When I was in school, Economics was a purely left brained logical pursuit.  This always confused me because I knew there were cases where a price increase with the same product could increase sales.  However, that was NOT what the Economics theory of the day predicted.

Sure the supply demand curves worked with commodities.  But calling any product a commodity was like waving the white flag of defeat and saying you didn’t know how to market that product.

We have worked with many clients to redefine products from commodities to create customer preferences.  It requires getting the customer to pay more attention to the details of the product.  We have seen it work, time and time again. 

The key is that the decision making in the human mind is not completely logical.

Economists have incorporated behavioural variation and this has now come to the fore.  Daniel Kahneman won the 2002 Nobel Prize in Economic Sciences and brought a merger between psychology and economics that is much more logical than the old left brained economic logic that started with a least two fallacious assumptions: an all knowing consumer and all other things being equal.

These right brained economists have opened the door to more creative thinking and should bring appreciation to the irrational added value that advertising can bring to business.

Now marketing professionals need to incorporate more of the behavioural economists ideas.

Price framing and other cognitive biases work well – that’s the basis for all those 99 cents price points.  They are drawing on the unwritten reference point of the $1.00 to make customers believe the price is lower.  Putting a product on an end-aisle display creates the perception that it is on sale, whether it is or not, and will increase sales based on the framing created by that perception.  Having a sale on limited products in a store creates the context of cheaper prices on the non-sale items.

Locating your product in a store can also set up a context for perception.

I worked with General Mills in the early days of what became the Nutritious Portable Foods category (I know, all food has nutrition and is usually more or less portable.  This category may be easier recognized as granola bars).  The critic factor in success was having a section in the store away from the candy and chocolate bars.  Closer to the cereal section, meant these products were more believable as wholesome products.

Then we launched chocolate, chewy and fruity products that out sold the earlier granola ones because of their better taste profile when in proximity to granola.

  • Share/Bookmark

Leave a Reply

Next Post
Powered by WordPress.
Calotropis theme by itx