Navigating the sales: cues to influence consumers

It seems like sales time is upon us again, although some retailers seem to be in a state of perennial discounting. I have been reading up on some of the research into how people react to sales and discounts and how retailers can use sales and discounts to their profit-boosting advantage. Unsurprisingly, that is a massive body of research, and it gives a lot of insight into not only the retail industry but also the cognitive reasoning strategies of the human mind.

One of the research papers I was reading referenced an article in the Harvard Business Review, which Oregon State University has made publicly available as a PDF here. It summarises a small sample of research findings regarding the effects of pricing on consumers, and is an easy read. The article is almost 10 years old now, so it’s interesting to think about both in terms of what is probably still true and what might have changed as the consumer landscape has evolved.

Have a read of the article and see what you think. Here are some of the findings it discusses, as well as my own thoughts about whether such findings would still hold true today:

  • If you ask an average supermarket shopper what the price of an item is after they’ve just taken the item off the shelf, less than half of the shoppers will give an accurate answer.
    I don’t find this particularly surprising for people of a particular economic position who aren’t being incredibly careful with their grocery spending – such a person is probably buying an item that they’ve bought before or is very similar to something they’ve bought before, so they probably know they can afford the price even if they don’t explicitly know what the price is. And I think once you get past perfunctory grocery shopping, people will start to know the prices of items better – if someone has just picked up a pair of jeans they intend to buy, it’s much more likely that they’ll know the price off the top of their heads, compared to if they’ve just picked up some milk or half a dozen eggs.
  • Consumers pay attention to pricing cues such as sales signs, but retailers should be careful not to put too many sales signs out – a sale that’s too extensive seems to cheapen the products under certain conditions, and people are actually less keen to buy if there’s a profusion of sale signs absolutely everywhere.
    I don’t know what contexts this is true for, because I think an established and respected department store, for example, could put a prodigious amount of sale signage out during sale time and people wouldn’t perceive the whole store as being “cheapened”. But if a store were to do that constantly, then I could certainly understand that it might have a cheapening effect in terms of people’s perceptions.
  • We seem to use prices that end in a 9 as a cue to a bargain. In one experiment using a mail order catalogue, demand for a dress was higher when it was priced at $39 than when it was priced at $34. This is possibly because some retailers at some point did use prices ending in 9 for sale items (the article doesn’t say exactly when or where or to what extent, although it does say that J.Crew and Ralph Lauren used 00-cent endings for regularly priced merchandise and 99-cent endings for sale merchandise, which as far as I know is still true of J.Crew).
    I think the price-ending-in-9 being used as a pricing cue to get the attention of consumers is something that has already been capitalised on, really, and therefore possibly isn’t true any more (or isn’t as true as it once was). I think enough retailers use prices that end in 9 for all their stock these days that consumers don’t have any sort of implicit assumption that 9 equals a bargain. I just had a quick look at the online stores for three major mid-range Australian clothes retailers and all three of them have prices that are in the format of either $xx9 or $xx9.95 for basically all full-priced items. I guess to a certain extent that little trick still works, as on a moment’s judgement $89 seems quite different from $90, and it makes it that little bit more difficult to do the mental arithmetic when buying multiple things. But I think a lot of people simply don’t have that mental association between a price ending in 9 and a sale price. Plus I think with the rise in popularity of online shopping and the possibility that people will be shopping in different currencies, fitting the price to particular formats is perhaps increasingly obsolete.
  • Retailers use signpost items, so: even if people aren’t great at knowing or guessing the prices of a lot of things, there are some items that a lot of people might be familiar with when it comes to pricing. Retailers place such items prominently and at a considerable discount, which makes people think “Oh hey, that’s pretty cheap for that item – the rest of the stuff in the store is probably cheaper than average as well, perhaps!”. And that is why supermarkets always have packs of Coke or Pepsi or whatever out the front. They often lose money on those items because they discount them so heavily to attract people into the store.
    I really hadn’t considered why there are almost always cans of drink stacked up outside a supermarket, but know that it’s pointed out, it’s kind of obvious in retrospect.

    It is incredibly interesting to consider these points from the standpoints of both retailers and consumers. As a consumer, being aware of tactics that might be employed to coax you into a purchase is empowering. However, these tactics are unlikely to remain static – as consumers grow wise to current tactics and as their access to information increases (both in terms of understanding how retailers operate and in terms of having alternative options available in an increasingly busy global marketplace), retailers will have to keep changing their game. I would be very interested to know exactly how those tactics have changed in the 10 years since that article was written – the changes have surely been drastic, and the changes in the future will probably have to be even more innovative.

Responsible recommendations and seeking information

Given my previous discussion of the not particularly compelling correlation between brand/price and quality, and people’s not particularly good ability to judge quality of items they might want to purchase, I’ve been wondering about what various factors and elements might coax people into consuming and what information people actually use to make a decision to purchase something, other than brand name and price (especially online, when information about the item you’re considering purchasing might be more limited because you can’t physically inspect and interact with the item).

Recommendations seem to me like they would have a pretty powerful influence over people’s decisions, particularly online. If I see a nice item recommended on a blog that I like, I find myself contemplating whether I need to buy that item myself, even though I might never have wanted it otherwise. More positively, recommendations are a good way of adding data to your decision about whether to purchase something, particularly if the recommendation comes from someone you feel has similar tastes or values to yourself.

Are online recommendations powerful? Do people pay attention to such recommendations and do the recommendations influence people’s purchasing behaviour? Because if you’re a blog writer or a blog reader, or you read or write online reviews, that would certainly be something to consider. Do writers need to be more circumspect about recommendations? Do readers need to be more cautious about evaluating information about a product based on online recommendations?

In the case of some research that looked into this, consumers can be divided into two groups: those who have a high motivation to process information related to a potential purchase, and those who have a low motivation to process that information. If you have high motivation, you do a lot of research, a lot of information gathering, a lot of shopping around, a lot of careful consideration. If you have low motivation, you try to minimise the effort you put into making the decision about what to purchase, you don’t investigate potential alternatives much, and you look for shortcuts that you hope or assume will lead you to the right choice.

Now these two groups – the one with a high motivation to process information (HM) and the one with the low motivation to process information (LM) – react differently to recommendations that they read about particular products online.

When an HM individual reads a recommendation online, it actually motivates them to do even more researching and evaluating. In fact, the stronger the recommendation, the longer an HM individual spends analysing information about all potential options (and the recommended option itself). That’s a pretty good outcome, really: HM individuals are pretty motivated to gather all the information they need to make a well informed decision about a purchase, and recommendations motivate them even further, and in the end they are more likely to make the optimal decision.

The LM individuals, on the other hand, are looking for shortcuts to minimise the time and effort in making a decision about a potential purchase, so they tend to focus on the recommendation too much. When an LM individual encounters a recommendation, that recommendation seems to redirect the individual’s search efforts: their search efforts end up limited to the recommendation and perhaps little else. And, unsurprisingly, LM individuals end up more likely to make clearly sub-optimal choices in their decision about what item to purchase. And on top of that, apparently all it takes for an LM individual to make a sub-optimal choice is a single online recommendation for that particular item.

I imagine that LM individuals might be able to improve their decision-making by devising some rules regarding the amount of information that they should try to obtain before finalising their decision. If you think you might be a bit LM in your decision-making style, try to come up with some points for a checklist to use in guiding your information gathering. If reviews of a product are widely available, have you sought out at least, say, 5 different reviews? If reviews of a product are scarce, what evidence is there that the one review you’ve seen is from a reputable source, or from someone who would have similar standards or needs to yourself? Have you looked for at least one or two alternatives to the product you’re considering, and again sought out multiple reviews of those items? Willfully applying a more strategic and structured approach to your information gathering might feel like a bit of drudgery, but it might yield better results for you in the long run!

How much are people willing to pay for craftsmanship and design?

To what extent can the average consumer identify quality in an item they purchase? Given the weight people give to an affordable price tag, and given the preponderance of cheaper options in the marketplace and the number of brands that emphasise lower prices as part of their business model (from H&M and Zara in the fast fashion domain, to Ikea for homewares and furniture), it is hard to know how much consumers care about quality relative to cost, and how good they actually are at assessing the quality of something to determine whether it is actually worth the cost. People must have some notion of how to appraise quality – just existing in the world and experiencing it is enough to give you some sort of idea of what quality is. Then again, whether you’re willing to actually pay for that quality or how much you’d be willing to pay for it might be another thing entirely. Empirical enlightenment might be at hand, as scientific research has investigated some aspects of this issue and come up with some potentially interesting results.

This particular study involved getting participants (who were just random people in shopping centres) to evaluate shoes in three separate experiments. In each experiment (each involving a different set of participants), there were the same three pairs of plain, black, men’s business shoes to evaluate – a pair valued at $33 by a brand called Ambition, and which were coded as pair S; a pair valued at $83 by Filanto, and coded R; and a pair valued at $233, by ECCO, coded Q (I don’t know if those prices are US dollars or what; the paper doesn’t say where the study was conducted, and all I know is that the authors are affiliated with institutions in Denmark and Canada, so I guess maybe it’s Canadian dollars). The prices were what the shoes were sold for in shops. As you can see, the shoes are pretty damn similar:

(Image copyright © 2011 John Wiley & Sons, Ltd.)

The participants filled out a computer-based questionnaire and had the three pairs of shoes at hand to evaluate. They were allowed to pick up and inspect the shoes as much as they liked.

Experiment 1

This experiment looked at how people evaluated the shoes when they weren’t given any brand information – any branding on the shoes was covered up and brand names were not mentioned at all. The participants had to rate how much they liked the pairs of shoes based on nothing more than an inspection of the three pairs.

Without knowing price or brand, participants still managed to prefer the Q shoes (the $233 pair) more than the R shoes ($83) and the R shoes more than the S shoes ($33). In fact, based on just a visual and tactile inspection, participants greatly preferred the most expensive shoes, which suggests that the quality and workmanship and general visual appeal were pretty discernible.

When asked how much they would be willing to pay for each pair of shoes, participants were willing to pay significantly more for the Q shoes than for the R shoes or S shoes. As to whether they would actually buy any of the shoes, if they were in need of such a pair of shoes, 27% said they would buy Q, 18% would buy R, 18% would buy S and 38% said (yes, that adds to 101% – that’s rounding errors for you) that they would not consider any of the pairs of shoes. So of the people who were hypothetically willing to buy one of the pairs, the majority wanted the Q shoes.

Finally, the participants were told that one of the pairs of shoes was ECCO, a brand that was apparently at least somewhat familiar in terms of name and image to the demographic these participants came from (it’s a Danish brand, but it’s pretty widespread throughout the world). When asked to guess which pair of shoes were the ECCO ones, 49% of participants correctly chose the Q shoes. If people were randomly guessing which pair was the ECCO pair, you’d expect only a third of participants, 33%, to identify the pair correctly, so participants were performing better than chance, suggesting that they associated the ECCO brand name with a certain level of quality and could then identify varying levels of quality in the pairs of shoes presented to them. So far so good.

Experiment 2

The effect of brand name was evaluated this time, by making the branding of each pair of shoes perfectly visible to the participants. The Q shoes (ECCO brand) were still significantly preferred over R (Filanto) and S (Ambition), although the preference for the Q shoes increased and preference for the S shoes decreased compared to when the branding was concealed. This suggests that adding a known and respected brand name to an object increases people’s preference for that object on top of their existing preference that was based just on a visual/tactile inspection of the object.

Experiment 3

Participants in this experiment were primed with information about the ECCO brand – “information central to the brand’s company vision”. They were told:

“[The ECCO company] is driven by passionate people who are deeply committed to well being of their customers, as well as design technology and product functionality. They create a timeless product, while at the same time following fashion trends. Their working style is also their lifestyle and their mission is to create comfortable footwear of a high quality which fits the foot and not the other way around. They are a well-known brand and sold around the world.”

Participants were given the three pairs of shoes, unbranded, to inspect, and weren’t told which ones were the ECCO shoes. When asked which pair of shoes they thought were ECCO, 53% of participants correctly identified the Q shoes as ECCO. The participants were then asked to rate their preference for each pair of shoes (still without knowing which shoes were which brand), and they preferred the Q shoes (yep, the ECCO ones). Not only that, the preference for the Q shoes was greater than it was in Experiment 1, when the brand identities were also concealed, which means preference for the Q shoes was increased simply by telling the participants the brand’s “company vision”. It seems that simply priming someone by telling them about a brand’s ethos and values perhaps makes that person sensitive to those values, and they subsequently try to seek them out.

Further analysis

Based on the data they had collected across the three experiments, the researchers were able to calculate how much the participants would be willing to pay for the ECCO shoes depending on different conditions. In experiment 1, with the brand identity withheld, participants would have been willing to pay $67 for the ECCO shoes (so the price is based on just perceived quality and design of the shoe). In experiment 2, with the brand name included, participants would have been willing to pay $173 for that same pair of ECCO shoes (so just adding the brand name to that pair of shoes increased their perceived value by 2.6 times!). And finally, in experiment 3, with the shoes unbranded but the participants primed with the ECCO brand’s ethos and goals, the price the participants would pay for the ECCO shoes was $159 (suggesting that just priming a person to think about an ethos of high standards and discerning taste makes them willing to pay more for an object they have a preference for).

As the authors of the paper summarise, “the results show that consumers prefer an object that is well crafted with particular design details; they also show that a well-known brand name will greatly increase preference for the object.” The main criticism I have here, though, is that the entire study is based on the implicit assumption that the ECCO shoes were actually objectively more visually appealing in terms of design, were more well-crafted and were of better quality than the other pairs of shoes. The study relies on the premise that the higher priced shoes are, by virtue of their cost, better quality and better designed. That might simply not be the case.

This might explain one of the issues raised in the discussion section of the paper. The participants were also all given another survey to assess the centrality of visual product aesthetics (CVPA) – that is, their concern or interest in a product’s appearance or design. If you score highly on CVPA, you have high design acumen and judge an object’s appeal based on its inherent design features. If you score lowly on CVPA, you would base your judgement on external cues such as brand name or price. It turned out that, when evaluating the shoes and forming preferences for them, participants with high CVPA didn’t necessarily show a preference for the ECCO shoes when the shoes were presented unbranded – people who apparently valued good design didn’t seem to think the ECCO shoes possessed good design. This might suggest that the CVPA assessment wasn’t measuring exactly the right thing, or it could mean the ECCO shoes weren’t necessarily of an objectively higher level of quality and design and craftsmanship than the others. (Or it could mean that there’s some degree of subjectivity when it comes to judgements of quality, design and craftsmanship.)

The fact that more participants (than chance would predict) converge on the same pair of shoes as their most preferred or as the shoes they think a high-quality brand would produce doesn’t mean that that pair of shoes is necessarily of higher quality or craftsmanship. Naïve people might generally make similar superficial and incorrect assumptions about quality – maybe they reason that the more small details or embellishment an object has, the higher its quality, when that isn’t necessarily the case. There might be any number of features of a manufactured or crafted object that might, at face value, seem to signify good quality or design, when in fact they do not, so you end up with multiple people accidentally and incorrectly arriving at the same judgement, while a true connoisseur or expert would arrive at a contrasting judgement.

I think there’s a reasonably good chance that the ECCO shoes were objectively more well crafted and of better quality and more visually pleasing than the other two pairs of shoes, but this study didn’t exactly get the opinions of designers and cobblers and shoe manufacturers in order to make sure that a higher price really did mean higher quality and better visual design. Other studies have sought the opinions of experts, such as in this study when researchers got two garment experts to evaluate quality. This study really should have done something similar. So for now it seems that the random person on the street (or in the shopping centre) can indeed detect quality and craftsmanship to some degree, but it’s difficult to know to what degree given that the quality and craftsmanship haven’t actually been directly measured.

Anyway, critiques aside, the interesting thing about this paper, I think, is just how much influence a brand name can have. People are willing to pay $67 for a pair of shoes – then tell them that shoe is by ECCO and suddenly they’re willing to pay $173 for that same pair of shoes. (Although you’ll note that that’s still not quite the actual price of the shoes in-store, which you’ll remember is $233.) And that’s just a brand with a sort of medium-level profile and perhaps an image of practicality and functionality. Imagine what a brand with a high-end image could be capable of. If someone said they were willing to pay $67 for a pair of shoes based on quality and design alone, and then I told them that the shoes are actually made by Prada, how much would they be willing to pay then?

As per usual, it comes back to treating price and brand as a proxy for quality. I think the participants in this study assessed the quality and design of the ECCO shoes unbranded and decided that the shoes were worth an average of $67 to them, but when they were told the shoes were ECCO, the participants assumed that there was some degree of quality in the shoe above and beyond what they had initially thought, to the tune of $173. That suggests that people just aren’t that good at assessing the quality of items like that, since they still rely hugely on brand name as a proxy for quality. Given the ratio of $67 to $173, it’s tempting to quantify it like this: that around one-third of the value of your judgement about an item’s quality and design is based on the item’s actual features and properties, and around two-thirds of the value of your judgement is based on desperately hoping that your assumptions about the brand and its image are accurate.

Well, the data don’t really stretch to quantifying it exactly like that, but it does seem to be true that we basically bet a fair amount of money in each purchase we make on our impressions of a brand being accurate. And given the extent to which brands go to manipulate our impressions of them, that’s not necessarily a great idea.

Social barriers to sustainable consumption

The attitude-behaviour gap is something I’ve written about before. In a lot of contexts, including, say, the purchasing of ethically or sustainably produced items, there is a gap between what people know and feel about an issue (their attitude) and what they actually practically do about the issue (their behaviour). For example, a person might be perfectly aware that a particular brand has been found guilty of using sweatshop labour in their manufacturing line before, and might think that the brand deserves to be boycotted for that reason, but in the end – the person still ends up buying something from that brand. Likewise, people might express the wish to buy less in an effort to minimise their consumption and lessen their impact on the environment, but in the end, for whatever reasons, they might not be successful in buying less.

It’s all too easy to come to the conclusion that this gap exists because people either just really don’t care or aren’t motivated enough to act in line with their attitudes. Certainly, it’s undeniably easier to not bother acting on any concerns you might have, because that might involve doing a lot of research about the possible concerns and issues and then limiting your options and enforcing restrictions – all of this requires much more effort than just not bothering, obviously. However, it actually seems that there are plenty of people who genuinely want to make ethical, sustainable, informed choices, and who would be willing to make a lot of effort to do so. There are simply (or not so simply) lots of external factors that affect whether you can act in line with your attitudes, and these can range all the way from the personal level up to the societal level.

This is one study that identifies and investigates the barriers to informed consumption and consumer choice in a nation that is amongst the more environmentally and socially aware in the world – Sweden. According to the paper, many Swedes are hoping to address consumption issues by aiming to shop less and to purchase more thoughtfully, but there are myriad barriers that are restricting progress in this particular direction. So why is it that some of the most environmentally minded, socially progressive, informed and aware people in the world still can’t always behave in a way that’s consistent with their attitudes? What stops them from consuming less even though they want to consume less?

Obviously, one set of barriers to more responsible consumption would be of the economic/market variety. Price, of course, is an issue – sometimes the more sustainable option is more expensive, and that will always limit who can take advantage of that option. Availability is an issue, too – sustainable options can be difficult or effortful to track down, and only a limited range might be available. And trust is an issue – consumers may doubt whether a product is genuinely sustainably or ethically produced, since recent history has shown that no shortage of companies and retailers are happy to capitalise on the appearance of being more eco-friendly rather than making genuine and profound efforts. Such economic/market barriers were identified as being personally relevant by the majority of the 58 Swedes that were interviewed in depth for this particular study.

There were also political barriers (e.g. people felt the Swedish government was putting the onus on the individual consumer to make the right choices instead of making efforts to regulate or punish companies and retailers who weren’t trying to provide sustainable options), informational barriers (e.g. there was a lack of information available to enable consumers to make an informed choice, or the information that was available was overwhelming and depressing) and lifestyle barriers (e.g. a lack of time to consider a choice and then hunt down the most sustainable option).

Within the lifestyle barriers, it was encouraging to note that very few people interviewed cited lack of interest or being unwilling as a reason to not make an effort to reduce consumption and make thoughtful choices. Only 11 out of 58 interviewees mentioned that, and only 5 out of 58 interviewees said that it was “easy to say and not do” – any lack of action isn’t because people don’t want to try. Of all the categories of barriers, these lifestyle barriers were the second most commonly mentioned reasons for not fully pursuing a more sustainable mode of consumption. So what was the most common category of barrier?

Social barriers, actually. It might seem like lack of time or high prices or a dearth of options might be the biggest reasons for not “down-shifting” and trying to minimise one’s consumption, but for the people of Sweden who want to do this, social expectations and pressures play a major role in holding them back.

Interviewees described how social barriers often restricted their desire to consume less, because not engaging in consumerism can be seen as anti-social. As the author of the paper says:

In fact, the largest number of barriers mentioned, and particularly in reference to anti-consumption and shopping less, can be classified as problems of sociality. This observation reminds us that consumption fulfills an important social function in our societies, helping us to signal belonging, mutual understanding, and adherence to shared societal norms and cultural logics. Today those of us living in complex post-industrial urban societies have little choice but to build our identities around symbolic objects that strangers can easily understand – possessions.

As such, parents felt the need to consume in a certain prescribed way so that their children didn’t become ostracised or ridiculed by peers, and the interviewees explained that they personally worried about deviating from the social trend of consumption because so many other people wouldn’t understand their motivations – they worried that people would “consider them missionaries, self-righteous, or living in bad taste” or “they think that you are poor or that you’re not well educated, that you don’t have nice taste or that you are not successful.” All legitimate concerns, regardless of how much an individual might tell themselves that the opinions of others don’t or shouldn’t matter.

As to why social barriers are the most commonly identified set of barriers restricting more sustainable behaviours, the paper identifies Sweden’s cultural conformity as a factor – “one likely rising out of a history of ethnic homogeneity and bolstered more recently by the legacy of a social welfare state has which long emphasized equality, fairness, and solidarity. [...] Indeed many Swedes find it stressful to imagine living in a manner significantly different from their social peers, regardless of how much they adhere to environmentalist values. They suggest that it is simply too hard to go against the grain of Sweden’s social logics, ignoring shared definitions of an adequate standard of living, necessary conveniences, and notions of good taste.” This paper doesn’t discuss the potential applicability of this assumption beyond the Swedish population, but I imagine it would be relevant to many other cultures and countries, to varying extents. Those of us in such societies feel pressured to display our beliefs and values and tastes and attitudes via our possessions, and to opt out of doing so is to risk others misunderstanding or ridiculing your motivations. We are an inherently social species, and avoiding social ostracism is a deeply ingrained trait.

It is encouraging to think that the resistance to reducing consumption as being a product of many external pressures – social ones to a large extent – rather than any sort of laziness or ignorance or disinterest or fecklessness that people might possess. It means that if the attitude gains sufficient momentum, and acceptance of it gradually spreads further and further, attempting to consume in a more sustainable and responsible manner might become easier and easier for more and more people, even if its adoption never becomes pandemic due to the very human traits that underlie the social compulsion to communicate through possessions.