Blog Archives

Post-purchase bias

I’m a very methodical (and slow) shopper.  This is especially true for big-ticket or important items.  Before I make such a purchase, I spend hours researching various products.  When I have made my shortlist of suitable options, I read every available online review to check for potential shortcomings.  Finally, I head in-store to evaluate the possibilities in person.  Finally, I make my purchase and head home…

…where I re-research the product again.

It sounds a little nutty…but chances are you’ve probably done this too.

According to a recent article by the Marketing Science Institute, my behaviour is a classic example of the well-documented “post-purchase bias”.  The bias was first discovered by Ehrlich et al. in a 1957 study.  They found that new car buyers read more advertisements for the car they had just purchased than for the cars that they had considered, but not purchased.  This effect has been reproduced many times and is considered to be one of the most robust findings in consumer behaviour.

Why do we do this?  By re-affirming the reasons for our initial purchase, we defend the wisdom of our acquisition and are able to allay the dreaded “buyer’s remorse”.

More recently, researchers have discovered that we also distort product information to reinforce our decision after a sale.  When presented with such information, we ignore the bad and inflate the good.  More importantly, because this interpretation is self-driven, we are more likely to believe in these positive evaluations.

This has big implications for business.  Traditionally, we think of marketing as something that occurs before the sale.  However, this study suggests that marketing is just as important after the sale has already occurred.

The MSI article outlines four implications for business:

1)       Managers should always find ways to follow through after a recent purchase.  Good customer service practices aside – when customers are given more information about a product, they positively interpret this information to create a stronger brand preference.

2)      This follow-up should take place as soon as possible after the initial purchase, while the customer still feels strongly about the product.

3)      After the initial purchase, we are likely to hear from some customers again – some products may be returned, others may require repair, or the customer may need additional instructions.  Every encounter offers businesses the chance to strengthen the customer’s product preference.

4)      The best kind of marketing is free-marketing – specifically when customers talk to friends about their experiences.  The more post-purchase follow-up, the more loyal the customer, and the more likely they are to offer positive feedback regarding the product.  Most importantly, because they are passionate about the product, this feedback is inherently more believable.

Remember: Your work as a retailer doesn’t end when the customer reaches the cash register – it has only just begun.

Do you research products you’ve already purchased? How does your business market itself to existing customers?

——

Thanks for reading!  For information on cellular point of sale, visit our website: mmspos.com

Advertisements

Discount Psychology

Who doesn’t like a sale?  I know I do!  But did you know that not all sales are created equal (even when they are)?  When it comes to sales, it turns out it’s more about perception than reality.

Last week, the Economist featured an interesting article which recounted the results of a University of Minnesota study on discounting.  And because game-show-esque examples are more fun than regurgitating conclusions from a journal, it’s time to play:

Hmm.  This is a tough one.  Did you pick A?  Most of the study participants did.

Unfortunately you have been misled, dear reader.  The answer is…..

Both are equivalent deals.

This has interesting implications for retailers.  If you are going to put a product on sale, science has clearly demonstrated that customers strongly prefer getting more of something for free, rather than saving money on a single item.  In the study, the researchers sold 73% more of their product using the “more free” strategy.

Don’t fret if you got it wrong because you have a chance to redeem yourself in round 2.  It’s once again time to play:

Hmmm…hmmmm….

So what do you think this time?  Are these deals the same?  Most of the study’s participants thought so.  (They both reference 33% after all…)

Nope.  In this case, B is by far the better deal.

In the first example, we saw that customers prefer getting more of something rather than saving money on a single item.  In this case, we see the same behaviour again, even when they would have saved a lot more money by choosing B.

As a retailer, you would actually stand to make more profit by offering a bit more of something for free, rather than offering a steep discount.  Customers generally view the deals the same, so you might as well offer the one that is more profitable for you.

Okay, time for round three.  You’ve got one last shot to redeem yourself.  It’s time to play:

Now this is something I see all the time when I’m shopping.  A previously discounted item has an additional discount applied to it.

What’s the better deal?  The study’s participants thought A was…

And if you did too…you’d be 0/3.

Yes, they are equivalent deals!

As a retailer, this is good to know.  Multiple discounts applied to the same product seem like better value, even though the cost to you is the same as one larger discount.

So why is this the case?  Are we all that bad at math?

Basically…yes.  And when reason goes out the window, it seems we rely on other less-reliable clues (i.e. more is always better).

Knowing these tricks could make the difference between a successful sale, and a not-so-successful one.  It also offers a sneaky opportunity to compete with other retailers.  Is your competitor discounting their widgets this weekend?  Offer the same deal, but instead offer an equivalent amount of free bonus products and you’ll be stealing their customers in no time.

So remember, when you’re planning a sale, customers always want to feel like they got “more” for their money, even if they really got less.  But don’t worry; they’ll thank you for it.

 

Have you used any of these pricing strategies?  What has worked in your store?

——

Thanks for reading!  For information on cellular point of sale, visit our website: mmspos.com

Bias and manipulation

I have a confession to make. As it relates to the battle of wills, I am known to succumb to good sales people every time I go shopping. It’s even worse near Christmas when I’m getting desperate to find better gifts than a gas-station jug of washer fluid.

I bought so much junk that I didn’t intend to buy that I had to take a step back and figure out what had happened to me. It turns out we’re all victims of our own minds. There are so many hidden biases trapped in our minds that it’s almost amazing we don’t constantly trade our houses and cars for magic beans.

So I looked into it a bit. It turns out we anchor our choices to a single trait when making a decision. If the salesperson knows this (and which trait to target), they only have to convince you of the one useless (but superior) feature in order to make the sale.

We also like to think we’re always right, so we look for support of a previous decision. Again, if the salesperson knows this, they can push the right buttons. This is part of the reason salespeople always ask you what you’re looking for – it’s much easier to encourage an existing opinion than to change it. That’s also probably why I bought this year’s release of the same crappy phone I was unhappy with last year – somehow it was still a good move in my mind.

These effects don’t just occur when we’re purchasing something new, but also when we’re being sold “add-ons” like extended warranties. For some reason, I’m happy to pay more to prevent the malfunction of something than I would be to just buy it for the first time. Evidently this happens to a lot of people, since they have a name for it: the ‘endowment effect’.

The surprising part of these biases is that they work on us even when we’re aware of them. And further: we all believe we are less biased than everyone else. This is related to our universal belief that we’re all above average (despite the mathematical difficulties inherent in this claim). Somehow, ninety percent of us believe we’re better than average drivers. But alas, ninety percent of skilled sales people probably already knew that.

Are your sales staff aware of these behaviour biases?  Do they utilize them when making sales?

%d bloggers like this: