People place higher value on what they’re waiting for; higher value makes them more patient

Let’s face it – no one likes to wait. We’re a culture of instant gratification. But what if the very act we dislike can actually help make us more patient and help us make better financial decisions?

According to a recent study by Ayelet Fishbach, Jeffrey Breakenridge Keller Professor of Behavioral Science and Marketing at the University of Chicago Booth School of Business, waiting actually does make people more patient, which can provide a payoff for consumers by helping them make better decisions.

Historically, research on patience has been approached by offering people the choice between a smaller reward sooner or a larger reward later. Given the choice between $10 now or $15 later, for instance, many people choose the $10 now, even though it makes them less well-off financially.

“People tend to value things more in the present and discount their worth in the future,” Fishbach says. “But my research suggests that making people wait to make a decision can improve their patience because the process of waiting makes the reward for waiting seem more valuable.”

Co-authored with former Chicago Booth postdoctoral fellow Xiani Dai, the study, titled “When Waiting to Choose Increases Patience,” was published in a recent edition of the Journal of Organizational Behavior and Human Decision Processes.

To test their hypothesis, the two researchers conducted a series of experiments in the U.S., mainland China and Hong Kong. In one study, the researchers invited participants to sign up to join a subject pool for online studies. In exchange for signing up, all participants were invited to enter one of two lotteries: one would pay out a $50 prize sooner; the other would pay out a $55 prize later.

The participants were divided into three groups, each having to wait a different amount of time before given their potential prize: the first group was told they could win $50 in three days or $55 in 23 days; the second could win $50 in 30 days or $55 in 50 days; and the third group was told they could win $50 in 30 days or $55 in 50 days, but they had to wait before choosing a potential reward.

Researchers contacted members of the third group 27 days later to ask for a decision, at which point the participants, like those in the first group, had to choose between waiting three days or 23 days to potentially receive a prize.

Fishbach and Dai found that in the first group only 31 percent of participants chose to wait for the larger reward. In the second group, that number rose to 56 percent. But among people in the third group, who had been waiting several weeks to make their choice, 86 percent chose to wait for the larger reward. Even though they were making the same choice as people in the first group ($50 in three days or $55 in 23 days), the fact that they had been waiting to choose increased their patience.

“When people wait, it makes them place a higher value on what they're waiting for, and that higher value makes them more patient,” Fishbach says. “They see more value in what they are waiting for because of a process psychologists call self-perception—we learn what we want and prefer by assessing our own behavior, much the same way we learn about others by observing how they behave.”

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People place higher value on what they’re waiting for; higher value makes them more patient

Warning of Potential Side Effects of a Product Can Increase Its Sales

Drug ads often warn of serious side effects, from nausea and bleeding to blindness, even death. New research suggests that, rather than scaring consumers away, these warnings can improve consumers’ opinions and increase product sales when there is a delay between seeing the ad and deciding to buy or consume the product.

“Messages that warn consumers about potentially harmful side effects — presumably with the intent to nudge them to act more cautiously — can ironically backfire,” says psychological scientist Ziv Carmon of INSEAD in Singapore.

Working with Yael Steinhart of Tel Aviv University and Yaacov Trope at New York University, Carmon has been exploring how adding a warning of potential side effects can impact consumer decision making. Their new findings are published in the September 2013 issue of Psychological Science, a journal of the Association for Psychological Science.

“We were struck by just how detailed, clear, and scary many warnings had become with regard to potential negative side effects of products,” says Carmon.  “It then occurred to us that such warnings might perversely boost rather than detract from the appeal of the risky product.”

Carmon and colleagues tested their hypothesis in four experiments. In one experiment, for example, smokers saw an ad for a brand of cigarettes: One version of the ad included a warning that smoking causes lung cancer, heart disease, and emphysema, while another version did not include the warning.

Predictably, participants who had the opportunity to purchase the cigarettes soon after seeing the ad bought less if the ad they saw included the warning.

In contrast, participants who were given the opportunity to purchase the cigarettes a few days later bought moreif the ad included the warning. The same outcome emerged when the researchers ran a similar experiment with ads for artificial sweeteners.

According to Carmon and his colleagues, the warnings backfired because the psychological distance created by the delay between exposure to the ad and the decision to buy made the side effects seem abstract—participants came to see the warning as an indication of the firm’s honesty and trustworthiness.

In fact, participants evaluated drugs for erectile dysfunction and hair loss that had potentially serious side effects more favorably, and as more trustworthy, when they were told the products weren’t on the shelves yet.

While conventional wisdom suggests that explicit warnings about dangerous side effect will make people think twice before taking medical risks, these findings suggest otherwise. The researchers believe that their findings are important because these kinds of warnings are so ubiquitous, accompanying many different products or services beyond medications, including medical procedures, financial investments, and sporting activities.

Given how frequently we are exposed to such warnings, Carmon hopes to bring greater attention to their potential to backfire.

“This effect may fly under the radar since people who try to protect the public — regulatory agencies, for example — tend to test the impact of a warning shortly after consumers are exposed to it,” says Carmon. “By doing so, they miss out on this worrisome delayed outcome.”

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Warning of Potential Side Effects of a Product Can Increase Its Sales

Report: Digital Shopper Relevancy

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Report: Digital Shopper Relevancy

How Do Consumers Compare Prices? It Depends on How Powerful They Feel

Your reaction to the price on a bottle of wine or another product is partly a response to how powerful you feel, according to a new study in the Journal of Consumer Research.
“The degree to which one feels powerful influences which type of price comparison threatens their sense of self-importance and, in turn, affects the perception of price unfairness,” write authors Liyin Jin, Yanqun He (both Fudan University), and Ying Zhang (University of Texas, Austin).
Variations in price are common in today’s market, the authors explain, but companies risk consumers’ wrath when those customers perceive unfairness. According to the authors, consumers have two main ways of evaluating the fairness of a price: they compare with what they’ve paid for the same item in the past (self-comparison) or they ask how the price compares with what other customers are paying (other-comparison). The authors looked at the ways consumers’ self-perceptions affected their reactions to the two kinds of comparisons.
In one study, the authors found that participants who felt powerful experienced more unfairness when it appeared that they were paying more than others. But people who did not feel powerful experienced more unfairness when they used self-comparisons. The study also revealed that “high-power” participants were more likely to get angry about unfairness and indicated they were more likely to complain about the perceived unfairness. Meanwhile the “low-power” individuals were more likely to feel sad and to use tactics to avoid thinking about the unfair price.
“Our findings suggest important ways that marketing professionals can engage customers of different power statuses,” the authors write. “For example, when marketing to high-power customers, one can better elicit preference by highlighting the special treatment that they are receiving in relation to other customers. Conversely, when the target customers are relatively low in power, loyalty may be better cultivated by highlighting the consistency in service or the level of commitment to these customers.” 

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How Do Consumers Compare Prices? It Depends on How Powerful They Feel

Mobile Marketing - No Longer Spam & Pop-up World

Image compliments of Top Marketing Schoolso

Mobile Marketing - No Longer Spam & Pop-up World

Wearing high heels can change the way you shop

When shopping for a big ticket item, such as a television, there is a checklist of things you should always do:

1. Read reviews
2. Compare prices
3. Wear high heels

If you’re uncomfortable with No. 3, you have other options. You can ride up and down the escalator, play a few games using the Wii Fit, or just go shopping immediately following your yoga class.

A new BYU study finds that consumers experiencing a heightened sense of balance are more likely to weigh the options and go with a product that falls in the middle of the high-end, low-end scale.

“If you’re someone who tends to overspend, or you’re kind of an extreme person, then maybe you ought to consider shopping in high heels,” said study author Jeffrey Larson, a BYU marketing professor.

Larson and BYU coauthor Darron Billeter have discovered that most anything that forces your mind to focus on balance affects your shopping choices as well.

In the example of the TV, balancing consumers are more likely to go with the 42-inch TV for $450 rather than the $300 32-inch set or the 50-inch screen for $650.

The study is part of an emerging area of research that examines the relationship between physical sensations and decision making. Previous studies have looked at the role of warmth, weight and hunger.

For their study, appearing in the current issue of the Journal of Marketing Research, the Marriott School authors set up experiments where balance was introduced to the consumer experience, including:

• Leaning back on a chair while shopping online
• Playing a Wii Fit game while simultaneously answering questions about product choices
• Standing on one foot while considering which printer to purchase

Other elements that could have similar effects but were not included in the experiments include making purchase decisions while on a cruise ship or walking on icy sidewalks during winter shopping.

The authors say the most important takeaway from their study is that people should be aware of how physical forces can change the way we think about things.

“We need to sit back for a minute and consider, ‘Is this really what I want, or are the shoes I’m wearing influencing my choice?’” Billeter said. “We need to be more aware of what is influencing our choices.”

The results of the study, the authors write, demonstrate that influential cognitive processes are at play as people stumble through life, regardless of whether those stumblings are literal or metaphorical.

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Wearing high heels can change the way you shop

When Do Consumers Think a Freebie Is More Valuable than a Discounted Product?

Consumers may value a free gift more than a deeply discounted promotional item, especially if it comes from a prestigious brand, according to a new study in
the Journal of Consumer Research.
“Since consumers believe the value of a free product is likely to be consistent with the value of the purchased product, pairing a free product with a high-end product may very well increase perceptions of its value,” write authors Mauricio M. Palmeira (Monash University) and Joydeep Srivastava (University of Maryland).
These days, companies often offer bonus products for free or at a low discounted price with a required purchase. For example, high-end cosmetics companies like Lancôme or Clinique offer free gifts with the purchase of a full-priced product.
In one study, participants were offered a free or discounted package of spaghetti with the purchase of a jar of organic tomato sauce for $8.95. They were then asked how much they would pay for the spaghetti individually. People offered free spaghetti were willing to pay an average of $2.95 for it, but those offered the spaghetti for $.50 were only willing to pay an average of $1.83.
When a free product is paired with an expensive product, consumers assume it is worth more than if it was offered at a low discounted price. For example, if a luxury jeweler offers a free bottle of wine with a purchase, consumers assume it isn’t cheap. But, according to the authors, customers might assume the same wine is cheaper if the jeweler offers it for $1.
“Promotions with low discounted prices devalue products more than free offers. In fact, free offers may not devalue products at all when they are paired with an expensive purchase, as consumers will use the price of the focal product to estimate the value of the supplementary product,” the authors conclude. “If Mercedes-Benz promotes a car with a free GPS system, we expect the GPS to be high quality,” the authors explain. 

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When Do Consumers Think a Freebie Is More Valuable than a Discounted Product?