Real time deals and irrational consumers


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Two recent though disparate developments affecting consumers could enable marketers across diverse fields to better attract the attention of consumers’ whose behavior is even labeled as “irrational” by some researchers.

The Huffington Post has an article from the Yale Center of Consumer Insights saying that the received wisdom of economists and marketers has “long assumed that potential customers rationally weigh the costs and benefits of every possible choice before deciding what to buy” needs to be turned on its head as “recent discoveries in behavioral economics and psychology demonstrate that consumers seldom behave rationally, meaning that neat frameworks are not, in fact, useful for predicting consumer behavior.”

Among the pointers to look for per the Yale Center is a need to factor in environmental stimuli which “can have a more powerful impact on shifting shopping goals than previously understood”. Yale offers the example of upscale department store Nordstrom, which works hard to provide cues to shoppers whose goal is luxury. Nordstrom’s fashionable settings, attentive service, classical music and other factors are all aimed at putting consumers into a goal-oriented mindset as they shop. Environmental stimuli like these help shift consumer mindsets that carry over into their purchase decisions.”

Another aspect to consider per Yale is exemplified by the differences in the way a browser and a buyer or consumer considers an object or service to buy. The former is deliberative taking costs and benefits into account while the latter is subject to “shopping momemtum” meaning the decision to buy has been made but could be persuaded to get on a shopping roll by “creating compelling front-of-store displays that offer “no-brainer” items for purchase. Placing complementary items nearby also ensures momemtum. The Center also urges marketers to pay attention to the “psychological” distance from the time of purchase as a central or core message resonates better the further away the consumer is from the moment of purchase as opposed to “peripheral” marketing claims when they are close to that point.

Such seemingly fickle and fast changing momemtum in consumer behavior perhaps underlies Groupon‘s recent purchase of Hyperpublic, a company that builds databases of local information and provides locations and daily deals to marketers. As the New York Times blog reporting on the deal notes “figuring out how local markets work and using public information from the social Web to understand consumer habits and interests is becoming a hot area for many companies. It’s not hard to imagine that Hyperpublic would be able to help Groupon better target subscribers in some of its coming products. Groupon Now, a soon to come service that lets users see deals happening in real time, based on their location is expected to be a significant beneficiary.

Similarly the hospitality industry, racked by a continually deal conscious consumer, just saw the launch of a “Deal Distribution System” which allows for flash selling and equips hoteliers with a powerful new tool to effectively drive real-time bookings or confirmed bookings, which allows hotels to better manage their revenue optimization and margins. While it undoubtedly will move “excess” inventory and provide real time deals it is unclear that it, like most real time deals, will be earnings accretive.

Republished with author's permission from original post.

Vijay Dandapani
Since August 1993, Vijay Dandapani, the President and Chief Operating Officer of Apple Core Hotels, has been instrumental in the company's growth and development, including acquisitions, six hotel renovations and the implementation of state-of-the-art computer systems. A hotel industry veteran, Dandapani, is also a member of the Board of Directors for the following associations: Hotel Association of New York City, NYC & Company, NYSHTA (New York State Hospitality & Tourism Association), and the International Hotel Motel & Restaurant Show at Javits.


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