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Will you buy something just because it becomes easier to buy?

Surely, people buy only the things they want or need. I either want to buy this shirt or I don't. I either want to buy this vacuum cleaner or I don't. Why would you buy something you don't want, or don't need?

 

Ah, but is it possible to change your mind on what you want - without you knowing it? 

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Mail or Phone?

In the 90s, Ogilvy was working with British Telecommunications to push out simple telephone products such as phone recording and call diverting. How this was done back then was that letters would be sent to potential customers, informing them of these new products. Remember, this was all back in the 90s, before mobile phones and the internet

Ogilvy and BT decided to run a little experiment. Would there be any difference in customer demand if they were to alter how customers ordered?

They decided to send out 3 versions of letters to customers:

  • Version 1: Customers could only order by snail mail (there were a form and a return envelope attached, i.e. the customer just needs to fill in the form, put it in the envelope, and post it together with the rest of his/her mail - again remember this was the 90s).

  • Version 2: Customers could only order via telephone 

  • Version 3: Customers could order through snail mail or telephone

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Before we look at the results, what do you think? Would there was a difference in customer demand? 

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Simply changing the mode of how people can make an leads to changes in demand, even if it is the same product. 

  • First, compare versions 1 and 2. Since the letter came by mail, it seems more natural to reply by mail. 

  • We can also observe that people found it more painful to order through a telephone than completing a return form. Perhaps people had the impression it would mean long waits on the phone, or they simply didn't want to talk to a customer service officer (while they could complete the form and mail back without interaction with anyone).

  • We call this transaction costs - where there is friction created that discourages people from doing something.

  • When we compare all 3 versions, we notice something interesting: Version 3 has a response rate that is the combined of Versions 1 and 2!

In other words, the biggest determinant of whether people would buy the products or not is the medium through which customers can make the purchase! Just by changing the medium, you can change the demand. 

Here's another example

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Vending machines are super common in Japan; there are over 5 million vending machines in the country. Having been to Japan about 10 times now, I can attest that you can find vending machines everywhere - from mountain trails to train stations, selling everything from hot drinks to mystery gifts. 

But I was always puzzled by the sight in the picture above, a very regular occurrence. Convenience stores and vending machines selling the same thing located practically side by side. This happens at train and metro stations, or along streets in major Japanese cities. But isn't this a classic case of duplication, offering the exact same product? And why wouldn't people just go to the convenience store (especially if there is no crowd)? There's a wider selection of drinks, and you might also find something else you want?

It turns out again that the channel in which the same product is sold matters much more than we think. In the early to mid-2000s, vending machines located close to convenience stores saw sales of up 80% higher than if they simply existed as a standalone. If you do not want to talk to anyone, you can get the drink from the vending machine (and there is a sizeable group in Japan that really values non-interaction - which also explains why some popular ramen chains like Ichiran design the entire experience for contact with anyone else to be minimised). If you don't mind interacting with staff or if you're not in a rush, you get the choice of going to the convenience store. The availability of the preferred mode of ordering again drives demand up.

There is also a second reason why convenience stores and vending machines can garner higher sales despite selling the same thing -  the introduction of a dominated choice. Our brains are keen to make decisions quickly, and we often rely on heuristics (simple cues) to help us decide.

 

For example, you might be deciding if it was worth stopping to get a drink. And if you are introverted and prefer non-interaction like some Japanese folks, you might hesitate going into a convenience store. You might think, I don't really need the drink. But say there is now a vending machine nearby. This option seems much better than the convenience store option. It dominates the other choice. Because there is a comparison, and your brain is able to easily deduce that one option is much more attractive than the other, the dominant option - to stop moving and buy a drink - becomes more attractive than if the comparison didn't exist. The dominated choice is a common marketing strategy that is used in many areas from selling larger-sized popcorn or drinks at fast-food restaurants to more expensive versions of a product at malls. You can read more examples of the dominated choice here. 

If you can design the context in which people choose, you have a surprising amount of power over the choices they make, without them even noticing. Even if it was the same exact product, simply making it easier and more comfortable to buy can lead to people wanting it more.

Read more about:

Dominated choices

Heuristics

Why do germans eat potatoes

Default choices

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