It’s true. Most consumers suffer from a bad case of dysrationalia which, according to Keith Stanovich, emeritus professor of applied psychology and human development at the University of Toronto, is the “inability to think and behave rationally, despite having adequate intelligence.” He should know, he coined the term.
Yep. I’m guilty, as well. And assuming you have adequate intelligence, you are, too. I came out when I bought a Suburban a couple of years ago. The slightly used car sat on the dealer’s lot for about four months when other Suburbans that were older and had more miles were selling within days of showing up on the lot. The only noticeable difference, other than the year and miles, were price. The older models that sold almost immediately were priced higher! For four months, I toyed with testing the car that wouldn’t sell, but my rational mind decided it would be a waste of time because, after all, it was priced nearly $6,500 below Kelley Blue Book value. Clearly, something had to be wrong with it.
WAKE UP!!! How did my rational mind know that there was something wrong with the lower-priced, newer car with fewer miles, unless my irrational mind was telling it so? And why does my irrational mind have more influence over my actions than my rational mind?
Upon discovering I, too, suffered from dysrationalia, I bought the car. And two years later, we have discovered absolutely nothing wrong with the car, other than the time my husband didn’t put the brake on and it rolled into a neighbor’s garage.
This same type of decision-making thought process and resulting behavior takes place daily among consumers of all ages, in all cultures, in all parts of the world. It’s human nature. For the most part, consumers never become aware that they are driven by irrational thinking and therefore, it never changes. So the reality is that we marketers have to address it, instead.
A great example of dysrationalia is found in the book of another one of my favorite psychologists, Daniel Kahnemann. In “Thinking Fast, Thinking Slow,” he asks the question, “A bat and a ball cost $1.10 in total. The bat costs $1 more than the ball. How much does the ball cost?”
Your first thought, if you’re like the majority of students at MIT, Harvard, Princeton and other prestigious schools, was 10 cents. Admit it. That’s the smart person’s answer. But it’s wrong. Do the math. If you do the simple math associated with this question, it’s 5 cents, because if you add 10 cents to the cost of the bat, which would be $1.10 if the bat is $1 more than the ball, you get $1.20. Wrong.
So why do most intelligent people get it wrong intuitively? Because we rely on our first thoughts to guide us, because in most of life’s circumstances, we don’t want to bother to really work out solutions and just want to go with our “gut.” Just like my “gut” told me the car was a lemon because it was priced below value, many consumers convince themselves to make poor choices daily.
Think back on the last time you went grocery shopping. Did you really stop to look at the shelf notes telling you the price per ounce of various items so you could see which brand and which price offered the best value for the money? And did you take the time to compare the price per ounce of the generic brands vs. the advertised brands? If so, get a life! Of course we don’t spend hours comparing price per value for every purchase we make. We rely on our “rational” thinking to do that for us quickly, and that “rational” thinking tells us that bigger boxes give us more value, and generic brands costs less. Pay attention next time you shop and you’ll realize it just isn’t always so, even at those big box warehouse stores.
Not only do you make irrational shopping choices daily, but so do your customers. To compensate, we marketers must present our messages in a way that fits our consumers’ irrational decision processes. As Dan Ariely pointed out in his book, “Predictably Irrational,” there are many ways we can do this. For one, when giving customers three options to choose from, put the one you want them to purchase in the middle. Consumers are not gong to do the math to see which offer provides the best price for the money, but instead are going to make a quick “gut” choice and purchase the one in the middle, because our intuitive mind tells us the first option is too basic, and the third option is likely extravagant or superfluous. So the middle option is most practical and therefore intelligent.
Another way we can appeal to irrational thinking is through price. Most of us will never buy the highest priced option, as it seems irresponsible. But we will buy something less expensive and feel good about it — even if it, too, was overpriced. Many studies show that if a salesperson shows us a clearly overpriced item, say a Lady Date Pearlmaster Rolex watch for $38,000, we will say “no, thanks.” But when they immediately afterward show us the Cartier Santos Demoiselle watch for roughly $15,000, it’s suddenly a bargain we have to have. Really? $15,000 for a watch is a bargain? My conscious mind tells me that it isn’t intelligent for anyone, regardless of income. (Yes, call me cheap.) The difference was our “rational” mind suddenly kicked into “irrational” thinking due to pre-set reference points created by someone trying to sell us something, and $15,000 is less than half of $38,000, so that is a practical and intelligent decision. For some.
So how do you, as a brand, create sales outside of marketing campaigns through psychologically driven pricing strategies, and how do you as a marketer position your products to sell precisely the items you want to sell most? Offering sales and promotional pricing can often backfire, as you saw in my car purchasing example.
Appealing to how our mind thinks, processes information, and calculates solutions — rational or not — is the key to “winning customers and influencing behavior” for life. Integrating other psychological drivers, such as authority and reward, will keep those same customers coming back for more.
Some key takeaways:
- Never assume your target consumer is really going to read all the details of your message. Make it clear and actionable with a scan of the eyeballs.
- Price according to what is reasonable and credible for the generation and mindset of customers you are targeting. Not too low and not too high.
- Don’t make your customers think. Simply create a promotion that is simple and appeals to key psychological drivers: social proof, our need for rewards and authority.
- Immediately recognize your customers with a “Thank You” (there are no excuses with automated emails today) and reward them at least with a gesture of appreciation for their business.
- Finally, spend some time studying shopping patterns of your most valuable customers to identify rational and irrational behavioral trends. Plan future promotions accordingly and enjoy a strong ROI!