99% pure, 99% fat free, and kills 99.99% of germs are the common advertisement messages given by different brands. Why the same brands does not use 1% impure, 1% fat, and 0.01 % germs survive?. Using the right kind message will induce consumers to buy product. Framing effect is the reason behind using the marketing messages like the ones mentioned above.

In 1979, Daniel Kahneman and Amos Tversky published a paper titled “Prospect Theory:An Analysis of Decision Under Risk”.(Also Tversky A., Kahneman D. (1985),Kahneman D. Tversky A.,(1983)). This paper investigated and questioned “expected utility theory” which is widely used in the area of economic decision making. Expected utility theory uses probabilities of the outcome and does not consider any other irrational factors of humans. To support their claim, authors refers to Allais Paradox which was proposed in the year 1953 by Maurice Allais.

Prospect theory has used a modified version of Allais Paradox to prove that people don’t take decision based on probabilities of the outcome, instead they choose an option by weight of an outcome. If the outcome of the choice is certain, people choose it instead of an option that comes with probability. They named this phenomenon as “certainty principle”.

An example problem from the paper for your view (extracted from Prospect theory paper – but I have used Pounds instead of Israeli money for ease of understanding )

1. 50% chance to win 1000 Pounds, 50% chance to win nothing
2. 450 Pounds for sure

Which one will you prefer?. I hope there is more chance you will pick 450 pounds since it ensure you get it for sure. Whereas, in the first condition you are given with 50% probability to win 1000 pounds which is more than double of the value in the second choice. Since, the second outcome is certain you picked it.

The authors concluded that people are normally risk averse and risk seeking based on the choices they encounter. Risk averse condition is where people tend to avoid uncertainty (while buying food products), risk seeking is where they accept uncertainty (while buying lottery or during gambling). To know more about this theory, please read chapters 26, 29 and 34 of Thinking Fast and Slow by Daniel Kahneman and chapters 4 and 10 of Misbehaving by Richard Thaler.

This theory is the base for framing effect phenomenon we discuss today. Messages have to be carefully crafted to show the benefits of consumers.

If a company say that their product 0.01% impure, they are inducing the risk averse behaviour of consumers. When the same message is crafted like 99.9% pure, it gives more confidence and promotes risk seeking in the consumer mind. In the former condition consumer tend to avoid buying compared to the latter condition.

Researchers have classified frames as gain Frame and loss frame. Gain frame conveys positive information and loss frame conveys negative information. Many studies was carried out to see the impact of gain and loss frame on decision making. Let’s take a look at one study.

Detweiler, J. B et al (1999) studied the effects of gain frame and loss frame among beach goers in using sunscreen, they found if the message is in gain frame (99.9% pure in our example) people used more sunscreen compared to the message in  loss frame (0.01% in our example).

Based on all the studies and their reports, it is clear that using gain frame can certainly influence consumer than the same message being written in negative frame.

Next time, when you want to advise your friend on weight reduction say, he/she will look attractive when they reduce weight rather than telling them being obese can lead health issues.

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