Consumers’ often imperfect reactions to marketing signals
We all know that errors in judgement are human. Today we highlight a few scholarly contributions that investigate lack of judgement when it comes to marketing signals such as promotions, pack sizes or price reductions. Beware these fallacies!
Price promotions reduce cognitive effort
Price promotions can lower consumers’ motivation to think rationally during the purchasing process. Because the (financial) risk of making a wrong decision decreases, emotions outweigh rational thinking and consumers are more likely to make a more emotional product choice. In addition, the ability to process brand-related attributes decreases. The chart shows that preference for a healthier snack option goes down and consumers remember substantially less product-related information when the product is sold on deal.
Consumer perceptions of pack size changes
Shoppers‘ estimates of pack size changes are most precise if a package changes one dimension only (e.g. its length), and least precise if all dimensions (length, width, height) differ. The same study also offers a reasonably close estimate of likely size perceptions after a redesign.
Consider a box of cereal measuring 10 x 10 x 10 which changes its proportions to 20 x 6 x 6. While the new box is clearly smaller (-28%), consumers on average conclude that it is bigger. Why? They arrive at a new size estimate by adding up the relative dimension changes (+ 100% – 40% – 40% = + 20%) instead of multiplying the ratios of each side (2 x 0.6 x 0.6).
Percentages are hard to grasp
One of the challenges with percentage calculations is base value neglect (BVN), the tendency to ignore the base values to which percentages are attached. A field experiment in a US retail store investigated how BVN impacts promotional offers. A hand cream was offered at either a price discount of 35% or in a 50% extra volume bonus pack. While the discount is the slightly better offer financially, the store sold 73% more when offering the bonus pack (see figure). A lack of analytical skills or a lack of motivation leads many consumers to compare the two percentages directly (50% sounds better than 35%) without considering the impact on the price per unit of either offer.
This effect becomes weaker for less known products where the extra volume increases the performance risk associated with a purchase (I buy more of an unknown entity). BVN suggests a suitable promotional tactic: respond to competitive price discounts by offering bonus packs.
Also, any changes in a numerical product attribute (e.g. package size, calories, formula) should be communicated accordingly. For example, claim 25% more washes, not 20% less detergent needed.
