Tag Archives: sales

Using Charity to Increase Voluntary Payments

If a busi­ness is exper­i­ment­ing with vol­un­tary pri­cing (‘pay-what-you-want’ pri­cing), to increase sales and profits give a por­tion of vol­un­tary pay­ments away to char­ity (and advert­ise the fact, nat­ur­ally).

That’s the con­clu­sion from a study by research­er Aye­let Gneezy com­par­ing a num­ber of pri­cing plans involving–in vari­ous combinations–voluntary pay­ments, fixed prices and char­it­able dona­tions:

At a theme park, Gneezy con­duc­ted a massive study of over 113,000 people who had to choose wheth­er to buy a photo of them­selves on a roller coast­er. They were giv­en one of four pri­cing plans. Under the basic one, when they were asked to pay a flat fee of $12.95 for the photo, only 0.5% of them did so.

When they could pay what they wanted, sales skyrock­eted and 8.4% took a photo, almost 17 times more than before. But on aver­age, the tight-fis­ted cus­tom­ers paid a measly $0.92 for the photo, which barely covered the cost of print­ing and act­ively selling one. […]

When Gneezy told cus­tom­ers that half of the $12.95 price tag would go to char­ity, only 0.57% riders bought a photo – a pathet­ic increase over the stand­ard price plan. […]

But when cus­tom­ers could pay what they wanted in the know­ledge that half of that would go to char­ity, sales and profits went through the roof. Around 4.5% of the cus­tom­ers asked for a photo (up 9 times from the stand­ard price plan), and on aver­age, each one paid $5.33 for the priv­ilege. Even after tak­ing away the char­it­able dona­tions, that still left Gneezy with a decent profit.

The research­er calls this “shared social respons­ib­il­ity” (in com­par­is­on to plain old cor­por­ate social respons­ib­il­ity).

Prevention of Attainment Increases Desire, Decreases Attractiveness

Being pre­ven­ted from obtain­ing some­thing we desire sim­ul­tan­eously increases our desire for the item and decreases its even­tu­al attract­ive­ness. That’s the coun­ter­in­tu­it­ive res­ult from a study that shows the vari­ous sur­pris­ing effects of “being jilted”.

We show how being “jilted”–that is, being thwarted from obtain­ing a desired outcome–can con­cur­rently increase desire to obtain the out­come, but reduce its actu­al attract­ive­ness. Thus, people can come to both want some­thing more and like it less. […] In Exper­i­ment 1, par­ti­cipants who failed to win a prize were will­ing to pay more for it than those who won it, but were also more likely to trade it away when they ulti­mately obtained it. In Exper­i­ment 2, fail­ure to obtain an expec­ted reward led to increased choice, but also neg­at­ively biased eval­u­ation, of an item that was merely sim­il­ar to that reward.

It seems that by being unavail­able our expect­a­tions are raised to an unreas­on­able degree and we even­tu­ally become dis­ap­poin­ted. I guess this is a warn­ing for those think­ing of scarcity mar­ket­ing.

The Influence of Sold-Out Products

Sold-out products cre­ate “inform­a­tion cas­cades” where we infer that the next-best item must also be of a sim­il­ar high qual­ity and value for money: sold-out items ‘val­id­ate’ sim­il­ar products, per­suad­ing us to pur­chase more read­ily.

“Sold-out products cre­ate a sense of imme­di­acy for cus­tom­ers; they feel that if one product is gone, the next item could also sell out. […] Research shows there’s also an inform­a­tion cas­cade, where people infer that if a product is sold out, it must have been good and there­fore a sim­il­ar avail­able product will also be desir­able.”

The study […] found 61 per cent of shop­pers would buy a par­tic­u­lar five-hour ski pass for $20, but that fig­ure rose to 91 per cent when they thought a 10-hour ski pass for the same moun­tain slope for $40 had sold out.

A sim­il­ar study of mer­lot wines found 49 per cent of con­sumers would buy a bottle if they had one choice, but when they thought a sim­il­ar wine had sold out next to it on the shelf, nearly twice the num­ber of shop­pers would take home the avail­able bottle.

The research­ers note that for com­mon ‘stock’ items a sold-out status breeds con­tempt, where­as new and sold-out products sig­nal an unanti­cip­ated demand for a qual­ity product.

It goes without say­ing that the sold-out items did­n’t neces­sar­ily have to exist, right?

Selling Premium Goods

In a short pro­file of ‘lux­ury sales con­sult­ant’ Jean-Mar­ie Brück­er, we dis­cov­er a few psy­cho­lo­gic­al tech­niques he teaches to his cli­ents on how to sell high-end lux­ury goods:

  • Describe an item in terms of its ‘value’ rather than it’s ‘price’ or ‘cost’.
  • Sell a story (‘romance’ and ’emo­tions’) rather than ‘products’.
  • The macar­oon tech­nique: sand­wich­ing the price “between the pro­duct’s more romantic bene­fits”.
  • Har­bour and eli­cit pos­it­ive emotions–they sell (e.g. com­pli­ment your cus­tom­er on their exist­ing items, even if they’re from your com­pet­it­ors.
  • Don’t dis­count. Gift instead (dis­counts get for­got­ten, free gifts don’t).
  • Cre­ate con­trast between old, exist­ing items and new ones.
  • Sug­gest ‘sorry-gifts’ for those who may lay guilt on the pur­chas­ing party (e.g. their part­ner)

As ever with these things, I believe you could sum­mar­ise it as: play on and exploit a cus­tom­er­’s emo­tions (hap­pi­ness, guilt, etc.) while using subtle lin­guist­ic tricks to dis­guise the price.

These hap­pen to be key ten­ets of casino mar­ket­ing, which revolves around flat­ter­ing men, dis­tract­ing their wives, and keep­ing them around as long as pos­sible; the longer they stay, the more likely they are to spend money. But Mr. Brück­er was nev­er dis­dain­ful of customers—in fact, he cham­pioned the need for bet­ter, more thought­ful ser­vice that makes the cus­tom­er sense caring and qual­ity —the stuff of lux­ury.

“You’re selling pure emo­tion,” he said. “That’s why I love this job.”

The Transformative Power of a Narrative

Can a nar­rat­ive attached to an every­day object increase its object­ive value? That was the ques­tion posed by Rob Walk­er (author of The New York Times’ Con­sumed column) and Joshua Glenn (author of Tak­ing Things Ser­i­ously) when they star­ted the Sig­ni­fic­ant Objects Pro­ject—an exper­i­ment designed to test wheth­er a series of stor­ies cre­ated about an object will increase its selling price.

After buy­ing 100 “unre­mark­able” objects with an aver­age price of just under $1.29 each, the two advert­ised them for sale along­side nar­rat­ives cre­ated by volun­teers. They then sold for a total of $3,612.51—more than 28 times their ori­gin­al price.

Dan Ari­ely of Pre­dict­ably Irra­tion­al dis­cusses the pro­ject and its find­ings:

The res­ults may seem sur­pris­ing, but this is actu­ally some­thing we see all the time. It’s the basic idea behind the endow­ment effect, the the­ory that once we own some­thing, its value increases in our eyes. […] But own­er­ship isn’t the only way to endow an object or ser­vice with mean­ing. You can also cre­ate value by invest­ing time and effort into some­thing (hence why we cher­ish those scrag­gly scarves we knit ourselves) or by know­ing that someone else has (gifts fall under this cat­egory).

And then there’s the power of stor­ies: spend a fant­ast­ic week­end some­where, and no mat­ter what you bring back […] you’ll value it immensely, simply because of its asso­ci­ations. This explains the find­ings of the Sig­ni­fic­ant Objects Pro­ject, and also how oth­er things like brand­ing works.