Context is Everything
In 2009, Duke University research psychologist and behavioural economist Daniel Ariely worked with The Economist magazine to test reader responses to a series of offers and price points. The study involved two stages, each one with options to choose from.
In round one of the study, readers were presented with two options to purchase The Economist magazine - print and digital for $125.00 and digital only for $59.00. In round two of the study, readers were presented with three options - print only - $125.00, print, and digital - $125.00 and digital - $59.00. The researchers, having promoted the offers, monitored sales. In round one, the sales or subscriptions were as follows - print and digital – 32% of sales and digital-only – 68%. The cheaper digital option was preferred. In the second round of the study, the sales were as follows - print only – 0%, print and digital – 84%, and digital-only – 16%.
This study and the findings helped to introduce two new terms into the marketer's lexicon – 'decoy effect' (people's preferences when picking between two options are altered by the addition of a third) and 'anchoring' (a cognitive bias that describes the human tendency to rely too heavily on the first piece of information offered). Moreover, this study highlighted the importance of 'context' (the principle that variables are rarely considered in isolation). To quote onetime Australian Prime Minister John Howard – 'context is everything.' And it is.
Here is another example. Joshua Bell is among the two or three greatest violinists in the world today. He plays regularly in the greatest venues, including - Lincoln Centre, Kaufman Music Centre and Carnegie Hall. Tickets to his concerts sell for hundreds of dollars, with box tickets attracting an even higher price. Despite his fame and prowess, in 2007, Bell played his violin in the Washington subway, busking for thousands of people and earning himself a paltry $52.17, which included $20.00 from one person who recognised him. Even though passers-by were listening to one of the best violinists in the world out of the context of a concert hall, Bell's music quality was harder to judge and substantially less value was placed on it.
A New York Department of Consumer Affairs study looked at 90 brands offering identical products (including shaving equipment). Using colours (pink and black) and design differences – some products were said to be for men, and others were said to be for women. The study found that despite a lack of relevant differences between the products, those targeting women were an average of 7% more expensive than those targeting me. Further, it was found that 42% of products targeting women were more costly than those targeting men. Colour created a context and made the pink products more appealing to women, so much so that they were prepared to pay more.
The point here is that John Howard was right – context is everything. No variable, price, or anything else is ever judged in isolation. Consumers evaluate all variables in the context of other related factors. It is essential to understand the context within which variables of importance to your target market will be considered. There is also merit in creating the context as occurs with decoys and anchors. What is the context in which your price points are judged?
John Carlson – Marketing Consultant Perth.Maximising performance through ethical customer-centric marketing, branding, and communication.
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For more marketing information and to understand the concept of greenwashing in marketing, visit my website at www.djohncarlsonesq.com or email me at [email protected].
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