Engage-Digital

With all the usability, analytics, survey, heat mapping tools and many others that are now available for the web analyst to draw on, you’d think it has become almost a matter of form that any questions related to the online shopping process can be answered and that the customer’s decision making process can be exposed but in fact it seems that customers don’t necessarily themselves understand the mechanisms by which they make decisions.

Dan Ariely, a professor at Duke University has done research into what he calls predictably irrational decision making and in his book (Predictably Irrational) he presents an example involving the subscription pricing for The Economist newspaper.

In the example The Economist newspaper offered 3 subscription options:

1. Print plus online for $125
2. Print only for $125 (no, not a typo)
3. Online only sub for $59

This was either a mistake by The Economist or a stroke of genius. Ariely presented this offer as part of an experiment to one set of students and then to another set of students with a modified offer in which he removed the middle option.

The upshot was that when the first set of students were presented with all 3 options the majority chose option 1. When option 2 was removed and the remaining two options were shown to the second set of students the majority chose option 3.

Ariely uses this to demonstrate seemingly irrational decision making but he goes on to explain the principle that option 2 while appearing to be useless and of no value (to the potential customer), in fact had value to The Economist insofar that it’s presence gave the impression that option 1 was really very good value. By removing option 2, the perceived value of option 1 was no longer apparent so people went for the cheaper option.

This has some pretty interesting implications for how product pricing can be displayed and more interestingly how up-sell can be achieved.

In the current trading environment shoppers are more likely than usual to be looking for a good deal. That generally means either cheap or good value and the two aren’t necessarily the same. Being cheaper than the next guy might have more to do with the supply chain and the deals that can be struck by the merchant with his / her suppliers, but demonstrating good value when your offering is not the cheapest on the market can be a pretty tall order.

Ariely refers to the middle option as a decoy but a conjuror or a lawyer might refer to it as simple misdirection. The point is to demonstrate value by creating a benchmark that is close enough but which the customer is easily able to discount in favour of the real offer.

Increasing average order value is hard but with this kind of understanding and a content management system and pricing structure that is flexible enough it is possible.