Wilful promiscuity and other behaviours

Too many marketers focus on the pay-off that their product or service offers the consumer and miss the point about the architecture of how people decide what to buy.

“When for example we must assess what price we are prepared to pay our decision is determined not only by the value we associate with that product but also by our expectations of what such a product should cost,” says Enrico Trevisan in The Irrational Consumer.

His book explains how to apply behavioural economics to your business strategy. It deserves a space in every marketing toolkit as he teaches you the same things that you may have read in Thinking Fast and Slow by Daniel Kahneman in a way that you can quickly apply to your plans.

Trevisan is a partner with Simon-Kurcher & Partners, world leaders in price consulting, and his economical use of language helps you to focus on how to use the insight instead of admiring the genius of unlocking how people think.

For wholesalers seeking to influence independent operators of foodservice and retail outlets, his case studies provide useful learning and ideas. For example, in chapter eight he explains how the challenge of self-control leads consumers to behave in ways that don’t appear to optimise the value they can obtain.

He tells a story about how his father explained to him when he was a child about why his father did not use his spare money to pay down his mortgage but instead invested in funds that would generate less income than if he paid down his mortgage. “The bank will  call me to get its own money back, not mine,” his father explained.

Trevisan said that his father was conscious of the difficulty of saving voluntarily and so chose to maintain the mortgage.

From his point of view, the interest paid on the mortgage was simply the price to pay for a self-control mechanism.

The same rules work with health club memberships and Christmas club saving schemes. Could they also work for symbol group membership? If so, this is frequently absent from the marketing materials that I see.

Elsewhere Trevisan discusses how most people find that losing something is less acceptable than failing to acquire it. A loss is an out-of-pocket cost and an unrealised gain is an opportunity cost.

This behaviour is what makes successful a marketing strategy where you give something away for a free trial period in the hope that the consumer will not want to give it back.

But today this is true only up to a point, suggests Trevisan. Because the strategy is so widely used that consumers may not necessarily see taking advantage of the free period as a commitment to buy. They may be wilfully promiscuous.

Many wholesalers provide a range of free added values services to their regular customers as a tactic to build loyalty. But they may need to consider greater customisation of these in order to capture customers.

A third area of interest is research that shows that an excess of choice leads to lower sales.

“Evidence suggests that three quarters of the alternative products to those habitually bought by a given customer are not even noticed by that customer [and this] makes it necessary to find an optimal balance between the range of products and the attention generated. The idea that a large number of options is not always the best solution to this problem thus acquires added importance.”

Every wholesaler has the challenge of providing a great product range with good margins that their retail and foodservice customers ignore.

There is no simple answer provided but The Irrational Consumer will help you to think about how to change your offer to win their business.