Look Before You Leap: New Study Examines Self-Control

Reckless decision-making can lead to dire consequences when it comes to food, credit cards, or savings. What’s the key to making good decisions? A new study in the Journal of Consumer Research outlines a novel method for measuring people’s abilities to consider the consequences of their actions. It also provides hope for consumers who want to make more prudent decisions.

Authors Gergana Y. Nenkov (Boston College), J. Jeffrey Inman, and John Hulland (both University of Pittsburgh) developed a 13-question survey that rated participants on a scale called the Elaboration on Potential Outcomes (EPO) scale. The scale proved to be a reliable measure of how much participants considered the consequences of their actions. For example, when undergraduates considered whether to get LASIK surgery or whether to charge an expensive electronics item on an already heavily charged credit card, high EPO scores were associated with more consequence-related thoughts.

In a number of settings, researchers found that consumers who think about the pros and cons before making decisions reported that they were more likely to exercise and consume healthy foods. They had lower rates of alcohol abuse, procrastination, and overspending. They were also more likely to be saving money for retirement.

The good news, according to the authors, is that people who aren’t inclined to consider the consequences of their actions can be aided by simple interventions, like brochures and advertising that encourage them to think about the dangers of obesity or the benefits of saving for retirement. Scare tactics, it seems, were the most effective. “The consideration of negative consequences has a bigger impact than the consideration of positive consequences,” the authors write.

“The importance of studying consumers’ self-control is widely recognized, since being unable to regulate one’s emotions, impulses, actions and thoughts creates problems, not only for individual consumers, but also for society as a whole,” write the authors.

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How Consumers Miscalculate Sale Prices

Quick: You’re walking by a store window and you see a sign that says, “20% off the original price plus an additional 25% off the already reduced sale price.” So, how much is the discount" Consumers often mistakenly think the total discount is 45% off the original price when, in fact, the true discount is 40%. A thought-provoking new study from the October issue of the Journal of Consumer Research explores why consumers frequently think a double discount is a better deal than a single discount of the same total magnitude.

“Retailers frequently use the strategy of double discounts for their regular promotions or to induce customers to open a credit card account with them. Such errors in peoples’ judgments of the net effect of multiple price discounts . . . have implications for a variety of marketing settings including advertising, promotion, pricing, and public policy,” write Haipeng (Allan) Chen (University of Miami) and Akshay Rao (University of Minnesota).

Prior studies have shown that even math teachers frequently have trouble calculating percentages. In the first experiment, the researchers found that 59 percent of the respondents – students at a large university – erroneously added the two percentages to calculate the overall discount. Only 26 percent of students got the answer right.

As not everyone was prone to the miscalculation effect, the researchers then sought to identify the situations that help counter calculation error. They first incentivized one group of participants, offering $2 for correct answers. The rate of computational error was 26 percent, compared to 44 percent for students who were not offered money for correct answers.

Participants were also less prone to computational error when the problems were easier or the results seemingly illogical. Students presented with a base price of $100 from which to calculate the double discount were less likely to make an error than students presented with a base price of $80. Similarly, the researchers asked participants to calculate either a double percentage decrease of 70% and 45% or a price increase of the same percentages. Those who mistakenly added the figures in the decrease condition were confronted with a decrease of 115%, and were more likely to make errors than those confronted with a 115% increase (explained as a change in gasoline prices).

“Since this computational error can potentially influence peoples’ judgment in a variety of settings, the economic impact of such errors on consumer welfare may be substantial,” Chen and Rao write.

The researchers also point to policy implications of computational error outside of consumer settings, such as when a 70% increase followed by a 60% decrease in statewide test scores is considered positive, even though the net effect on test scores is a 32% decrease.

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Researchers Find Ceiling Height Can Affect How a Person Thinks, Feels, Acts

For years contractors, real estate agents and event planners have said that whether building, buying or planning an event, a higher or vaulted ceiling is always better. Are they right? Until now there has been no real evidence that ceiling height has any influence or advantage with consumers.

But recent research by Joan Meyers-Levy, a professor of marketing at the University of Minnesota Carlson School of Management, suggests that the way people think and act is affected by ceiling height. Meyers-Levy and co-author Rui (Juliet) Zhu, assistant professor of marketing at the Sauder School of Business, University of British Columbia and a Carlson doctoral alum, found that, depending on the situation, ceiling height will benefit or impair consumer responses.

The paper “The Influence of Ceiling Height: The Effect of Priming on the Type of Processing People Use,” will be published in the August issue of the Journal of Consumer Research.

“When a person is in a space with a 10-foot ceiling, they will tend to think more freely, more abstractly,” says Meyers-Levy. “They might process more abstract connections between objects in a room, whereas a person in a room with an 8-foot ceiling will be more likely to focus on specifics.”

The research demonstrates that variations in ceiling height can evoke concepts that, in turn, affect how consumers process information. The authors theorized that when reasonably salient, a higher versus a lower ceiling can stimulate the concepts of freedom versus confinement, respectively. This causes people to engage in either more free-form, abstract thinking or more detail-specific thought. Thus, depending on what the task at hand requires, the consequences of the ceiling could be positive or negative.

“Depending on the activity or the desired outcome, ceiling height can make a big difference in how the consumer processes the information presented,” says Meyers-Levy.

This work has important implications for retailers of all types who are faced with consumers whose thought processes might influence what products they buy, how they process point-of-purchase information and even sales persuasion strategies, the researchers say. Careful attention to this important design aspect of retail spaces can pay off for those with one eye on the ceiling and the other on the bottom line, they add.

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CONSUMED: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole

In his new book CONSUMED: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole, political scientist Benjamin Barber offers a vivid portrayal of the way that a consumerist mentality has superseded the public good.

With a combination of vast evidence and sharp insight, Barber explains howAmerican society is being transformed by the triumph of consumerism, and the potentially devastating consequences this transformation has already had on democracy.

Tracing the economic and intellectual history of capitalism, Barber argues that in the late 18th century, capitalism brought the promise of economic parity. During the two centuries following its ascendancy, the free market provided essential goods that met the public's needs. In recent decades, however, most of the critical public infrastructure needs like housing, education, roads and health care, had been met and people shifted their attention to non-essential desires instead.

In CONSUMED, Barber argues that the rise in consumerism has created a dangerous mentality that values personal choice over the public good, thereby infantilizing otherwise mature adults and turning children into permanent shoppers. Divided by their conflicting impulses as consumers and as citizens, individuals are increasingly drawn to a behavior Barber terms "civic schizophrenia."

The only solution, Barber argues, is "a transformation of capitalism back into a needs-satisfying economic machine, and a transformation of democracy back into the sovereign guarantor of all domains private, the market domain included." The only way to do this, and also save capitalism from itself, is to democratize globalization.

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January Web Traffic Reflects New Year's Resolutions

January saw significant increases in visitation to tax, travel, careers and real estate sites. Heightened interest in tax software and Microsoft's new Vista operating system boosted traffic to the computer software category, while mounting speculation about 2008 U.S. presidential candidates drove traffic to political sites.

That's according to the comScore Media Metrix monthly analysis of U.S. consumer activity at top online properties and categories for January 2007.

"As we've witnessed on an annual basis, consumers turned to the Web at the beginning of the year in a very utilitarian fashion, with an eye toward planning," says Jack Flanagan, executive vice president of comScore MediaMetrix. "Traffic to tax sites continued to grow versus December, and Travelsites also saw increases as Americans explored ways to escape the winter doldrums. Politics also captured consumers' attention, as politicians turned to the Web as their primary vehicle to announce their candidaciesfor the first time. In addition, Americans took keen interest in potential career changes and housing moves in January."

comScore Media Metrix, a division of comScore Networks, provides Internet audience measurement services that report detailsof online media usage, visitor demographics and online buying power for the home, work and university audiences across local U.S. markets and across the globe. All comScore Media Metrix syndicated ratings are based onindustry-sanctioned sampling methodologies, according to the company.

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