In the early 1980s, Coca-Cola was on the edge of losing the cola war to their rivals Pepsi. The previous fifteen years, Coke’s market share had remained flat while Pepsi’s climbed steadily. To make matters worse, more and more consumers were switching to diet soft drinks and non-cola beverages.
So Coca-Cola decided to do something drastic. They started experimenting with their original formula. A new recipe was put forth, and it seemed very promising. Blind taste tests showed people liked the new formula more than regular Coke and Pepsi by a large margin.
In 1985, they launched the new and improved version of their drink. But despite the test results, the response from the public was extremely negative. After being bombarded by phone calls, 40,000 letters, and tons of bad press, the company reintroduced its original formula within three months.
Interestingly, the return of “Coca-Cola Classic” resulted in a significant increase in sales. That made some people speculate that introducing the new formula was a marketing ploy to stimulate sales of the original drink. The Coca-Cola Company, however, maintains that it was a genuine attempt to replace the original product.
The Status Quo Bias
Regardless of The Coca-Cola Company’s intentions, the introduction of the new Coke recipe is an excellent example of the status quo bias.1 We like things the way they already are, so we treat any changes to the current state of affairs with a lot of skepticism and resistance.
That tendency can partly be explained by loss aversion and the endowment effect. We weigh the potential losses of switching from the status quo more heavily than the potential gains. But several other tendencies also contributes to the status quo bias, including:
- Psychological commitment — We want to justify previous actions and maintain a consistent self-image.
- Mere exposure — We prefer certain things just because they are familiar to us.
- Regret avoidance — We feel worse about bad decisions than we do about poor outcomes from inaction.
All of these tendencies can have big impacts on our decisions. For instance, the status quo bias pretty much determines if we choose to donate our organs after we die2. It also explains why we tend to, for example:
- Go to the same restaurant, sit in the same spot, and order the same dish.
- Stick with the same internet, phone, and TV providers.
- Use the same bank, savings options, and insurance companies.
And there’s nothing inherently wrong with sticking to what’s easy and familiar. In fact, the status quo bias can help us save energy and prevent unnecessary risks. But it can also make us miss out on great opportunities.
So whenever you feel like turning down a new choice, ask yourself why that is. Is your default option truly better, or are you being swayed by the comfort of the status quo?
This article is an excerpt from my book The Decision-Making Blueprint.