Commit Shoppers from a Distance for Expenses

Consumers are more willing to pay a premium price for a product they desire if you obtain a commitment well in advance of the product’s availability. In a demonstration of this phenomenon, researchers at University of Mannheim watched what happened when consumers were told about a desirable product to be launched soon along with the premium price of the product. These consumers considered the high price as acceptable more often than did consumers who didn’t learn the price until the time of product launch.
     The time distance reduces sticker shock in a few ways:

• The shopper has more time to budget for the purchase. That’s the principle behind layaway plans.
• The announcement in advance encourages a longer-term perspective, which in turn relaxes budget restrictions. Researchers from Princeton, University of Chicago, and Digitas-Boston surveyed people entering a grocery store. One set were asked questions about the contents of their wallets. This nudged their thoughts toward the money they had to spend in the short term. Another set of shoppers were asked instead about the different types of accounts they had in their investment portfolio, such as checking and savings accounts. This got those shoppers thinking in the longer term. The second group went on to spend 36% more than the first group.
• When acquisition will occur at a somewhat distant time, the consumer correlates price more strongly with quality. The Mannheim researchers discovered that if the shopper faces an immediate expenditure of a higher amount than they predicted, the shopper devotes energy to thinking about other opportunities this expenditure will preclude. This distracts from associations between the item price and item quality. When extent of the price wasn’t a surprise because it had been announced some time in advance, the acceptance of the price lingered until the product’s availability.

     The Mannheim researchers also found that other sorts of distance—beyond time—can work. They reflect on how when a shopper purchases an item for someone else, the social distance can relax defenses against high prices.
     During a “Competing with Large Retailers” seminar I conducted last week in Stanislaus County, California, a participant told of shopping for perfume to give to his wife. As he smelled around, another man approached the counter and said, “Show me your three most expensive perfumes so I can select from those.”
     When buying a gift for another, we get less price sensitive.

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