30th June, 2021

Squeezing value | How customers don’t use common sense when spending money

2 minute read

Consumers aren’t very good with their money. There I said it. We don’t make good money decisions when it comes to spending our limited resources. The consumerist dystopia rationalizes spending more than half your salary on the latest I phone or the new set of golf clubs that we saw on the cover of Golf Life magazine. Most of us really don’t think about how much we use a product when we make purchases and too often skimp money on the essentials like the new pair of glasses or those walking shoes that badly need to be replaced.

While I go on this rant some researchers decided to put this theory to test. They wanted to test the hypothesis that consumers don’t consider usage frequency while deciding what products to purchase.

 The way they decided to test this was by creating a hypothetical choice where they asked a group of people to decide between replacing an ice cream maker and a microwave. They were informed that they could only choose one item to purchase and replace.

The audience was further divided into 2 groups. The first group was asked to fill out a questionnaire to describe the features, attributes, and price of both the products. The second group however was prompted to answer a question related to how often they expected to use each product if purchased (thereby creating a prompt reminding the group that the microwave was likely to be used more often than the ice-cream maker).

The results confirmed the hypothesis that in the absence of a prompt people were almost equally likely to purchase the microwave as the ice cream maker, however when people were reminded that they were probably going to use the microwave a lot more than the ice cream maker more than 2/3rd of the subjects opted to purchase the microwave.

Thinking about real world applications of this result for marketers (especially of essential everyday items like mattresses or microwaves), one can think of the merits of stressing on and reminding potential customers how much time they are likely to spend using the product and the value for money they are likely to derive from their money.

Original research by Mauricio Mittelman, Dilney Gonçalves, Eduardo B. Andrade

https://myscp.onlinelibrary.wiley.com/doi/full/10.1002/jcpy.1155