How Much Did I Save?

  |  May 31, 2007   |  Comments

Everybody likes to save a buck or two when they can, but shoppers who are reminded of how much they can save are more apt to buy the lower-cost item. Researchers at the Yale School of Management, MIT, and Arizona State University found out that once consumers are reminded of alternative ways to use their money, they're more likely to prefer the cheaper option in choices that involve a tradeoff between price and quality. Their study involved the offline world, but online marketers take note: The research strongly suggests that ads will get a higher response rate when there's an explicit reminder that the product on offer is X dollars less than the competition -- and what that amount will buy in ancillary goods

Everybody likes to save a buck or two when they can, but shoppers who are reminded of how much they can save are more apt to buy the lower-cost item.

Researchers at the Yale School of Management, MIT, and Arizona State University found out that once consumers are reminded of alternative ways to use their money, they're more likely to prefer the cheaper option in choices that involve a tradeoff between price and quality.

Their study involved the offline world, but online marketers take note: The research strongly suggests that ads will get a higher response rate when there's an explicit reminder that the product on offer is X dollars less than the competition -- and what that amount will buy in ancillary goods.

"In one experiment, two groups of consumers were asked to decide between a $1000 stereo and a slightly inferior $700 model. For one group the price difference was left implicit, while the other group received the description `leaving you $300 in cash'" to spend on, say, CDs. The less expensive stereo was chosen significantly more often when the price difference was explicitly noted, the authors said.

"Consumers only focus on information that is explicitly presented to them. Although factors like the price difference between two items seem obvious, just mentioning it explicitly seems to dramatically change how consumers think about a purchase," study co-author Nathan Novemsky, an associate professor of marketing at the Yale School of Management, said in a statement.

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