Behavioural economics and construction marketing

Duke University professor Dan Ariely has conducted some research and written a few popular books outlining how humans often make (and repeat) seemingly irrational decisions -- and how these traits can be applied rationally, by salespeople and marketers seeking to convince people to behave the way they wish.

One of his clearest observations, which struck close to home because of its immediate application for my own business, is the Economist subscription offer.  Readers were presented with three choices.

You could pay $59.00 for a one year subscription to economist.com (online only).  You could pay $125.00 for a one year printed subscription.  Or you could pay $125.00 for a combination print and web subscription.

Ariely noted the obvious:  Why would anyone even consider the second option (print only) and why did the Economist offer it?

Well, the marketing geniuses at The Economist had in fact, devised a scheme that dramatically increased the number of subscribers signing up for the combined print and electronic version of the magazine.  Given a simple choice of a seemingly "much better deal," they took the combined offer.

When Ariely tested a comparison offer, where subscribers could simply elect to purchase the web or web+print options, a much higher percentage accepted the lower, web-only offer.

There are plenty of other examples of how marketers can use psychology to manipulate the results and stack the odds in their favour.  In fact, any person whose business is sales and marketing would be wise to spend as much time as possible understanding the growing body of psychological and scientific research.

Yes, we are creating a web directory to go with our printed publications.  So, based on these results, we'll replicate the Economist offer concept, with a third choice which really isn't rational or "necessary".

Maybe your own construction marketing strategies should follow these paths.

See Ariely's blog here.  See constructionmarketingideas.com here.

Is this an argument in favour of free estimates?

This image is from an open courseware site. Caption reads: An experiment testing money mapping and value of experience. (Image courtesy of Prof. Dan Ariely.)

Readers of this blog know that I don't think much of "free estimates" as a marketing ploy. It invites you to spin wheels and waste times as purchasers seek out the low-ball offer. But here is a counter argument -- and it is the marketing value of the word "free".

This article describes some research by Duke and MIT economist Dan Ariely in his book: Predictably Irrational: The Hidden Forces That Shape Our DecisionsHis clearest example of irrational thinking is a Halloween treat test. He offered kids who knocked at the door two Hershey Kisses. They could then either accept a third small Snickers bar for free, or trade one of their Kisses for a large bar.

"The bigger bar was a better deal, an 8-to-1 return on chocolate. But most chose the smaller one; the idea of getting something for nothing was too tempting."

I still don't like Free Estimates; but am intrigued at the possibilities of finding something else Free that is actually conditional on your making the purchase. Maybe, indeed,throwing in the big free screen television, or some 'hot button' extra you know the potential client would really like, into the estimate/proposal makes sense (of course adjusting your proposal cost to more than cover the 'free' extra.)