Tag Archives: marketing

Price Reductions and Cognitive Fluency

If the mental calculation required to determine the discount given on a product is difficult then we often misjudge the magnitude of the reduction.

This “ease-of-computation” effect for judging price reductions is obviously related to other recent studies looking at ‘cognitive fluency‘ and is another way to manipulate and be manipulated through product pricing.

Consumers’ judgements of the magnitude of numerical differences are influenced by the ease of mental computations. The results from a set of experiments show that ease of computation can affect judgments of the magnitude of price differences, discount magnitudes, and brand choices. […] For example, when presented with two pairs of numbers, participants incorrectly judged the magnitude of the difference to be smaller for pairs with difficult computations (e.g., 4.97 – 3.96, an arithmetic difference of 1.01) than for pairs with easy computations (e.g., 5.00 – 4.00, an arithmetic difference of 1.00).

via Barking Up the Wrong Tree

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?

Making Applications Viral, Without Spam

Virality isn’t an indispensable feature of all successful applications, but for those where it can be hugely beneficial there are four core principles that help the virality of an application, says Daniel Tanner:

  • Invitation should be a core process, that is essential to using the application – this will maximise the chances that your users do invite new users.
  • Keep pulling people back in, rather than letting them forget you after the initial invitation, and make this “reminder” process also be central to the use of the application.
  • Be useful even to the lone user, because that lone user is the source of all your other users.
  • Remove artificial invitation limits, to recognise the reality that most invitations come from a few very active users, and help those users spread the word.

Tenner also notes–in passing–the concept of the viral loop. Andrew Chen’s take on the loop is the best I’ve read on the topic.

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 Entrepreneur’s Ignored Demographic

Andrew Warner of Mixergy recently interviewed Alex Algard: the entrepreneur who founded the $57m a year (revenue) business WhitePages.

One exchange in the interview I particularly enjoyed is when Warner ponders WhitePages’ target demographic. Realising that he, his colleagues and his friends don’t use the site, don’t talk about the site or even hear about the site he asks who are the people that bring in this revenue: who are the users?

Algard’s answer touches on something I discussed with a friend recently: that many (most?) entrepreneurs and software developers produce products and systems targeted at people like them: computer-literate, progressive power users. The huge market of barely-computer literate casual users who are enthusiastic about the Internet (yet need help for basic tasks) is largely ignored.

Andrew Warner: Well tell me about it, because you know that all I hear about everyday is Twitter and Facebook and some of the hotter sites, some of the sexier sites. I don’t hear people talk about WhitePages. I don’t remember when I went on WhitePages, or referred WhitePages to somebody else, but obviously a lot of people are on the site. What am I missing here?

Alex Algard: For one thing I think we do a good job in catering to what the typical American needs, as far as content information goes. A lot of our friends, I think, tend to be a little bit more focused on, you know, what’s hot in the Bay area and so forth. So I think it’s very important that we, every once in awhile, pinch ourselves and remind ourselves that not everyone in the world, or in the US, is necessarily living on Twitter, or quite yet on the social network. Certainly that’s the way things are moving, but I think we’re doing a good job on addressing Americans’ needs as of the here and now. Like I said, I’m a here and now kind of guy. I think that’s also how our company thinks.

When asked if anything in particular sticks out that helped him separate himself from the competition, Alex replied:

I think in retrospect, it was just being really, really focused around what users are looking for; providing a relevant service; really trying to put myself in the users’ shoes. In the WhitePages scenario it’s finding contact information, so doing a better job than anybody else: being singularly-focused on helping our users find the contact information that they’re looking for. That more than anything has helped our success.