Framing Matters
One of the most studied factors in sales is price presentation. Open any journal that blends psychology and business, and you’re likely to find something on price framing.Researchers from the University of Michigan, University of Texas, and Columbia University collaborated on an
analysis of results from a number of different studies conducted in the past.The groups most important finding when it comes to influencing consumers’ perception of a deal they are getting are additional savings on a bundle and the deal percentage.The big takeaway here is people love bundles when it means additional savings. However, as the size of the bundle grows, the less favorable the consumer perceives the bundle.So if you are running a business, look for relevant products that you can bundle together and maybe take an extra 10% off the bundle. But don’t get too carried away—bundle fifteen things together and you’ll scare buyers away.Another interesting effect of this analysis is that discounts are more powerful when they come from retailers that don’t often have discounts.So, you need to be selective when putting on sales and providing discounts. If you have a bunch of different items on sale every day, consumers won’t really find the discounts valuable. But if you make your discounts and sales scarce, people will likely gain an appetite for your deals and be quicker to buy.
Bad News Bias
This last study out of Australia takes our negativity bias and
applies it to consumerism. The study looks at the relation of consumer sentiment and consumption. By consumer sentiment, the authors mean the outlook and confidence level of consumers in the economy. So, if they have confidence in the outlook of the economy, they would have a high consumer sentiment, and consumers with a negative outlook and low confidence in the economy would have a low consumer sentiment.The study was conducted by observing the consumers after they were exposed to either good or bad news about the economy or world of finance. After receiving the news, the researchers asked the subjects whether it is a good time to buy major household items.Since major household items are not usually a necessity, they serve as a predictor of how willing people are to spend money on non-necessities. Even with low consumer sentiment, it’s reasonable to suspect that people will continue to buy toilet paper, not dishwashers.The researchers found that when people were exposed to bad news, their consumer sentiment went down and as a result, so did consumption. However, when they were exposed to good news, there was no impact on consumption.The takeaway here is that people are significantly impacted by bad news and less likely to buy non-necessities, but the inverse effect isn’t true with good news.This means it might make sense to consider the news when you’re making marketing decisions. If you are planning a sale right after some bad economic news, it might be smart to market things that are necessities rather than nice-to-haves.