Hypothetical Bias Explained in 500 Words
According to Nielsen, 78% of FMCG innovations fail in the first year
When nearly 8 out of 10 new products fail, it’s hard not to think about all of the effort and resources that were put into their development and launch—just for them to be removed from grocery shelves within a year. How and why does this happen? Innovations fail for many reasons—often outside of a company’s control—but it usually occurs because the brand misjudged consumer wants and needs. The culprit is often research that provided an overly optimistic view of demand for a new product—in many cases, due to something called “hypothetical bias.”
What is hypothetical bias?
Hypothetical bias occurs when participants in a research study say one thing and then do something different.
For example, imagine you are working for a breakfast cereal company and are considering introducing new eco-friendly packaging. You conduct a survey asking consumers how much they would be willing to pay for your cereal if it was packaged in environmentally friendly materials. Respondents express a higher willingness to pay in this hypothetical scenario, stating that they value sustainability and are willing to pay a premium for eco-friendly packaging.
However, when the new packaging is actually introduced to the market—along with a price increase—consumers behave differently. Faced with a real purchasing decision in a store, they prioritize price over environmental consideration. This leads to lower-than-expected sales and a complete mismatch between the company’s expectations and consumer behavior.
The fact is, people often don’t do what they claim they will do. Saying one thing but doing another is just human nature. How often have you caught yourself saying, “Just one more piece of my favorite snack” when you previously decided to have only one piece?
To quantify the effect of hypothetical bias in CPG research, we conducted a study on breakfast cereal in which we compared interest in a product as measured by a survey versus using the Veylinx behavioral methodology. The results? On average, claimed purchase interest (i.e., the survey) was more than 81% higher than actual behavior.
How can you tackle hypothetical bias?
The most effective way to tackle hypothetical bias is to introduce consequences to the research participants' claims. That is, participants need to have skin in the game. For example, in a Veylinx study, participants are informed that the amount they choose to pay for the product will be paid from their own pockets if they win the auction. Once participants understand and agree with the terms, they proceed to the study. Now the participants know their claims will have consequences, and biased survey research is transformed into behavioral research accurately reflecting real consumer behavior.
Learn more about the Veylinx's auction-based methodology here.