Category Archives: Behavioural Economics

BOGOF takes a holiday

santaSanta is soon due to end his 364-day holiday and pay an annual visit to his workplace.  I could tell that today by all the Christmas posters and stuff littering the shop windows in Durham.  Halloween is upon us, so “trick-or-treat” will soon give way to “penny for the guy”, closely followed by carol singers.  Then, sure enough, it is mid-December and the Easter eggs are back in the shops!

Remember, though, Christmas is a time of giving…especially to retailers!  We will all spend a disproportionate amount of money relative to our monthly income as the “festive” season approaches and the retail industry knows that.  As a consequence, the behavioural economists will be out to get our hard-earned cash with their psychological tricks.  Buyer beware – indeed!

This piece published by Chicago Booth is quite timely in this respect.  It highlights the ways in which retailers exploit our heuristics and biases to increase sales, especially in the run up to the big day.  We typically discount the future, for instance, so this time of year sees a growth of enticing offers on larger items to “buy now, pay later”, the logic being that it seems less expensive if we don’t part with our cash until April 2015.  Similarly, we can also expect to see all of the cosmetics counters in department stores offering free gift sets when we buy a standard purchase, even though this desirable free item is simply a cheap bag full of samples (still, we can wrap it for someone we don’t like that much, can’t we?).

The “special offer” that almost completely vanishes soon until the new year is the “buy one, get one free” (BOGOF) deal.  I find these fascinating as they are a relatively recent invention in the scheme of things.  When I was younger, the same offer was simply called “half price”!  BOGOF off is a much clever development though because, although economically the same, it means we have to buy double the quantity in order to get the item at half-price.  Smart!

BOGOFs are hard to find from early November, however, except in the supermarkets.  They typically go on holiday until January.  Why?  Because retailers want us to work just that little bit harder to find the best deals, thereby increasing their profits during a crucial sales period.  This is the reason we see items in Boots with the little green Christmas trees on them – we buy three items with the trees, the cheapest item is free.  More a case of “buy two, get one free” (BTGOF).  Oh now that is clever…..!

Why my physiotherapist should walk the plank!

elbow-plank-with-donkey-kicA year ago this week, I was in a golf buggy accident.  Ironic really as it had nothing to do with golf, I was simply being shown around a tea plantation when the accident occurred, but that’s life I guess.

Could’ve been worse and I’m fine now, more or less, but the main injury was a broken arm and it took almost the full year to heal – something the doctors just love attributing to the fact that I’m getting older, I smoke, or both.   One of the indignities of a broken bone, of course, is that hospitals afterwards feel compelled to send you for physiotherapy.  Yuk!

For someone like me who avoids exercise at all costs (other than regular walks to the smoking area, obviously), physiotherapy is a particular ordeal as you’re not used to stripping off in front of strangers and being bent around into strange positions, so the whole thing becomes something of a nightmare and you end up with the strange feeling that this is designed to do nothing more than subject you to ritual humiliation!  Doesn’t help that sometimes, just like other professionals, physiotherapists seem to speak their own language and assume you know more about exercise than you actually do.  And of course, we go along with it rather than admit we don’t know what they’re talking about for fear of looking stupid.

The exercise depicted in the illustration is apparently called the plank.  It’s an exercise designed to strengthen abdominals, the back and shoulders, and good at helping develop a six-pack apparently (whatever that is!).  I know this not because I’m turning into some kind of fitness fanatic, my mid-life crisis has long since passed, but because when the physio asked me what I thought of the plank, he was somewhat puzzled by my reply when I said I rated it as one of Eric Syke’s finest pieces of work. Embarrassing!

Anyway, like all embarrassing things we want to forget about, we inevitably keep encountering reminders of them over and over again!  Tonight, while looking for an article on something entirely unconnected to exercise, golf-buggies or broken limbs, I came across a new paper by Priebe and Spink that uses the plank in an experiment designed to explore the psychological power of expectations.

In the study, the experimenters took around 70 regular gym-goers and asked them to perform the plank to the point of exhaustion.  After a suitable rest, they then asked them to perform the plank a second time.  Under normal circumstances, individuals perform better on the first attempt and, indeed, in this study the control group averaged a performance drop of around 18% in the time they were able to hold the position.

Here’s the intriguing thing, though… a second experimental group were falsely told that 80% of people in their age group normally hold the position for 20% longer on the second attempt.  The outcome?  Well, the group given false information achieved a 5% increase in the average time they were able to hold the plank position!  So, simply being told that most people do better second time around led them to buck-the-norm and conform to their false expectations.  Mind over matter?  Not really… this is a great example of social norms messaging at work.  Although some of us like to think we are rebels, we aren’t in practice.  We want to be different, but not too different, so we tend to conform to social norms (or what we believe the norms to be, in this case).

Ever stayed in a hotel and seen the little sticker asking us to “help the environment” by only washing towels if absolutely necessary?  Some people go along with that request, most don’t.  I personally go one step further and make sure every towel is washed every day, whether I’ve used it or not, just to annoy the hotel by not helping it reduce its operating costs!  Messages stating how many people have helped the environment by reusing their towels work far better, while messages stating the percentage of people staying at that specific room reusing towels will work best of all.  The power of the social norm at its best.

Where does all this leave us?  Well, if you’re involved in coaching in any type of sport, Priebe and Spink’s work suggests a “little white lie” about average performance levels can go a long way in helping boost individual performance. Similarly, the work on hotel towels suggests that messages crafted around social norms can be very effective in changing behaviour in a social marketing context, whether we want to encourage people to take more exercise, quit smoking or eat their greens.

I’m probably a lost cause on all these healthy counts, alas, and my embarrassment over the Eric Sykes movie simply means I’ve never been back to physiotherapy since!  So, I guess I will just build up my upper arm strength in other ways (probably my lifting the TV remote) and watch the only video on the plank I ever want to see…..

Low fat fries have had their chips

chipsDieting is a funny business, as behavioural economists have long known.  About 70% of consumers booking a table in a restaurant, for instance, say they will be choosing a meal from the “healthy options” menu, but only about 5% actually do when they arrive.  Scrap the healthy options, though, and they book a table elsewhere!

Fast food outlets get a lot of stick and, certainly, they are a massive part of the problem.  All of the main brands do try to do their bit, however, but it just doesn’t seem to work.  Take Burger King as an example.  The miami-based chain has had to withdraw its “low fat” fries as a result of disappointing sales, even though they were heavily demanded by consumers in the firm’s original market research.

So, what can we do about all this?  Well, i’d be much wealthier if I knew the answer to that one!  We need to keep in mind that consumers like the idea of eating a healthy diet and losing weight, but not if it means actually dieting for real or planning their menus carefully.  So, more subtle techniques (e.g. smaller portions/plates) are much more effective than well-crafted health messages and low-fat menu options.  Seems the only way to help consumers is to sometimes fool them…for their own good, naturally!

Why do little things feel heavier?

Weight_Lifting_Hamster One of the most interesting and persistent illusions in psychology is the so-called “size-weight illusion”, first described by Augustin Charpentier way back in the late nineteenth century. We’ve probably all experienced this at one time or another…

If we have two objects that way exactly the same, but are different physical sizes, the object that is smaller always feels heavier than the larger one even though it’s not. Psychologists have been trying to explain the illusion for years, without complete success.

One popular explanation if that we expect the larger object to be heavier, so we use more strength when picking it up and it therefore seems lighter than the smaller object simply because we are trying harder.  I’ve never quite bought that explanation… Seems to me it only holds true once.  If we’ve already picked up both objects and figured out they are the same weight, we shouldn’t be caught out the second time we pick them up – but we are, the smaller one still feels heavier.

New research by Gavin Buckingham in Experimental Brain Research takes us at least a step closer to understanding what might be going on here,  It seems the expected weight differences might be a result of learned expectations about weight encoded within the brain.  In an innovative series of experiments, Buckingham found it was possible to completely reverse the SWI effect by having participants repeatedly lift supposedly identical weights that had been rigged such that the larger object really was lighter.  After a period of time living in this back-to-front world, the participants began to always experience smaller objects as being lighter than larger ones, even though they were the same weight.

What’s going on here?  Well, I think Buckingham’s work supports the “effort put in” explanation.  After repeatedly experiencing the smaller objects as being heavier, the brain has learned this general rule and applying it; in other words, it has come to expect smaller things to be heavier, so extra effort is put in to lifting them and, as a result, they begin to feel lighter.

Pssssttt… spinach is good for you, but don’t tell anyone!

popeyeI guess it’s one of those cliches all around the world, isn’t it?  Families sitting round the dining table (ok, probably the TV or something), parents desperately trying to convince protesting kids to eat their greens because they’re good for them, they’ll make them big and strong, they taste yummy… You get the idea.  Rarely works, not even when the manufacturers helpfully supply potatoes shaped like daleks or goldfish or Katy Perry or whatever.  Hopeless!

New research by Maimaran and Fishbach in the forthcoming issue of Journal of Consumer Research, however, at last sheds a little more light on what might be going on here;  why can we very rarely sell fruit and vegetables and other healthy stuff to our children?

The problem appears to be that we try too hard or, in fact, that we are actually trying at all.  In an innovative set of experiments, the researchers found that telling children to eat their greens because they are good for them had very little effect at all, whereas trying to convince them at they tasted good fared only slightly better.  In fact, by far the best strategy appeared to be to say nothing at all.  Consumption of a range of healthy foods was at its highest when the children were simply given their mean and left to get on with it!

Why should this be the case, I wonder?  Well, probably the best explanation, also hinted at by the authors, is what I like to call “proposition overload”.  In marketing, we are constantly striving to provide customers with a unique set of value propositions, something that makes this run-of-the-mill hatchback car better than that almost-identical one parked next to it.  Sometimes, we simply try to hard and offer too many value propositions from a single product, so the consumer faces information overload and the propositions themselves become diluted.  This appears to be what’s going on when parents try to persuade their reluctant children to eat healthy foods; they try so hard with all the potential virtues that the messages become confused and the real value to the child is lost.

And the message for marketers here generally?  Don’t overdo the value propositions you are trying to sell to your customers.  This may well be an Internet-enabled games console, with built-in television and baby monitor, but much better to describe it simply as the “latest entertainment system” if you want  to achieve higher sales!

Warning – touching boxer shorts may empty your wallet!

boxersHere’s a slightly odd study from Belgium that nevertheless has some quite interesting and potentially important results.  It concerns sexual priming effects in advertising and their subsequent impact on purchasing.  Or, put another way, why attractive models supposedly help product sales.

Ever since Watson and Rayner conducted their famous “Little Albert” experiment in 1920 to demonstrate that it’s possible to condition emotional responses to stimuli in humans, marketers have been exploiting this technique and it is perhaps nowhere more obvious than in the use of sexual imagery in advertising. Just as a dog can be made to salivate to the sound of a bell that has been repeatedly paired with food, so the same Pavlovian principles can make men (quite literally!) drool at the sight of a sports car that has been paired with an attractive girl.  The conundrum in the consumer psychology literature, however, is that the effect doesn’t seem particularly significant when such techniques are used with women.  Sure, they rate a brand/product higher when it’s paired with an image of an attractive man, but this doesn’t translate into a significant increase in actual buying in the same way as it does in men.

The study by Anouk Festjens and her colleagues sheds new light on this mystery, however.  It seems that it is the nature of the stimulus that may be the problem.  Sexual priming of products seems to work well with men because they are quite visual in terms of the stimuli amenable to conditioning, whereas women are more tactile.  This doesn’t surprise me at all.  My own research on female fashion buying over ten years ago demonstrated the importance of the sense of touch when making a purchase decision and this remains a significant problem when trying to convert female fashion buyers into online shoppers.

So what did this new study find?  Well, it seems asking female consumers to touch stimuli that carry sexual connotations does have an impact on purchasing, very similar to the effect seen in male consumers when they look at the bikini-clad girl on the sports car.  Specifically, the experiments demonstrated that asking female consumers to handle a pair of male boxer shorts significantly increased their desire for monetary rewards (e.g. finding a bargain), reduced their loss aversion and increased willingness to pay a higher price.

So there we are… sexual priming does have an economic effect on women as well as men, it’s just men buy with their eyes and women buy through the sense of touch.  Now, I’m currently at a loss to think of a way of actually using these results in a practical way at the moment, but I’m sure there’s a canny marketer somewhere already working on it… can’t wait to see what they come up with!