Wednesday, May 31, 2017

People buy logically - Not

Education is the most powerful weapon which
you can use to change the
– Nelson Mandela

But education is not just school.  It is more about learning.   I pride myself in being a constant learner and want that to be part of the Danby Appliance culture.

When I have a challenge, I devise a deliberate study plan.

I have learned about learning from my Syrian project.  You can learn some English in ESL school but those that thrive and do well implement a deliberate learning plan that includes not just sitting through class but learning.  They study.  They practise.

To learn English, we suggest ESL class, Duolingo (a free language learning tool), Mango Language (free computer learning if you have a Guelph library card), watching English TV with English subtitles, reading a few pages each day, English word of the day, conversation circles etc.  And study/work hard at it.

And much of learning is practise and just speaking English so interact.  It takes courage and it is work.
Speaking of education.  I am a big proponent of the "university in your car".  While driving, I always listen to audio books.  The most recent one was by a behavioural economist.  This is sort of a cross between a psychologist and an economist.   They study what people really do - rather than what pure economics would say.

The book is Misbehaving by Richard Thaler.

I love that the book is well researched and scientific.  Thaler is a university professor.  So many of the examples he uses are of studies.  For example - people who are buying a calculator for $20 are told by the clerk that the same item is on sale for $10 5 minutes away.  Most people spend the 5 minutes to save the $10.  The same experiment is repeated when someone is buying a $1,000 appliance and almost no one goes.  It is the same $10 so logic would say spending the same time makes logical sense but...

Another study was done on price differences for using credit cards.  When a gas station sells gas for $1 and says 2% surcharge for using a credit card - they are flamed.  When they price their gas at $1.02 and say cash price $1 - people love them.  But it is the same price.

When a store advertises buy 2 get 1 free, sales do much better than 33% off.

When a store advertises free knife with $40 cutting board, they sell much more than $10 knife with $30 cutting board.  The cost is the same but the sales are different.

I recall another book I read that had a study comparing free shipping to $0.30 shipping and the results were huge.  Even just $0.30 was enough to stop people from ordering.

Advertising and promotion is much about this psychology.

I have also thought a lot about value.  Some people can be "gamed" by the psychology but what really helps products to sell is offering a complete value.  People may say they want the cheapest product but in most cases they mean the best value.  So spending time considering what things consumers value and adding them to product is the best way to build sustainable edge in the market.

As a marketer, I find this subject fascinating.  


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