The Science of Framing: Losses vs. Gains 

The Science of Framing: Losses vs. Gains 

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Our “Inside the Mind” series provides a deeper dive into modern marketing-psychology trends.

By Dr. James McFarland, People Scientist

In the evolving landscape of marketing and consumer behavior, framing remains a psychological principle of perennial importance. The framing of your message makes all the difference in how it is perceived and acted upon by consumers. A recent example that stirred controversy and highlighted the nuances of framing is Wendy’s CEO’s Q4 2023 proposal to introduce “dynamic pricing” of their menu to enhance sales. (Dynamic pricing is a time-based pricing strategy where businesses set flexible prices for products/services based on shifting market demands.) While this was not intended as a message to the public at large — it was announced during a company earnings conference call — the framing of Wendy’s proposal ignited a firestorm of criticism. The outrage from consumers and media alike is suggestive of the powerful psychological principles at play, particularly the concept of equality, the perception of losses vs gains, and most importantly, how a message’s success is entirely dependent on the way it’s presented to its audience. Join us as we explore how the science of framing has the power to shift a message from being shunned to being embraced.  

The Wendy’s Controversy: Negative Framing and Consumer Perception 

When Wendy’s CEO initially announced their “dynamic pricing” strategy, it triggered a digital wave of backlash among consumers and the media. Unfortunately for Wendy’s, the term “dynamic pricing” is easily equated with “surge pricing,” yet there are subtle differences between the two. Dynamic pricing encompasses a broad strategy where prices are optimally adjusted up and down in real-time based on a large variety of factors, including supply and demand, competition, and customer behavior. On the other hand, surge pricing is a specific type of dynamic pricing where a company’s baseline prices are increased during periods of high demand. It is commonly used by ride-sharing services like Uber and Lyft, as well as transportation, hospitality, and entertainment industries (e.g., buying airline tickets for a popular destination, or tickets to Disney World during peak periods of attendance). You might say that all surge pricing is dynamic pricing, but not all dynamic pricing is surge pricing.  

Which is indeed unfortunate for Wendy’s, as the public’s negative reaction can be attributed to framing their announcement as surge pricing. It conveyed the idea that some customers (but not all) would be forced to pay a higher price for the same item. This framing, albeit unintentional, triggered consumers’ innate psychological discomfort towards perceived inequality and loss, ultimately leading them to view the new pricing strategy as unfairly exploitative and discriminatory. 

Psychological Aversion to Inequality and Loss  

From a psychological perspective, a sensitivity to inequality and an aversion to potential losses are both incredibly well-documented phenomena in human behavior. Research suggests that humans possess an innate system of values that evolved to promote cooperation, survival, and continued reproduction among the human population. These intuitive “morals” often drive thoughts, attitudes, and behaviors without us realizing why or how they were triggered. One of these moral intuitions is the idea of fairness, which can be further broken down into the concepts of equality (equal treatment among individuals) and proportionality (an individual’s reward being proportionate to their contribution). As can be expected, the idea of surge pricing violates these innately held values on multiple levels, resulting in uneasiness, suspicion, and anger on the part of consumers.  

The perceived potential for loss is another area that can automatically trigger inaction, distrust, and avoidance among consumers. “Loss aversion” is the tendency for people to prefer avoiding losses over acquiring equivalent gains. Outlined by Kahneman and Tversky in 1979, loss aversion predicts that when consumers are presented with two scenarios, one framed as a gain and the other as a loss, the potential for gains is not nearly as motivating to a consumer as the potential for loss. For example, the psychological fear of losing $100 tends to be greater than the psychological appeal of gaining $100, and framing a discount as a way to “Save $20” is typically more appealing than framing the same discount as a way to “Put $20 in your pocket”. One of my favorites is a study showing that people are significantly more likely to buy a  hamburger advertised as “75% lean” rather than the same exact package that is marketed as “25% fat.” This bias against negative information and potential loss (even at the expense of potential gains) is a powerful motivator among consumers, and it is a huge reason the public found Wendy’s announcement so unsettling. When it comes to consumer behavior, the perception of losses and gains are not equal, and it is up to marketers to frame their messages in a gain-centric way. 

Gain-Based Framing: Shifting the Narrative 

Simply put, consumers are more sensitive to the prospect of paying higher prices (perceived as a loss) than they are to the possibility of receiving discounts or lower prices (perceived as a gain). Thus, surge pricing narratives are to be avoided at all costs. To their credit, Wendy’s quickly responded to backlash by clarifying their position — distancing it from the idea of surge pricing, and instead reframing the strategy as more of a “Happy Hour” promotion where they would lower baseline prices rather than raise them during busier times of the day. This was exactly the right move, as their shift in framing from a negative loss-based context (paying more during the lunchtime rush) to a positive gain-based context (getting a discount on a midafternoon snack) leveraged the psychology of gains, and emphasized the benefits, rewards, and savings that Wendy’s new dynamic pricing offered. Overall, it was the exact same message, but with a different framing.  

Leveraging Gain-Based Framing 

The psychology of framing suggests that individuals are more likely to be influenced by how information is presented rather than the information itself. For example, offering a “Buy One, Get One Free” promotion frames the offer as a gain (getting an additional item for free) rather than a loss (paying full price for two items). Similarly, in communication aimed at behavior change, conveying a message like “Cutting out junk food from your diet,” will likely be perceived as restrictive or negative. Instead, frame it as a gain, like “Boost your energy with nutritious meals!” In both marketing and behavioral change contexts, the goal of positive framing is to emphasize the gains rather than losses, ultimately influencing decision-making and encouraging actions that individuals might not have otherwise considered. 

Closing Thoughts 

I would be remiss if I failed to point out that framing (like beauty) is in the eye of the beholder. While we might fault Wendy’s original announcement as being loss-based from the perspective of their consumers, it was gain-based from the perspective of their shareholders and board members (the intended audiences). This nuance is just one more element for savvy marketers to keep in mind as we craft our messages, along with the knowledge that the information age comes with its own unique set of framing challenges. Fortunately for us, we have a wealth of psychological insights at our disposal. Whether it’s navigating the fallout of dynamic pricing strategies or crafting persuasive messages, a deep understanding of the science of framing will continue to unlock new avenues for marketing success.