The Default Path: A Moat Worth Defending

Life is busy, the world is noisy, and it seems to get more so each year.

When attention is increasingly scarce, we rely more heavily on the default path.

The default path is the option that is automatically selected unless an alternative is specified.

It is the first thing to come to mind when making a decision.

For companies, owning the default option is valuable real estate.

It is the result of hard-fought product positioning.

Source: Here

But this does not just apply to search results.

In accounting, the default path for new graduates is to pursue employment at a Big Four accounting firm. That provides those companies with a competitive advantage based on talent.

For PC manufacturers, the default operating system is Windows. We know what kind of competitive dominance Microsoft exerts.

The default path for customers in financial services is to open an account at their parents’ banks or to use their parents’ financial advisor. Not only does this create a pipeline of young new customers that firms can nurture over time, it also acts as a retention mechanism to keep the entire family relationship at the company.

When do we rely most on the default path?

  • When we are overwhelmed with options
  • When we anticipate regret in trying something new
  • When we lack the requisite information for decision-making, or;
  • When we have a general preference for stability.

Owning the default path provides incredible economic advantages.

It is a moat that is worth defending… but is also a moat that should be constantly under siege.

Every firm in a particular industry should be identifying where their customer’s default paths are and how they can ‘insert’ themselves as an option.

Sometimes this will be obvious, like being the default investment fund selected when people set up a workplace retirement plan.

Other times, it will be more subtle, like owning the product positioning synonymous with your category (Kleenex, anyone).

For wanted consumer behaviours, we should make the default path easy to find.

Organ donation creates a positive social good, so it should be the default path (and just look at the difference in uptake rates below when it is).

Source: Here

Socially responsible investing is similar. To maximize societal capital allocation to the most important ESG causes, investing options should default to ESG strategies, unless otherwise specified.

For unwanted behaviours, we should bury the lede.

To direct the focus away from speculation, trading/investing accounts should default to showing account balances, rather than focusing on gains and losses.

Instead of carrying long-term credit card balances, expensive revolving debt should roll into cheaper term loans.

The default path is subtly influential.

It is anchored by the status quo bias and the human preference for familiarity.

It avoids competition.

It makes customer acquisition laughably cheap.

It is pure economic power.

Find the default path, understand how it works, and use it to your advantage!

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