Getting Customers to Spend More
I just read Dan Ariely’s 2017 book, Dollars and Sense. Admittedly, the book is a few years old, but Ariely’s behavioral economics approach to how people spend is more relevant than ever (and co-author Jeff Kreisler has an amusing writing style!). The book talks about the irrational ways we spend money and how we, as consumers, can spend smarter.
Of course, as a marketer, it also makes me think of the flip side: how marketers utilize those same mechanisms to get customers to spend more. That’s the duality with which we must contend. As consumers, we try to watch out for the very same methods we employ as marketers. But let’s face it – if we don’t use these methods, there’s a chance our competitors will!
Here are some of the highlights from the book
Context matters. Customers will pay more (or less) for something based on contextual cues, such as MSRP or where it’s being purchased (e.g., convenience store vs. supermarket). Even when we know that the seller raised the list price to then offer a “sale,” it still impacts us (Yes, even you!).
Spending buckets are real. Even though a dollar is a dollar is a dollar, people do “mental accounting.” For example, we might not be willing to spend any more on “luxuries,” but if that same expenditure gets reframed as “education,” then we are willing to spend on it. Marketers should consider if there are ways to reclassify their products or services to a category that customers are more likely to spend on.
Prices must be perceived as “fair.” We consider whether a person or company “deserves” the price they are charging (rather than what it’s worth to us). For example, we get annoyed at the locksmith who fixes our lock in two minutes and charges $80 but are willing to pay $120 to the locksmith who took two hours and broke the original lock in the process. Even though we got a greater benefit from the two-minute job, it just seems wrong. Marketers need to make sure they emphasize all the effort that went into the product or service (e.g., artisanal widgets? hours of deep thought?) so customers will feel prices are fair.
Language is important. Not only can descriptions make products sound better, but they can also literally change the way we experience things. In other words (pun intended), we will enjoy a product or service more when it’s described in a way that appeals to us. Don’t skimp on copywriting. Find out what makes your product or service enjoyable to customers and tell them all about it!
What does this mean for your research projects?
It’s important to understand what consumers are comparing your product or service to when considering a purchase. What is the context? What would they buy if they didn’t spend on your product or service?
The “fairness” question can be a great way to understand some of the less rational considerations in a purchase. It’s worth asking consumers if they think a price is fair. What would make it “fairer?” What would make it less so?
When testing marketing messaging, it can be beneficial to ask what consumers anticipate based on the text. What are the expectations the messaging creates? When listening to their answers, take careful note of which responses are more emotional and which are flat.
How do your customers make the decision to spend? It’s worth finding out! Let’s talk about how we can help. Email me at jay@ignite-360.com
For further reading on research trends:
For more on empathy and its ROI, check out these reads:
10 REASONS YOU AND YOUR ORGANIZATION SHOULD BE DOING ACCESSIBILITY RESEARCH
HOW CONSUMER INSOURCING IS IMPACTING YOU AND YOUR BUSINESS (AND 3 STEPS TO DEAL WITH IT)
GETTING OUR GROOVE BACK – HOW THE 4BS ARE CHANGING AMERICAN CELEBRATIONS