Psychology of Consumption
The idea that consumers buy products based on their quality or price alone is a myth. In fact, many other, often subconscious factors pull strings at the point of a sale. The dawn of big data analytics has opened the eyes of many marketing professionals to the complexities of consumer markets. Here are some intricacies that directly have an impact on the psychology of consumption.
Price Can be a Feeling
What’s easier: a $500 cash transaction or a $1000 one touch online payment? Convenience often matters more to consumers than pricing (convenience gives a feeling of empowerment), even though they may not actively think about the mode of payment. When you count those $100 bills one by one, you may perceive the price to be unreasonable. It makes you stop and think for a second and ask “Is it really worth it?”. But a credit card swipe, or an online touch payment, provides no scope for such second thoughts. Consumers never essentially get to weigh the pros and cons of each purchase. A tap is all it takes, and tap is what they’ll do.
Consumption after purchase is almost guaranteed when people are acutely aware of the price that they’ve paid towards a service or a product. How? Let’s take the example of the following scenario.
An electronics company in Asia recently started selling smartphones at just $30. Pre-orders were open and they "struck gold". Over 100,000 orders were placed and people signed up mainly just for the fun of using a $30 smartphone. A month passed by and it was finally time for shipments to arrive, but the execution of the company was so bad that they delayed the entire process by another month. Local researchers who conducted polls noted that over 60% of customers who made the pre order, no longer shared the same enthusiasm in using the phone. Why? Because, over the course of time, their attention to cost had slowly come down.
Picture them paying for the phone at a storefront and being told that they would receive the phone after a lengthy delay, would there be an outrage? Most likely. This is due to the fact that when consumers are actively aware of the cost of a product, they’re more excited and eager to consume it, regardless of whether it was $5 or $500.
Over the last few years or so, we’ve seen a lot of enterprises employ price bundling strategies. It's not just limited to products, even a combination of services are being sold at a single price point. It’s one place where marketing executives managed to score a home run. A whole list of studies show that consumers tend to value and consume products that are bundled more than their individual counterparts.
Picture this: a consumer who isn’t an avid drinker may never buy an expensive bottle of champagne. But offer him a bundle of hand made cookies, chips, chocolates and then a bottle of champagne to go with it. What does he do? Consume it all. Essentially, bundles and combos target a variety of target audiences, thereby increasing the rate of consumption and profits. Marketers have worked out many bundling tricks to encourage consumers to part with more dollars.