Did you know that Google pays Apple over $10B a year to remain the default search engine on iOS? To uderstand why, let’s talk about the default effect.
What is the default effect?
The below chart shows the organ donation consseveralr a number of countries in Europe. What’s striking is that countries that one would imagine are fairly similar such as Denmark and Sweden have large differences in consent rates.
What might explain these differences?
In countries such as Denmark and Netherlands, organ donation consent is “opt-in”, meaning people have to fill in a form and check a box to choose to donate their organs. In countries such as Austria and Sweden, organ donation consent is presumed. People who don’t want to donate their organs have to essentially fill out a form to “opt out”, meaning by default people consent to donate their organs.
The large difference in organ consent rates is essentially caused by a difference in defaults in the two sets of countries and illustrates the default effect.
The default effect is the phenomenon where making an option the default among a set of choices increases the likelihood of it being chosen.
Where does the default effect come from?
Now if you’re getting worried about your free will, fret noseverale a number of reasons for the default effect — some of which are quite rational.
Choosing something that isn’t the default requires some effort. And we all know that people are generally lazy and don’t want to put in the effort.
The effort required could vary from a lot (such as having to fill out a form and mailing it in to change something) to almost nothing (such as changing something from the default option on a dropdown while filling out a form online).
In general, “laziness” aside, it is rational for a user to stick with the default if the incremental benefit from switching is less than the effort required to do so.
An area where this plays out is default apps on phones. For example, Google Maps is widely regarded as being better than Apple Maps on iOS, but Apple Maps comes pre-installed on iOS and is the default. Unsurprisingly, it was used almost 3x as often as Google Maps¹ on the iPhone over a year after launch.
One thing to note is that when it initially launched, Apple Maps was so bad that many users felt the need to install Google Maps. As it has continued to improve, even though Google Maps might still be better since the gap has narrowed, the “cost” to switch is about the same as it was before, it makes sense for fewer new iOS users to make that switch because the cost is the same but the benefit from the switch is less for them, so one can imagine over time, less and less new iPhone users will feel the need to download Google Maps.
Risk and Loss Aversion
Often the default (especially if the person with a choice trusts the intermediary providing the options) is viewed as the recommended option. In such a situation, switching away from the option might be deemed risky, in that the person making a decision might feel that they aren’t considering some factors that the knowledgeable party made when setting the default.
This factor tends to be particularly important when people decide between choices that they aren’t very familiar with or are complex or when the party presenting the choices is trustworthy.
For example, data from Vanguard Research shows that among new hires, participation rates in retirement saving plans more than doubled to 91% under automatic enrollment compared with 42% under voluntary enrollment. In this case, because people trust their employer (among other factors), they feel good about sticking with their employer’s “recommendation” of being enrolled in a retirement plan.
Additionally, people tend to view the default option as the base case (or “already in the bag”). If outcomes are uncertain and switching to another option could lead to a gain or a loss, then people tend to be more averse to the potential loss from the switch, and so tend to stick with the default.
Changing of Norms
Over time, it’s possible that the way defaults are set can change the meaning of the choices themselves, and so over time lead to even more people choosing the default option, thus re-enforcing the default effect.
Going back to the organ donor example presented at the start, the chart below shows how people in an opt-in country perceive donating their organs relative to those in an opt-out country. As you can see, in the opt-out country, donating organs is viewed as not a big deal. But in the opt-in country, it’s viewed as a very generous act, akin to giving away half your wealth. Other options are viewed similarly, indicating that cultural and other differences are minimal.
What this essentially shows is that because of the default effect, the actual actions associated with the default are over time viewed as less substantial. In such a way, the setting of the default has actually over time changed people’s views of whether a certain act was a big deal or not.
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The good and the bad
The default can clearly nudge people and influence their choices. As one might imagine, it has been and can be used both for good and bad.
Take the organ donor example, where using opt-out consent as the default was a good thing. Or take the example of Disney which changed the default choices in its kids’ meals from soda to juice and french fries to fruits and vegetables. Guess what happened? Kids consumed 21% fewer calories and 40% less fat and sodium.
But on the flip side, consider that until relatively recently banks by default included overdraft protection for consumers, which was one of the biggest sources of revenue for banks. They made $38.5 billion in fees from overdrawn accouTo. In order to better protect consumers, the Fed began requiring that banks secure explicit opt-in from consumers for the service in 2010, essentially changing the default by regulation.
Defaults in Building Products
Given the default effect, here are some things for product builders to keep in mind when building products:
Offer Defaults within your product to reduce friction: In onboarding flows and other areas of process flows where the goal is to reduce friction, offering a default option reduces the friction for consumers.
Don’t offer defaults when you want to see choices someone makes: However when trying to get accuracy on what people choose between a certain set of options, do not set a default. This forces them to actually make a choice.
Try to become a default for the customer: Attempt to become a default for customers for whatever workflow the product tries to serve – whether that means finding a place on their home screen, the application of choice to open a certain filetype, or just becoming synonymous with solving a specific problem for a customer.
When trying to unseat a default product, reduce the friction: The likelihood of switching away from a default is inversely proportional to the effort required to do so. By reducing the friction to switch, you can make it more likely someone switches away from a default. This involves things like reducing time and cost to install, time and cost to set up, etc.
Google and Apple
To end with, here’s an anecdote from a recent filing on just how much defaults matter.
Google is believed to spend upwards of $8-10B a year on being the default search engine on iOS. That’s not all. In fact, on mobile, Google contracts with Apple, Samsung, Motorola, most browsers, and three US telecom carriers - AT&T, Verizon, and T-Mobile to ensure its search engine is set as the default and comes preinstalled on new phones.
Per the justice department, they’re doing so to maintain their search dominance:
“Google invests billions in defaults, knowing people won’t change them,” Dintzer told Judge Amit Mehta during a hearing in Washington that marked the first major face-off in the case and drew top DOJ antitrust officials and Nebraska’s attorney general among the spectators. “They are buying default exclusivity because defaults matter a lot.”
In fact, a few years after the move from Apple’s default change from Apple Maps to Google Maps, Google did an internal analysis on what the impact of Apple switching the search engine on iOS would be, and the answer was a lot (but redacted from us), which is why the started to pay the $8-10B sum to ensure they remain the default.
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