| Chris Chan |
KUALA LUMPUR (The Star/ANN) – People’s consumption patterns can be influenced by discounts, promotions and sales.
I like my dog. We set off for walks two to three times a day and he always picks his own route through the village and woods. There are many forks in the paths, so there are many options and we rarely have an uninteresting walk – but although he has a few favourites, his inquisitive but fickle nose initially ensured I never knew which route he would choose beforehand.
My dog’s behaviour is interesting because it became possible to know to a high degree of certainty which way he would turn, just by observing a few factors. It is also a fun extension of some work I had done on Game Theory, a branch of mathematics to do with establishing a “dominant strategy” which is dependent on pay-offs received for various actions involving target subjects. As not all data is always known, it was necessary to apply Bayesian logic, where outcomes are modelled on available data. Examples are: If we left home after 10am, my dog would tend to follow the path of the neighbour’s dog which had been out before him. If it had rained, he would prefer mossy paths – if sunny, he likes sandy paths. In autumn, he is fonder of chestnut tree leaves on the ground than oak leaves, and so on. Therefore, if we left after 10am on a rainy day and the neighbour’s dog had gone down a mossy path, then it is very certain my dog will do the same. The maths does not attempt to explain why my dog has these preferences; only that his behaviour is predictable by certain conditions – and the same predictability applies to humans.
We like to think of ourselves as independent, thoughtful persons, able to weigh up the pros and cons before making decisions about what to buy or eat. But as described in my article What We Think Of When We Think of Food on star2.com, many human decisions are actually based on System 1 thinking, as quick decisions using biases are a survival strategy hard-wired into us during our evolution.
However, humans also make decisions based on other curious perceptions of reality, and these perceptions are surprisingly easy to manipulate. In fact, chances are very high you would want to choose the decisions engineered for you without even knowing why. People are simply hard-wired to make a lot of flawed decisions. The factors controlling our decisions are well-known, usually immutable and it can be fun to observe them in action, even within your own self.
So following are several startling ways we can be manipulated to be predictable. They are an intrinsic part of modern life, and they affect what we buy, eat and even feel about ourselves.
Before we start, a couple of terms need to be understood. One is “utility”, which in economics is defined as the benefit or satisfaction of consuming/buying an item. The other is “marginal utility” which is, therefore, the benefit or satisfaction of consuming/buying an ADDITIONAL item.
It is a common mistake to assign monetary values to desirability because in reality, the right equation should express an inverse relationship. As an item gets more expensive, the normal reaction is a drop in demand as people weigh up the utility of owning or not owning the item against the cost. Hence, when we see beluga caviar on the menu at RM500, we would likely get very curious and many people would want to try it, but unless you are an ex-PM of Malaysia, we probably would not actually order it. However, if the price is lowered to RM50, we would be much more likely to order it as it then becomes affordable enough to satisfy our curiosity, if nothing else.
Following this innate logic in our brains, the very most desirable items are therefore those that are perceived as free. That is why we prefer to buy items marked as “Buy one, get one free!” because the desirability of getting something for free is extraordinarily high, even though we might not have wanted the item originally. The same tactic also works for items marked as “Buy X, get Y free!”, even if Y is some worthless toy. The emotional charge of getting something for free is quite primal, often irrational and has boosted sales of billions of unhealthy children’s meals packaged with pointless plastic trinkets. Similarly, many adults prefer unsound meals with “unlimited free refills” for drinks, simply because humans very much prefer anything they perceive as zero cost.
Why this behaviour evolved may be due to the efforts required by our Palaeolithic ancestors to acquire food and shelter items. In their harsh environments, usually nothing was acquired easily and therefore anything that they could obtain for free or at a low cost in terms of effort would be extremely desirable and probably even irresistible.
Zero cost marketing strategies rely on the customers’ own motivations, which influence perceptions of utility and/or marginal utility – but it is important to note that these motivations are dictated by culture and environment. For example, buy-one-get-one-free roasted grasshoppers would not have the same appeal in Europe as in some Asian countries.
As an aside, an experiment found that people would eat up to 85 per cent more if food is perceived as free.