Price Is Not What It Seems – Or Is It?
I recently read a very interesting article by Philip Graves on his Consumer Behaviour site called Price is not what it seems and it made me think hard about the notion of price and the assumptions we make.
Philip was noting that Waitrose are selling ‘Essentials’ branded pizzas cheaper than their own label brand. He suggests that emotional priming as ‘less expensive’ might obscure the rational fact that they are more expensive. So Philip’s key point is:
When it comes to understanding consumers it’s always important to consider the issues from a rational perspective, and then completely ignore what you conclude.
But I simply don’t agree. It’s not as simple as that and I think it come down to how we interpret the word ‘rational’.
The economist’s view of ‘rational’ is often taken to be ‘buying it for the least amount of money”, and Philip’s point appears to be consequent to this.
But, our lives are not just about saving money. Other rational strategies are:
- Time saving – important for a lot of people who shop online. For many people time is money.
- Trusting – and trusting an organisation like Waitrose is a perfectly rational decision in my book.
So, what is a decision? Well, assuming no deadly threat that would invoke the reptile brain, the other two brains get involved:
- A rational, neo-cortex.
- An emotional, amygdala or limbic system.
The amygdala scans our experience for ideas on how we proceed with a given situation, and presents it to us as an emotion. It packages a vast amount of information into one stab of fear, or sense of well-being.
So ‘not-rational’ is definitely not ‘irrational’, and to call it so seems to write it off as ‘wrong’ in some way. I don’t think it is. And the neo-cortex can choose to use this emotional response as the best way to proceed.
We need both brains to make a decision. People who have an intact neo-cortex but no access to messages from the amygdala, cannot make decisions about anything, not even what to have for breakfast. I think we ignore half the decision making equipment of the human brain at our peril!
So, back to price …rational decisions are not always simply made on price. When we make our decisions, the feeling of trust is rational too, so is time saving and much else. So you can’t dismiss it and you shouldn’t ignore it.
And, back to Philips piece, the big danger for the retailers playing price games is losing trust. As Richard Branson’s mum said to him, “all you have is your good name”. Getting ‘found out’ will trigger the amygdala to a massive negative emotional reaction, and this will be supported by the neo-cortex with it’s own reasoned rejection. And this combination would be unstoppable, like in the current public reaction to MPs expenses.
Thanks for visiting my consumer behaviour blog and commenting.
Firstly, a minor but significant correction to your quote from my blog: the implied budget “Essentials” range was being sold more expensively than the regular (non-budget) Waitrose product in the example I gave.
Without wishing to disappear down a semantic cul-de-sac, I was using the word rational in relation to a decision based on reason. In the case of the “Essentials” range customers consider buying it because it is positioned as cheaper; if you were to ask them why they had bought an “Essentials” product I’m fairly sure they would say that the lower price was the main factor, it is the whole reason for the range.
And yet, as the pizza example reveals, it isn’t actually cheaper. They buy it because they feel it is is cheaper, rather than because they know it is cheaper (the disingenuous pricing reveals this perfectly).
I agree that their purchase is the consequence of an unconscious emotional reaction to the brand. That may or may not have been validated in their initial encounters with it.
And yet, just as someone who has hitch-hiked several times and not been bludgeoned to death by a psychopath feels safe getting into another car, the next trip is statistically just as risky as the first and may lead to their demise.
The nature of the adaptive unconscious is such that people can operate very efficiently because reappraising the risk of every living moment would be energy-sapping and progress-limiting (and hence it has considerable evolutionary benefits for us to function in this way).
But the consequence of this, and this runs very much contrary to your suggestion that we need both parts of the brain to make a decision, is that our behaviour can occur without our conscious involvement. Danage to the amygdalae doesn’t affect consciousness; indeed, patients with damage to this area are often conscious of their own impairment. But the fact that people with damage to the emotional processing areas of the brain can’t make decisions, doesn’t mean that decisions taken with emotion are necessarily good ones (when gauged from an independent, rational perspective).
Is the car driver making a conscious decision to slow down and keep a certain distance from the car in front on the motorway? Not when he realises that, for the past few minutes, he has no recollection of the journey or anything that happened on it. His unconscious mind has been running the show.
I don’t believe that the FEELING of trust is rational (as in my hitch-hiker example above). It’s a feeling; an emotional response triggered by a familiar scenario that is associated with a particular outcome. It might be, indeed it usually is, efficient and practical to operate at this level but it is not rational to do so (at least not in my understanding of that term).
At a conscious level buyers of the Waitrose ‘Essentials’ products believe they have made a prudent purchase; they may well be quite adamant that they have. But they have been tricked.
Ironically, whilst being duped in this way can lead to a back-lash it is not necessarily the case that it will. I have encountered numerous examples where people’s primed positive associations with a brand effectively overwhelm extremely negative experiences. Our minds are adept at discounting information that conflicts with our perceptions and beliefs.
The example you mention of the media-induced reaction to MP’s expenses doesn’t necessarily support your argument. I suspect that most people have a healthy distrust of politicians. When the negative press emerged it wasn’t much of a stretch to think that MP’s were corrupt, quite the opposite.
Interestingly, what most people have failed to acknowledge is that they behave in exactly the same ways as the MP’s they’re critical of: every large organisation I’ve worked in has had conversations along the lines of …”Did you know you can claim for this?” “Crikey, no, but I will from now on!” Yet again, the emotional resposne, that fits the established belief over-rides what one could argue was a more rational response: “Actually, we all do that a bit don’t we? Isn’t that just human nature?”
Of course, group influence can overwhelm a brand, but it takes a large amount of (usually media) energy to reach critical mass and the few examples that do come to mind (Ratners, New Coke, Dasani) are dwarfed my the millions of second chances that brands are given when they let customers down who have a sufficiently strong prior positive belief about them.
I’m not advocating playing price games to lose trust, rather that people can get too caught up on price when it is very often not what it seems. Price isn’t an absolute issue and must be considered in totality. As you say, other factors like saving time are considerations, but such evaluations aren’t usually conscious ones. Would any buyer of “Essentials” have reasoned, “I’m buying this product because I’m trusting that it will be cheaper, even though I don’t actually know, but trusting that it is will save me the time of looking and enable me to function more efficiently overall. And even if I’m wrong the likely loss involved is relatively small, so it’s still a good move.”? That would, to my way of thinking, be a rational basis for buying a more expensively priced ‘low price’ option, but I doubt any of them thought anything like that!
There is plenty of other evidence that price is not what seems. People will react differently to the same price expressed in different terms; using the right combination of small numbers can lead people to behave as though a higher price costs less; holding a product causes people to feel it’s worth more; a more expensive version of the same product is experienced by the brain as being better, and so on.
Whilst I realise we have a slightly different take on this example I hope you share my sentiment that such debate is extremely healthy and, as I can see from your website, reflects the fact that we share a broader understanding about the nature of consumer behaviour. It’s an emerging area and it would be dull if we agreed on all the nuances straight-away!
Philip Graves
Fascinating stuff, thank you for your comments. To quote Jonah Lehrer, from his book ‘The Decisive Moment’:
Our decisions and how we make them are a complex interplay of what we believe, what we reason, what we love and what we are fearful of.
And I think the words are important too. We haven’t yet got to grips with all the semantic baggage carried round by common language terms like ‘rational’, ‘irrational’ and ‘emotional’, let alone the implications of ‘conscious’ or ‘unconscious’ decision making. I don’t believe we can throw ‘rational’ away, but we probably can agree whatever we think we think, it’s complicated up there…