Wednesday, December 11, 2013

Sidestep Heuristics When Ethical

Consumers take decision making shortcuts. Researchers call these shortcuts “heuristics.” Most of the time, heuristics pay off for the consumer, since time is money. Still, some heuristics can mislead, and when the retailer knows about them, it can be unethical to allow them to continue.
     An example concerns package sizes. Researchers at Erasmus University and INSEAD found that shoppers estimate changes in the volume of a product container by roughly adding percentage changes in the height, width, and length. The accurate way to calculate the change in volume is to multiply the percentage changes in the three dimensions. That’s more complicated to do, so the shoppers take the mental shortcut.
     As a result, participants in a study failed to notice a 24% downsizing of the package when one dimension was increased to mask the decrease in overall volume. Astoundingly, this distorted perception held even when the study participants were instructed to closely attend to the package size and weighed the container.
     The ethical practice is for a retailer to clearly notify consumers of percentage changes in package size and any change in the per unit cost.
     Another example concerns habitual purchases. Researchers at University of Texas-Austin found that half of the number of laundry detergent shoppers take no more than nine seconds to select the product. We can figure that most of those seconds are spent in locating the product and lifting it into the cart. These speedy shoppers almost surely aren’t discussing their decision with a salesperson or with other customers.
     If the purchaser’s selection satisfies both her product performance objectives and our profit making objectives, we don’t need to do much. The consumer is on automatic. But if we believe the consumer would benefit by purchasing a new brand, the ethical alternative is to use pre-shopping advertising, store signage, product adjacencies, and very brief salesperson interactions to steer the consumer. Slow down the decision making process.
     And then there are times the proper action is to complicate choice just because it helps the consumer feel they’ve selected the least bad alternative. Researchers at University of Pennsylvania and Columbia University say this circumstance arises with purchase decisions the consumer considers as having potentially life-changing consequences and the alternatives are quite clear-cut. Some of these situations, such as buying a house, extend over time. Others, such as selecting funeral arrangements, could last no more than a day or two.

Click below for more: 
Utilize Unit Pricing 
Hitchhike onto Purchasers’ Shortcuts 
Try Out Dollar Over Percentage Discounts 
Complicate Life Decisions for the Concerned 
Trade Ethics with Consumers

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