[China Glass Network] When I bought the speakers before, I spent nearly an hour entangled in a $700 SONY and another $1,000 Pioneer (I think there may be a lot of customers with similar experiences). The salesman worried that I would give up the purchase because of hesitation (and not a few), so I said, "Think about it, would you rather have a Pioneer speaker, or a SONY and a stack of new records worth $300?"
Wow! There is no doubt that I chose the latter. I thought I really made a lot of money. Fortunately, I didn’t lose more than 20 new albums for that little bit of sound quality! I certainly figured between $700 and $1,000. The difference in numbers (not impossible to know), but if it is not the reminder of the salesperson, I completely forgot that I can buy so many albums that I love for $300. I think about it carefully.
Neglected opportunity cost
Anyone who has studied economics knows that opportunity costs need to be considered before making decisions – the loss of greater utility due to the abandonment of another option. Whether in textbooks or in actual advertising promotions, it is an unwritten rule to assume that consumers have fully considered the opportunity cost of purchasing decisions. Opportunity cost research experts Becker, Ronen and Sorter wrote in the book: “Customers who buy caviar will think about how many hamburgers a caviar can buy. People intuitively take the opportunity cost into account.†Big Mac Index It is such a product, it seems that the customer knows a ticket to the Forbidden City or how many Big Mac burgers a pasta can change. Consumers will always calculate the opportunity cost of price differences and then make more rational decisions.
Is this really the case? People have already reminded themselves of the opportunity cost before purchasing the decision? We have recently studied the “neglected opportunity cost†in the promotion and found that the opportunity cost often requires others to prompt. It really affects the purchase decision.
We asked 150 students at Arizona State University who were randomly grouped to imagine they could buy a DVD for $14.99. The options faced by the former group of students are: A) purchase this DVD; B) do not purchase this DVD. The choice for the second group of students is: A) buy this DVD; B) don't buy this DVD, and leave $14.99 to buy something else. As a result, it was found that the proportion of people who are willing to buy in the former group is 75%, and in the second group it is reduced to 55%.
We might think that consumers don't buy this DVD or that speaker because they want to save money. But you see, if you don't remind them of the opportunity cost behind the price—the money saved can buy something else, people's willingness to buy is unaffected. A series of controlled experiments also tell us that telling consumers about the price difference of $300 is far from convincing that the $300 can be used to buy something specific.
Low price appeals are not spiritual
Advertisers must be surprised by this result, which means they usually use "low price appeals" such as "saving you $100", "20% cheaper than our main competitors" or "using this product" Consumers can save an extra tens of thousands of dollars in spending" is not more effective. Brands that are more willing to fight price wars should change a promotion strategy and instead should emphasize the specific items that the money can buy.
For example, a more effective car advertisement should be like this: Volkswagen should emphasize the purchase of its car, the owner can use the saved money to buy a stylish high-end suit, the commercials show the image of the owner of the car, His brand new Beetle car is another outdated friend of his clothes. Using this theory as well, the promotional picture of IKEA should be like this: In the left picture, an angry woman stands on the side of a cabinet with only one pair of shoes, with the words "custom cabinets ($1,670) + a pair of shoes ( $30) = $1,700." Correspondingly, in the picture to the right, a woman and her daughter stand in front of the IKEA cabinets filled with their shoes. The copy is: "Cabinet ($245) + 48 pairs of shoes ($1440) = $1,685" .
In addition to reminding consumers of $300 in promotional ads, they can buy a lot of records. Another experiment proves that SONY speakers are bundled with a $300 VCR for sale, which is more than a $700 SONY speaker. It is more attractive not to remind consumers that Pioneer's $300 price difference can be bought. Economists generally advocate that the money saved should be left to consumers. They think that the $300 VCR is obviously not a "big effect" for consumers, but $300 in cash can save any other items, but our The experiment refuted this argument and brought inspiration for companies to implement more effective promotions.
Two points of attention to the opportunity cost strategy
Luo listed "neglected opportunity costs" for consumers to consider, can effectively affect their final purchase decisions. However, it's important to remember that there are two points to be careful about when using this strategy:
Going forward, let consumers think about the opportunity cost. Consumers choose to choose your product next time, and it is also possible to choose a cheaper product. You need to grasp the "degree" and limit such thinking to a reasonable range. I am here to give a counterexample for the reader's reference. After completing the experiment, our researcher bought a $3 brandy chocolate and went out quickly. I threw the question that I had not had time to ask him: "Is this chocolate worth the money?" He started thinking about the "opportunity cost" in the experiment: he can buy 6 snickers for $3. Or a "Sports News", or a better red wine... or you can save the money, build up a lot, and buy a bigger house next year. He said that he still remembered that his satellite TV would cost $49 a month, but he rarely watched TV at night. If he saved $49 a month, he could buy a lot of brandy chocolate... It is important to note that such thinking may be endless, and by that time you will not be able to sell anything.
Second, let consumers think about the opportunity costs they really value. An anti-war website once described the damage caused by the Iraq war to the United States (they estimated an estimated total of $300 billion): "You can let every American eat 9 steamed cakes a day (Twinkies)" ? Steamed cake? When I heard this description, I can only say that this war is really cheap. Also calling for peace, Eisenhower said in his 1953 speech (Chancefor Peace Speech): "A modern heavy bomber is equivalent to building a modern, solid school in more than 30 cities, equivalent to two seats. The power plant used by 10,000 people is equivalent to two well-equipped first-class hospitals, equivalent to 50 miles of concrete roads..." The latter mentioned is the "opportunity cost" that people really value. It has a strong psychological push - even if it can't stop a war, it's more than enough to drive your sales.
Luxury goods or brands with slightly higher prices can grasp the coping strategies to defend against the promotion of opportunity based on opportunity costs—that is, try not to mention or underestimate the opportunity cost. DeBeers diamonds have had a successful slogan: "It is not too late to renovate the kitchen next year." The background picture is two large diamond rings. The opportunity cost of the two diamond rings is said to be (misunderstood) just a year later to decorate the kitchen. Such rhetoric is really convincing. Many families are or have saved money for renovations. After watching the advertisements, there may be many people who feel that it is not difficult to save money from scratch (completely forgetting that this is not the case). For example, many charitable organizations often say, “Save the money for a cup of coffee, and the money you donate can be...†This method of insignificant cost of opportunity is also very suitable for the promotion of small projects.
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