All Posts in UX

November 10, 2014 - No Comments!

The psychology of discounting

"When retailers want to entice customers to buy a particular product, they typically offer it at a discount. According to a new study to be published in the Journal of Marketing, they are missing a trick.

A team of researchers, led by Akshay Rao of the University of Minnesota's Carlson School of Management, looked at consumers' attitudes to discounting. Shoppers, they found, much prefer getting something extra free to getting something cheaper. The main reason is that most people are useless at fractions.

Consumers often struggle to realise, for example, that a 50% increase in quantity is the same as a 33% discount in price. They overwhelmingly assume the former is better value. In an experiment, the researchers sold 73% more hand lotion when it was offered in a bonus pack than when it carried an equivalent discount (even after all other effects, such as a desire to stockpile, were controlled for).

This numerical blind spot remains even when the deal clearly favours the discounted product. In another experiment, this time on his undergraduates, Mr Rao offered two deals on loose coffee beans: 33% extra free or 33% off the price. The discount is by far the better proposition, but the supposedly clever students viewed them as equivalent.

Studies have shown other ways in which retailers can exploit consumers' innumeracy. One is to befuddle them with double discounting. People are more likely to see a bargain in a product that has been reduced by 20%, and then by an additional 25%, than one which has been subject to an equivalent, one-off, 40% reduction.

Marketing types can draw lessons beyond just pricing, says Mr Rao. When advertising a new car's efficiency, for example, it is more convincing to talk about the number of extra miles per gallon it does, rather than the equivalent percentage fall in fuel consumption.

There may be lessons for regulators too. Even well-educated shoppers are easily foxed. Sending everyone back to school for maths refresher-courses seems out of the question. But more prominently displayed unit prices in shops and advertisements would be a great help."

http://www.economist.com/node/21557801?fsrc=scn/tw_ec/something_doesn_t_add_up

November 10, 2014 - No Comments!

Innumeracy: How Your Pricing Strategy can take Advantage of Mathematical Ignorance

http://www.priceintelligently.com/blog/bid/153136/Innumeracy-How-Your-Pricing-Strategy-can-take-Advantage-of-Mathematical-Ignorance by Miranda Steinway

"Essentially, consumers would rather “buy one month and get the next free” than “receive 50% off [their] first month."

"The team exposed this incompetence through a series of studies that asked consumers which deal they would prefer: a 50% increase in quantity or a 33% discount in price. The secret: they’re both the same offering. Despite their mathematical equivalence, they found consumers overwhelmingly assume the quantity increase is a better value. What’s even more interesting is that the results stayed true even when the discounted product was blatantly a better deal."

November 10, 2014 - No Comments!

The Effect of “Useless” Price Points

"A snippet from Dan Ariel's TED talk. This is a great illustration on the psychological effects of options pricing."

"The price in the middle, while seemingly “useless” in that it didn’t provide any value (since the print + web was the same price) was actually useful in that it helped get costumers to turn from “bargain hunters” to “value seekers”.

What was happening was that customers began to compare the middle option to the latter option (since their prices were similar) and this comparison made option 3 look like an excellent deal.

Without the middle option, we can see that the price points set by the economist had too much contrast: when the middle option was taken away, people looked at the two prices and tried to convince themselves that they didn’t need the “upgrade”.

Essentially, they became “bargain hunters” rather than “value seekers” which are the kind of customers you really want.

With appropriate pricing in place, you can offer customers options that fit their budget, while at the same time influencing “on the fence” customers that your more premium offerings give enough benefit that their extra price is justified."

November 10, 2014 - No Comments!

Jennifer Aaker: The Happiness-Time Connection

Why many effective consumer marketing campaigns focus on experiencing, rather than possessing, a product.

"In their first experiment the authors set up a lemonade stand — operated by two six-year olds, to make it appear authentic — for which they used three different signs. The first sign read "Spend a little time and enjoy C&D's lemonade"; the second one, "Spend a little money, and enjoy C&D's lemonade"; and the third, neutral one said simply, "Enjoy C&D's lemonade." Only one of the signs was displayed at a time. Customers were told they could pay between $1 and $3 for a cup of lemonade; the exact amount was up to them. After they made their purchase, they were surveyed to determine their attitude toward the lemonade.

The results were instructive: The sign stressing time attracted twice as many passersby — who were willing to pay almost twice as much — than when the money sign was displayed."

Read more: http://www.gsb.stanford.edu/insights/jennifer-aaker-happiness-time-connection

November 7, 2014 - No Comments!

10 Ways To Increase Perceived Value

"If we lived in a world where the value of a good was indisputably equal to its price tag, we would never have these issues.

Instead, we live in a world where people come up with their own interpretation of the perceived value of a good.

If their perceived value is greater than the price tag, in most circumstances they will buy.

If it is not, they won’t.

It’s really as simple as that."

Read more: http://www.selfmadebusinessman.com/2014/08/25/perceived-value/