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I love you, discount!

They say there are only two things that elevate a woman’s mood. When someone whispers ‘I love you’. Or, when someone screams ‘50% off’.

Both will elevate her mood, alright. But does a discount elevate the image of a brand? Even if, in the short run, it elevates the brand’s sales?

To know more about it, psychology professors chose the Theatre Department of Ohio State University to conduct a small experiment.

Every year, the department offered buyers a season pass that gave access to all ten shows of the department’s own productions. The researchers chose the first 60 people who came to buy tickets, for this experiment.

The first 20 customers were sold the tickets at the usual price of $15.

The second set of 20 customers were told there was a special $2 discount offer and were offered the same ticket at $13.

The third set of 20 customers were told they had a very special $7 discount offer and were sold the same tickets at $8.

Note, none of the 60 knew they were part of an experiment. Nor were they allotted different seats. All were given vantage seats to all the 10 shows.

Did the price they paid for the tickets affect the way they enjoyed the performance?

One way to know it is to see how much they laughed or clapped at each of the shows they watched. But this is easier said than done.

So, the researchers used another metric – to track whether they returned for subsequent shows. At the end of the season, when the researchers checked, they were in for a surprise.

Those who paid full price for their tickets attended significantly more shows than did those who received discounted tickets. You may think they watched all the shows since they wanted to recover the money they paid in full.

Staying on the same logic, you may also think those who got a $2 discount would have watched more shows than those who had a discount of $7. Was it the case?

Nope!

There was virtually no difference in attendance levels between the two discount groups. How come?

The amount of the discount hardly mattered. Both the groups equally missed most of the shows. The quantum of discount doesn’t matter, once it is given. Value Attribution Bias kicked in the moment they received a discounted ticket.

We imbue a person or thing with certain qualities based on our initial perceived value of them. Regardless of the amount of discount obtained, the buyers saw the tickets as substandard. Hence, they perceived the shows to be substandard. And that affected their attendance of subsequent shows.

Moral of the story: Whisper ‘I love you’ to a girl and ‘No discounts’ to your customers and they would love you back and buy you again.

Scream ‘Discounts’ to a girl and ‘I love you’ to the customer and they too would buy you again and love you back.

Try any other combination and be prepared to be discounted!

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No immunity, sorry!

Let’s continue from where we left in our last post. This is not a sequel but it would help if you read the previous one before you continue.

There is another bias that inflicts us with error of judgment and afflicts us with unforced errors – the Diagnosis Bias. This refers to our propensity to label people, ideas or things based on our initial opinions of them – and our inability to reconsider those judgments once we have made them.

If you think you don’t have this bias, may I share some bad news. None of us is immune to falling into this trap. In a manner of speaking, that’s the good news too!

How susceptible we are to diagnostic bias?

Extremely, enormously, immensely and immeasurably. So much so that even a single, seemingly innocuous word has the power to change our opinions. Need proof?

Let me share an experiment conducted in the Economics class at the Massachusetts Institute of Technology. Students of the class were told their regular professor was not going to come that day and that a substitute instructor would be filling in. This man was someone the students had never met before.

As is customary in American colleges, the students were given a write-up describing the instructor. There was one catch. No, make it two. Two different write-ups were handed out to the students. Only that the students didn’t know it and thought all of them were reading the same write-up.

One group of students got the following write-up.

The substitute instructor is an economics graduate student at MIT. He has had three semesters of teaching experience in psychology at another college. This is his first semester teaching Economics.

He is 26 years old and married.

People who know him consider him to be a very warm person, industrious, critical, practical and determined.

The second half received a nearly identical write-up.

The substitute instructor is an economics graduate student at MIT. He has had three semesters of teaching experience in psychology at another college. This is his first semester teaching Economics.

He is 26 years old and married.

People who know him consider him to be a rather cold person, industrious, critical, practical and determined.

Both the write-ups sound the same, right?

Wrong. Two words were different. ‘very warm’ versus ‘rather cold’.

The instructor came, taught and left. The students were then handed a feedback form. They filled them and left.

When the results were tabulated, the researchers couldn’t believe that the feedback from both groups of students were for the same instructor. The feedback from the two groups looked like black & white. Chalk and cheese. BJP and Congress. You would have thought the students were responding to two different instructors!

Students in the group that had received the write-up describing the instructor as ‘warm’, loved him. They described him as good natured, considerate of others, informal, sociable, popular, humourous and humane.

The second group, who sat in the same class and listened to the same man and the same lecture, didn’t like him much. They saw him as ‘self-centred, formal, unsociable, unpopular, irritable, humourless and ruthless.

Why this kolaveri?

When we hear a description of someone, no matter how brief, it inevitably shapes our experience of that person!

Psychologist Franz Epting, an expert in understanding how people construct meaning in their experiences, says all of us put on diagnostic glasses when we encounter new people. When we meet someone, we quickly diagnose him or her before deciding whether we want to engage in a conversation with him or her.

Epting says, ‘the baggage that comes with labeling is the notion of the blinders, really. It prevents you from seeing what’s clearly before your face. All you are seeing now is the label.’

The contrasting feedback from the students was caused by one word used to describe the instructor – ‘warm’ versus ‘cold’. Interestingly, the word is completely irrelevant in the whole scheme of things. His qualification, experience and teaching should have defined him. Instead, the students’ perception of him was fashioned by a word unconnected to any of it.

Imagine the impact of this bias in the context of advertising that we see. In the context of product write-ups that we read. In the interviews we conduct based on what we read in the CV.

Do you still think you are immune!

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Naanum Hero Da!

Apparently, there’s a punch dialogue in a Tamil film which I didn’t see but only heard. The hero says: ‘Once I make my mind, even I can’t change it’.

Who says it or in what context is immaterial to this article but what was said is very relevant to the topic of this discussion.

Once we attribute a certain value to a person or thing, it dramatically alters our perceptions of subsequent information. Psychologists term it the Value Attribution Bias. In other words, once we attribute a certain value to something, it’s very difficult to view it in any other light. The initial value we attribute cloud our subsequent views of the same thing.

The bias is so powerful and potent that it affects us even when the value we assign is completely arbitrary.

A simple experiment conducted by three researchers, the findings of which were subsequently published in the ‘Journal of Marketing Research’ explains it.

The researchers picked three groups of students and told them they were checking the intelligence-enhancing properties of a beverage called SoBe, which they said increased mental acuity of those who drank it. To test the acuity, the researchers explained to the students that they had developed a thirty-minute word jumble challenge that the students would have to solve after drinking a glass of SoBe.

The first group was the control group which meant they were to take the test and solve without drinking SoBe.

The second group was told to pay $2.89 for SoBe and were served the drink.

A third group was given SoBe but was told that the university had gotten a discount and that they need to pay only 89 cents for it.

When the researchers tabulated the results, they found something interesting. Let the drums roll please….

The second group, that paid $2.89 for SoBe, performed slightly better on the test than did the group that received no SoBe. And if you think, SoBe should indeed be intelligence-enhancing, here is the clincher. The students who drank the cheap SoBe, the 89 cents group, performed the worst of the three groups. Which means, they performed poorly even when compared to the first group that didn’t drink SoBe.

Note, it’s the same drink. Never mind if it enhances intelligence or suppresses stupidity. Given that the same SoBe was served to the second and third groups, we can only conclude that it was the value the students attributed to the SoBe that made the difference in their test scores.

As idiotic and as stupid as it may sound to you, the more expensive SoBe made the students smarter and the cheaper SoBe made the students, well dumber!

The journal article that carried the findings was aptly named: ‘Placebo Effects of Marketing Actions: Consumers May Get What They Pay For’!

Expectations change the reality we live in. The value that we attribute to something fundamentally changes how we perceive it. When we get something at a discount, the positive expectations don’t kick in as strongly. We tend to discount the benefits as well.

Guess we are like that Tamil film hero after all. Once we make up our mind, even we can’t change it!

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