Shopper Communication, Public Blog, Knowledge Bank Blog

The Psychology of Value

Let’s start with a quick maths question…

In a lake, there is a patch of lily pads.  Every day, the patch doubles in size.  If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half the lake?

What was your answer?

Many of you will have said “24”.  It’s the immediate intuitive answer.  If the lily pads cover the entire lake in 48 days then it must cover half the lake in 24 days, right?

Wrong.  The lily pads cover half the lake on day 47.  The patch then doubles one final time and covers the entire lake on day 48.

It’s only when you take a step back to properly think about it, that you figure out “47” is the answer not “24”.

In our day-to-day lives, we rarely stop to properly do the maths.  Our brains don’t like to.  It’s hard and takes time.  Our brains prefer things to be quick and easy.

So, we often take the easier option.  We make decisions based on what is most intuitive.

Why are we talking about this?  Many FMCG brands are facing value challenges right now.

Cost challenges – spikes in input costs leading to price rises.  Profitability challenges – needing to promote less to hit margin targets.  Competitive challenges – cheaper competitors encouraging shoppers to trade down.

It’s a value minefield out there and you need to navigate your way through it.

To do this you need to take a different approach.  Most manufacturers think about value in a very rational and analytical way.  Reach for the big data.  Fire up the models.  Run the numbers.

This is important.  But it’s not enough.  If you only rely on the numbers, you miss the psychology.

The way actual shoppers behave in an actual store.  Quick decisions based on what is most intuitive.

To win the value battle, you need to understand and apply shopper psychology.

So, how can you do this?

It means identifying the things that DON’T change the price of your product but DO change perception of its value.

Here are a few examples…

You could show shoppers how long your product lasts. Gillette have had a ruthless focus on this over recent months.  Using a consistent “up to X amount of shaving” message that gets tailored by product and pack sizes.  Go into stores and you will see “up to 1 year of shaving,” “up to 16 months of shaving,” “up to 2 years’ shaving.”  The intuitive shopper reaction is going to be “wow, that’s a LOT of shaving.”  Doesn’t change the price of the product.  Does change the value perception.

You could show shoppers how much more your product does.  Fairy liquid consistently dramatise their value.  They say things like “cleans 2x more dishes.”  Tide detergent in the US say they do “3x” the loads.  The first thing shoppers will see is the “2x more” or “3x more.”  They think “this is the smart choice,” and move on.  Doesn’t change the price of the product.  Does change the value perception.

You could show shoppers the unit cost instead of the headline cost.  Another razor brand, Harry’s regularly do this.  They talk about “£2 or less per cartridge.”  Coffee brands have done It with “only 3p per cup.”  For any product that has multiple units or servings it’s a key way of signalling value.  Doesn’t change the price of the product.  Does change the value perception.

You could show shoppers that you are worth paying more for.  Saying something your product can say that competitors can’t say.  The recent Magnum “stick to the original” campaign is a great example of this.  Prompting shoppers to “spot the 7 differences” between a Magnum and the generic equivalent.  Doesn’t change the price of the product.  Does change the value perception.

These are just a few examples of the type of things the big data and analytics won’t tell you.

Things that play to the intuitive way shoppers make decisions in a busy retail environment.  Things that don’t change the price of a product.  BUT do change its value perception.

To win the value battle you need to have the right ammunition.

Do you?

If you want help maximising you value with shoppers, please get in touch.

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