• Tristan

The Psychology of Sales Promotions


I'm currently reading The Tipping Point by Malcolm Gladwell, an incredible book explaining the social dynamics that cause sudden change and growth in trends 📈. There is a great study Gladwell quotes that powerfully demonstrates how the way something is framed, and the subtleties of persuasion, can determine what people believe and how they act.


It goes like this...


A group of students were recruited to take part in a study to test headphones 🎧. Each person was given a set and told they were testing them when in motion, and were given various tasks to undertake. One of which was listening to an editorial on the debate on the level of student tuition fees.


The first group was told to move their head up and down whilst listening, the second was told to shake their head left and right, the third was told to keep it still.


The last group thought current fees were appropriate, proving the debate they all listened to was overall unbiased, or at least not very persuasive one way of the other. The up and down shakers found the editorial very persuasive and wanted to increase tuition fees (despite being students themselves!), the left right shakers wanted a 20% decrease in current fees, strongly persuaded by the opposition's debate.


The simple act of moving your head during the debate determined your stance on the argument! Wow... and you think you're a rational thinker 🤔.


Well then, clearly judgements and decisions are not always rational or optimal (Kahneman's Prospect Theory). Let's see some examples of this with regard to promotions...


Framing the promotion


People evaluate decisions based on the reference point and not in absolute terms.


Consider this, you want a new BBQ. Out of these 2 options which one would you buy immediately in a shop, and which one would you assess your options in other stores:


EG 1: BBQ Model 1100 - WAS = £345 NOW = £250

BBQ Model 1100 - WAS = £260 NOW = £240


Despite the second option being £10 cheaper in absolute terms, you likely would still shop around for other deals as the promotion does not appear all that inviting.


Diminishing Sensitivity


The same change has a smaller impact the further away it is from the reference point.


Would you drive 20 minutes to save £10 for the radio? Would you drive 20 minutes to save £10 for the TV?


EG 2: Store 1 20 min drive> Store 2

Radio = £35 Radio = £25

TV = £650 TV = £640


In both options you save £10, yet most people would only drive 20 minutes to the other store for the radio!


Rule of 100


The way you frame a discount depends on the value of the product you're selling, >£100 use £, <£100 use %. What to you sounds more appealing?


EG 3: £25 shirt - £5 off OR 20% off

£2000 laptop - £200 off or 10% off


Conclusions


People are easily influenced by their environment or the way something is framed, and people are not always rational about how they make decisions.


Bearing this in mind, next time you want to run a promotion for your product or business think about the way you frame the promo. Can you use the Rule of 100? Can you optimise the time the promo gets sent to a customer to increase conversion? Can you segment your customers or personalise a sale to increase how appealing it appears?


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© 2019 Tristan Gillen.