Some time ago, M-Factor team conducted a set of experiments for the famous cosmetic retail company in Sarajevo. The aim of the experiments was to show how consumer minds have particular pattern and how consumer behavior can be predictable. Today, we will reveal one of those experiments and conclusions we have gathered.
The experiments were conducted in focus group. The focus group is the method that produces wide range of opinions, triggering between members, group pressure and deep discussion. For this particular research, the focus group consisted of 22 and 60. For the start, we will give you a short overview of the experiment itself.
Experiment With Prices
In the first part of the experiment, participants were given two prices: 6 euros and 9 euros, from which they had to choose one that they would pay for product X. The product was not important, because the story behind is that they are in the imaginary shop where they can choose the price by themselves. The second part of the experiment has the same story behind just there are three prices now: 7.5 euros, 9 euros and 6 euros. Again, the participants were asked to choose one price. Hereby, the choice experiments were applied. These types of experiments attempt to identify the utility that individuals derive from the attributed of chosen commodity and focus groups are good in determining which attributes are important for these choice sets, information, potential bias or other problems.
Results and Conclusions
The hypothesis behind this experiment was taken from the experiment with beer conducted before, which said that more than a half of number of subjects (around 80 percent) when they were offered to choose between two prices would choose the lower one, but if they were offered three prices would choose the middle one. What happened here was that four out of seven subjects chose the middle price in the second case and all of them chose the lower price in the first case. When people want to adapt, their sensors make instant comparisons and pick the stronger, louder, more delicious, less frightening alternative and the selection depends on what do we expect. No one chose the highest price in the second part of the experiment. Daniel Kahneman said that people do not have good solution in communicating small risks, because the variations in predictions can be too wide to be comprehended in decision- making. That means that for them it was a comfort zone and by choosing the one of the extremes they could make a mistake. Three alternatives choice is easier to handle emotionally than two trade-off choice. Leon Zurawicki, neuromarketing guru, explained what happens in the brain when comparing three and two alternatives choice: decrease in the activation of amygdala (decrease in negative emotions) and medial prefrontal cortex (the evaluation of preference), while dorsolateral prefrontal cortex and anterior cingulate cortex activities increased (stronger reliance on summary evaluation, greater conflict control). Basically, if a retailer wants to sell certain product, it should put it in the middle price.
#Sincere thanks to the focus group participants.