How expectations alter our perceptions and what that means for product development

Perception is reality. It’s an age-old concept. How we experience the world is heavily dependent on our perception of those experiences. But one thing that often seems to be overlooked is how much our expectations alter our perceptions. I’ve become fascinated with how this concept manifests itself in various domains and how it can be applied to product development.

See For Yourself

A simple way to see for yourself how expectations can alter your perception of reality is the classic psychophysics experiment with three bowls of water. To set things up, put hot water in one bowl, cold water in another bowl, and room temperature water in the third bowl. Place your left hand in the hot water and your right hand in the cold water. After a few minutes, put both hands into the room temperature water. You’ll perceive this water as both hot and cold at the same time! The hand that was in the hot water will tell you this water is cold, while the hand that was in the cold water will tell you this water is hot.

Photo credit: OEN

In this experiment, the hot and cold water set a different reference point for each of your hands. When both hands were placed into the room temperature water, you perceived the difference between the current experience (room temperature water) and the reference point (either hot or cold water) for each hand. This phenomenon is explained by the contrast principle in psychology, but the experiment also helps to illustrate a fundamental concept of prospect theory in behavioral economics.

It’s All About Reference Points

The key breakthrough in prospect theory was looking at changes in value rather than levels of value. The changes are deviations from a reference point. The reference point is what allows people to feel things in terms of gains or losses rather than simply as absolute values or states. This is why two people with the same amount of money will feel very differently if one got to that point by a sudden windfall and the other got to that point due to an unexpected loss. Just as we observed with the bowls of water, it’s not so much about the experience in absolute terms, but the combination of what we experience and how we got there.

The reference point is what allows people to feel things in terms of gains or losses rather than simply as absolute values or states.

This concept is extended specifically into financial transactions with the theory of transaction utility, or the difference between the actual price paid and a reference price. Essentially, transaction utility is what leads to the feeling of getting either a great or a terrible deal. Once again we see how expectations (the reference price) define the subjective outcome of the purchase. Buyers and sellers don’t just evaluate the value of the item being sold, but also the value of the terms of the deal.

Expectation Management

Given that people are so strongly affected by their expectations, it becomes very important for companies to be aware of the expectations of their customers. In fact, they may even want to proactively set or manage those expectations.

JCPenney tried and failed to have a more honest pricing policy by getting rid of their sales and coupons. The argument seemed rational: rather than showing an artificially high price that is then reduced due to a sale, just show the actual low price up front. However, JCPenney underestimated the importance of expectations. When shoppers saw the inflated prices and then a massive 50% markdown, they felt like they were getting a great deal—“I can’t believe I’m getting this for half-price, what a steal!” However, once those discounts were gone, shoppers just saw a single price and the thrill of finding the best deal was gone. Shortly after losing nearly $1 billion in a year, JCPenney reinstated their previous pricing policy and replaced their CEO. Their customers had essentially elected to be manipulated by inflated prices and discounts because they felt better believing they were finding great deals.

Airlines have also used this phenomenon to their advantage. Rather than giving their best guess for arrival times, they started to pad their estimates a bit. The estimated arrival time sets an expectation and creates a reference point. A passenger’s response to the actual arrival time will be compared to the estimated arrival time they were given. When the the plane arrives before the estimated arrival, passengers are delighted that they’ve arrived “early” when in fact they’ve simply arrived on time (or maybe even a few minutes late).

Expectations in Product Development

We can apply these concepts to see how users’ expectations affect their perceptions of products and interfaces. A great example of this is the labor illusion. Researchers showed participants mock travel and dating websites and tested various wait times with and without visual feedback of loading states. The counter-intuitive findings of this study show that users actually preferred longer wait times in many cases, despite getting identical results. Why? Because it more closely matched their expectations.

When the interface matched their expectations, they felt better about the overall experience.

We’ve come to lightning fast results from certain products. You certainly don’t want to wait around longer for your Google search results. But when it comes to elements of personalization and trust, sometimes a quick response seems a little too good to be true — “how could they have possibly searched all of the options to get the best match for me so quickly?” The fastest results in the labor illusion experiment violated user expectations, causing users to be skeptical of the information being presented. By adding an artificial waiting time along with some indication of the calculations that took place, users were more likely to trust the results that came back. When the interface matched their expectations, they felt better about the overall experience.

Understanding user expectations can also help with feature prioritization, as noted by Aaron Rich and Mick McGee. By comparing actual (perceived) usability ratings with expected ratings, features can be grouped into one of four categories: fix it, leave it, promote it, and opportunities.

Image Credit: Expected Usability Magnitude Estimation, Rich & McGee, 2004

When users are expecting things to be easy and instead experience difficulty, they get very frustrated and may abandon the product. It’s important to identify these issues and address them quickly. On the other hand, when users expect something to be difficult, there’s a huge opportunity to get it right and create a flagship feature.

Expectations in Usability Testing

When I was in grad school, I wanted to find out whether local and remote usability testing methods would yield similar results (which I wrote about in more detail here). Rather than simply asking for usability ratings after each task was completed, I also had participants give their expected usability ratings for each task prior to attempting the task. This process led to the most interesting finding from the study: while the same usability issues were identified using each method, the actual vs. expected ratings differed.

By asking for expectations, we gain a reference point for each participant and a key insight into their subjective experience.

Looking at the relative experiences of each group (actual vs. expected) rather than the magnitude of individual task ratings, the data showed two different subjective experiences: the remote participants reported that the experience was better than expected, while the local participants reported that the experience was worse than expected. This underlying aspect of the participants’ experience (pleasant surprise vs. disappointment) would not be observed in the data without the expected usability ratings. By asking for expectations, we gain a reference point for each participant and a key insight into their subjective experience.


Understanding user expectations is an important tool in product development and user research. The expectations provide a reference point, giving insight into the user’s subjective experience. While users may be completely unaware of how their expectations are influencing their perception, product developers should be sure to keep this in mind when creating and evaluating their products.

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