WHY WE ARE IN LOVE WITH OBAMA ALL OVER AGAIN

Obama

“With every passing day I like Barack Obama even more,” remarked an ex-colleague a few days back. In fact, this seems to be the general feeling these days. The recent CNN/ORC poll put Obama’s approval ratings among Americans at 55 per cent. Obama’s rating in 2016 has been at 51 per cent. This has been the highest since his first year as President.

Obama is currently what Americans call a lame duck President. An individual can become the US President only twice. This essentially ensures that any President is typically lame duck during his last few months as President.

So what explains such high approval ratings for Obama, given that there is no way he is going to get a third term? What the economists call the contrast effect is at work. As Barry Schwartz writes in The Paradox of Choice—Why More is Less: “If a person comes right out of a sauna and jumps into a swimming pool, the water in the pool feels really cold, because of the contrast between the water temperature and the temperature in the sauna. Jumping into the same pool after having just come indoors on a sub-zero winter day will produce sensations of warmth.”

And it is this contrast effect which has been driving up the approval ratings of Barack Obama. The elections to elect the next American President are scheduled to happen on November 8, 2016. The two main candidates are Hillary Clinton and Donald Trump. Of course, when people compare Obama to Clinton and Trump, he comes out right on top. This contrast effect has essentially ensured that Obama’s approval ratings have gone up.

In fact, the contrast effect has even led some people to say that Michelle Obama might be the right candidate for President in the years to come. As Myra Gutin professor at Rider University and author of The President’s Partner: The First Lady in the Twentieth Century put it: “Michelle Obama is able to talk to people in a way in which Hillary Clinton can’t.”

While the American first lady has maintained that she has no political ambitions, there is already speculation being made that she might be elected to the American Senate in the years to come. And all this is happening because of the contrast effect that is at work.

In India, closer to home, the prime minister Narendra Modi suddenly starts looking so much better when we compare him to the Congress Party leader Rahul Gandhi.

In fact, the contrast effect is a standard tool used in the marketing of products. A 1992 research paper written by Itamar Simonson and Amos Tversky, shows this through an example of a retailer who was selling a bread making machine. The machine was priced at $275. In the days to come the company also started selling a similar but larger bread making machine priced at $429. The sales of this new machine were very low. But a very interesting thing happened. The sales of the $275 machine more or less doubled.

The $275 bread making machine was expensive on its own. But when compared to another machine at $429, it suddenly started looking like a good deal and the sales went up.

In fact, this is a standard trick used by retailers all over the world to great effect. By displaying two largely similar but differently priced products, the sales of the product with the lower price can be increased significantly by making it look like a bargain.

Retailers often use this trick to promote their own brands by placing their own cheaper products against more expensively priced other brands. Tim Harford points this out in his book The Undercover EconomistIn Dalston, Sainsbury’s [a big retailer] own brand of fresh chilled juice was sitting next to the Tropicana at about half the price.”

The moral of the story is, whether it’s juice or the American President, the contrast effect can really drive up sales.

The column originally appeared in Bangaore Mirror on October 19,2016

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About vivekkaul
Vivek Kaul is a writer who has worked at senior positions with the Daily News and Analysis(DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System , the latest book in the trilogy has just been published. The first two books in the trilogy were published in November 2013 and July 2014 respectively. Both the books were bestsellers on Amazon.com and Amazon.in. Currently he works as an economic commentator and writes regular columns for www.firstpost.com. He is also the India editor of The Daily Reckoning newsletter published by www.equitymaster.com. His writing has appeared across various other publications in India. These include The Times of India, Business Standard,Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, Quartz.com, DailyO.in, Business World, Huffington Post and Wealth Insight. In the past he has also been a regular columnist for www.rediff.com. He has lectured at IIM Bangalore, IIM Indore, TA PAI Institute of Management and the Alliance University (Bangalore). He has also taught a course titled Indian Economy to the PGPMX batch of IIM Indore. His areas of interest are the intersection between politics and economics, the international financial crisis, personal finance, marketing and branding, and anything to do with cinema and music. He can be reached at vivek.kaul@gmail.com

One Response to WHY WE ARE IN LOVE WITH OBAMA ALL OVER AGAIN

  1. Prajakta says:

    Was fun reading about the contrast effect theory

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