By Feng Jiang, Rui Zhang and Su Lu
Red Means Losses, or Not?
Color, a ubiquitous phenomenon, influences our everyday decisions, from dating to stock transaction. If you go on a date wearing red, your date might find you sexy. If you read an annual report printed in red, you might avoid buying stocks of that company. This works through activating connotations of the color red, such as danger or a down-market.
Given that color connotations vary across cultures, it is probably not surprising to know that red in Chinese culture carries the opposite meanings. Red is routinely used as the metaphor for business prosperity and “red door” is an expression that describes those from a wealthy family. Moreover, in the stock market in China, red is used to indicate up-markets. It would therefore be expected that if a Chinese person reads an annual report printed in red, they might buy instead of selling stocks.
However, this cultural difference on red effects may not be as straightforward as it seems. In studying people across cultural contexts, Leung and Cohen (2011) commented “individuals are always in a cultural context, though they are not always of it.” The point is, cultural differences are not always reducible to individual differences. Speaking of color associations, although it is true that red is associated with upward trends, flourishing, and growth in the Chinese financial market, it would be inappropriate to assume all or even most Chinese people hold the same red-gain association. For example, Hong Kong Chinese have been shown to hold less red-gain association given the same green-up red-down convention they follow in the Hong Kong stock market. Therefore, in our research published recently in the Journal of Behavioral Decision Making, we tested how variability both within and between cultures would affect red effects on risk preferences.
What We Found
Across three studies, we exposed Americans and Chinese to red or green when they indicated their risk preferences, while assessing the strength of their personal associations between red/green and gain/loss. We found that in risk-taking tasks (e.g., participants were asked to pump animated balloons with the information that each pump would them earn a point, but they would lose all the points if the balloon popped), color normatively associated with loss (American: red / Chinese: green) led participants to become more risk seeking if they personally associated them with gain. In risk aversion tasks (e.g., participants were asked to indicate how much were they willing to pay at most to play the lotteries with various expected values), color normatively associated with gain (American: green / Chinese: red) led participants to become more risk averse if they personally associated them with loss.
We interpret these findings to mean that those whose personal beliefs deviate from cultural beliefs show extreme reactions or overcorrection in response to culturally laden stimuli — a phenomenon that is sometimes known as cultural reactance. For example, for Americans, the culturally normative connotation of red should lead to the expectation that it results in stronger risk aversion (i.e., pay less to play the lottery) compared with green. However, this pattern was reversed among Americans holding stronger green-loss associations which are culturally incongruent. It was rather green that led Americans with culturally incongruent associations to become more risk averse.
Implications
Our work suggests the importance of matching the cultural meaning of the cued color with the task at hand. This may be particularly relevant to those multinational enterprises because using appropriate colors could significantly enhance their product as well as service localization. For example, on Amazon, coupon or promotion slogans are displayed in color of green and the “buy now” button in brown. These settings must be culturally appropriate for its customer base in the U.S. or UK, however, it may not work well in China. Apparently, Amazon’s Chinese competitors, such as JD and Taobao, are all using red rather than green to display “add to cart” and “buy now” buttons. Almost all the coupons and other promotional information are presented in red as well. This is probably because that shopping behavior relies on the feeling of gain, which is better facilitated by the color red in Chinese culture.
In addition, our work adds a cautionary tale about the limitation of considering cultural variations only. Given large within-culture variations, they may sometimes eliminate or even reverse between-culture variations. Our work highlights the need to consider cultural norms and individual differences within each culture simultaneously. For example, in business Road Shows, where investors have limited cognitive resources processing financial information, the color red may serve as a peripheral signal to economize information processing. Thus, it is not surprising that in Chinese society, entrepreneurs would like to use red cover their business plans. According to our findings, if one investor or judge personally associates green rather red with gain, a green page probably encourages he/she to allocate more investment than those who favor the red-gain link. To be sure, our findings need to be replicated and extended. We do not know the prevalence of holding culturally incongruent color associations in a given culture. To the extent that cultural reactance occurs, it remains unclear how frequently it occurs and how consequential it is in the real world.
