Liking and subscribing on FB, and the opposite

10 Facts About Why and How Consumers "Like" and Subscribe

View more PowerPoint from Constant Contact

o

Liking and subscribing on FB, and the opposite

Budgeting backfires – shoppers unconsciously spend more when trying to limit costs

Setting a price limit when shopping often backfires, according to new research from Brigham Young University and Emory University marketing professors. The study found that merely thinking about prices leaves you likely to spend more than you would otherwise.

The researchers found that consumers spent up to 50 percent more when they started shopping with a price in mind than those who didn’t. The findings were so counterintuitive that the researchers tested them with six separate experiments, and the results held up each time.

“We don’t mean to repudiate budgeting, because its positives probably still outweigh the negatives,” said author Jeffrey S. Larson, assistant professor of marketing at BYU’s Marriott School of Management. “But it’s important for consumers to realize how budgeting can affect our thought process and actually prompt us to spend more than we intended.”

Experiments tested consumers’ thinking about buying televisions, pens, laptops, earbuds, garage doors, mattresses, Blu-ray players and luggage. Various approaches got shoppers thinking about price – they could select a target price from a set of choices, identify their own target price, select a maximum price they were willing to pay, or determine a budget for a specific purchase.

“The results were always the same – a preference for higher-quality, higher-priced items,” said Larson. “The most surprising aspect of this study was that people’s decision-making process can change so easily. Doing something as simple as asking, ‘Hey, how much would you budget for this product?’ completely changes their thinking.”

The researchers reassure us that “aggregate” budgets still achieve their intended result. It’s only when we focus on purchasing one specific product that budgeting can backfire.  They wrote, “A $100 budget for a grocery trip would not leave a shopper exaggerating quality differences between the $3 block of cheese and the $5 one.”  

The study, coauthored by Ryan Hamilton of Emory University’s Goizueta Business School, will be published in the next issue of theJournal of Marketing Research, a top journal in the field.

Our thought process

Here’s what goes on in our minds, explained Larson, who earned his doctorate at Penn’s Wharton School of Business. When we start off the purchasing decision process with price in mind, we first narrow down our options based on price. If we decide we’ll spend about $500 on a new TV, we look only at TVs around that price range. Of course, once we do that, we start to notice that higher-priced sets within that range have more features and better quality, so we lean toward those. Larson’s study found that after we screen our choices based on price, we essentially ignore price after that and focus on quality. And better quality products usually cost more.

For example, in one of the experiments, the researchers asked a group of consumers how much they would be willing to spend on a new TV. Those consumers were then given the option of choosing a TV $18 above their target price and a lower-quality one $18 below. About 55 percent of them chose the higher-priced option that was above their target price range. But among a set of consumers who were given the same options WITHOUT being asked how much they would be willing to spend, only 31 percent chose the higher-priced option.  Those who set a maximum price first also rated the difference in quality between the choices as much greater than those who didn’t.

In another experiment, research subjects were given $6 for participating in the study and given an option to purchase a steeply discounted pen on their way out. Those who were asked how much they planned to pay spent an average of $2.10, compared to the average of $1.64 spent by those who were not asked.

What should we do instead?

So if we’re concerned about spending too much, and setting a budget backfires, how in the world are we supposed to approach shopping? Don’t fret, Larson says – the fact that you’ve read this means you’re now well on your way to developing immunity to this phenomenon. There are two steps we can take to protect ourselves from the effect his study identified.

1. After you evaluate your choices based on quality, force yourself to re-consider price. The researchers found that the effect disappeared after consumers had their attention drawn back price after they had evaluated quality. “Just knowing that the effect is there is going to be enough for most consumers to be able to overcome it,” Larson said.
2. Start by determining what features and quality levels matter most, before you think about price. “We haven’t tested it yet, but our initial research would indicate that if you decide on the quality level you’re comfortable with, you will then focus on price and end up spending less money,” Larson said.

o

Budgeting backfires – shoppers unconsciously spend more when trying to limit costs

Navigating the Social Media Jungle

Navigating the Social Media Jungle - social media for service providers

View more presentations from Shai Shamir

o

Navigating the Social Media Jungle

The CMO Guide to Social Media 2012

CMO.com has done an update of previous guides. Click here to watch an in a larger format.o

The CMO Guide to Social Media 2012

How Do Mood and Emotional Arousal Affect Consumer Choices?

When they‟re in a positive mood, people tend to choose products that match their mood and their level of emotional arousal, according to a new study in the Journal of Consumer Research. But crabby, low-energy people will seek products to reverse those states of mind.
“We examine how consumers‟ choices are affected by the interplay between their level of arousal (i.e., the intensity of a consumer‟s mood state) and the valence (the direction of their mood state—whether consumers are in a positive or negative mood) of their current affective state,” write authors Fabrizio Di Muro (University of Winnipeg) and Kyle Murray (University of Alberta).
Although the vast majority of products, services, and experiences offered for sale are designed to be pleasant, the authors say there is a much greater variance in the level of arousal to which these offerings are designed to appeal. For example, lying on a beach and surfing are both pleasant, but lying on a beach is a low-arousal activity, as opposed to surfing, a high-arousal (intense) experience. And tea and energy drinks are both pleasant, but one is more arousing than the other.
The authors conducted experiments using scents and music to elicit arousal and mood states among participants. Then they measured people‟s preferences for experiences and products that are perceived to be either low or high arousal.
They found that in addition to regulating mood (positive or negative), consumers also make choices that are consistent with regulating their level of arousal. “For example, people who are feeling relaxed tend to choose relaxing products, whereas those who are feeling excited tend to choose exciting products,” the authors write. On the other hand, when consumers are in a negative mood they prefer products that are incongruent with both their level of arousal and their current mood. “For example, people who are in an unpleasant low-arousal mood will tend to choose pleasant high-arousal products, whereas those who are in an unpleasant high-arousal mood will tend to choose pleasant low- arousal products,” the authors write.
“In general, we find that people will demonstrate a strong preference for products that make them „feel better,‟” the authors write. “Consumers‟ product choices will be consistent with pursuing pleasant moods and mitigating unpleasant moods.” 

o

How Do Mood and Emotional Arousal Affect Consumer Choices?

How Does the Order of Choices Affect Consumer Decisions?

Let‟s say you‟ve got to book a flight, choose a hotel, and rent a car. Does it matter which thing you shop for first? A new study in the Journal of Consumer Research finds that the order of choices does affect consumers‟ decisions.
“Consumers often shop for multiple products in a single trip. This research looks at whether the order in which consumers shop for the different products influences how they search for each individual product,” write authors Jonathan Levav (Stanford University), Nicholas Reinholtz (Columbia Business School), and Claire Lin (formerly Columbia Business School).
The authors tested consumers‟ reactions to different configurations by looking at a business traveler who had five possible flight options (airlines), 10 possible hotels, and 15 possible car rental options. “When we order a group of decisions by increasing choice-set size, we find that consumers search through more of the possible choice options than when we order the same set of decisions by decreasing choice-set size,” the authors write.
In other words, the business traveler in the above example would examine more of the possible hotel options when that choice is preceded by the choice of flights (five options) rather than the choice of rental cars (15 options). “This difference seems to be driven by the consumer‟s desire to maximize her choice outcome,” the authors explain. “If she starts with a choice from a small choice set, she will probably try to choose the best options from that set. This „choose the best‟ mindset tends to persist to the later choices.” In contrast, if consumers start with a larger choice set, they adopt a “good enough” mindset.
The authors believe that starting consumers with choices from small choice sets can help them become motivated to find their desired products from larger assortments.
“Our result is an interesting counterpoint to the popular research on choice overload,” the authors write. “Our results suggest that large choice sets don‟t have to be demotivating. By positioning a large choice set after smaller choice sets, a retailer may make the large choice set less daunting to the consumer.” 

o

How Does the Order of Choices Affect Consumer Decisions?

Why Would Consumers Pay Less for Separate than Bundled Products?

Packaging an expensive item with a cheap one seems like a no-brainer. But according to a new study in the Journal of Consumer Research, most consumers in this situation are not willing to pay as much for a combination as they would for two separate items.
“Consumers often encounter product combinations, many of which include both expensive and inexpensive items,” write authors Aaron R. Brough (Pepperdine University) and Alexander Chernev (Northwestern University). “Logically, people should be willing to pay more for options that they like. Adding an attractive option to an existing offering might be expected to increase the offering‟s value and consumers‟ willingness to pay.”
But consumers don‟t always follow that logic. For example, consumers who were willing to pay $2000 for a flat-screen TV and $10 for a video cable when they considered them separately were only willing to pay $1950 when the two were combined. Likewise, pairing an inexpensive tote bag with a higher-priced suitcase decreased consumers‟ willingness to pay. The authors say this occurred even when consumers were willing to pay full price for each item considered alone.
Consumers tend to think in categorical terms, according to the authors. For example, when items classified as expensive or inexpensive are combined, consumers perceive the combination to be “moderately expensive.” “The problem is consumers forget that they are purchasing multiple items. As a result of the erroneous perception that a combination of expensive and inexpensive items is less valuable than a single expensive item, consumers are willing to pay less for the combination than for a single item that they perceive as „purely expensive.‟”
The authors found that the number of consumers who chose an expensive product declined by approximately 15 percent when an inexpensive item was added to it. They also found that across six different product categories (scooters, grills, phones, jackets, backpacks, and TVs) participants were willing to pay, on average, 25 percent less for a combination of an expensive and inexpensive item.
“Because including an inexpensive item in a bundle can decrease consumers‟ willingness to pay, managers may be better off selling items from different price tiers separately,” the authors conclude. 

o

Why Would Consumers Pay Less for Separate than Bundled Products?