Here are some things you’ll learn:
What is the Effect of Valuation and Devaluation?
How may the valuation effect be used to boost sales?
Why using the goals of the consumer as a selling point is incredible?
What time of year is ideal for selling a snow shovel? Most often during or immediately following a significant snowfall, when people are in desperate need of one and even willing to pay more for one. This makes rational sense since consumers would place a higher value on the product or products that will enable them to meet a need.
The COVID-19 epidemic has led to astronomical pricing for safety masks and hand sanitizers, which the valuation effect has also greatly contributed to.
The authors offered to sell lottery tickets to college students as part of one of their investigations. They approached students in line at the university’s bursar’s office, which is responsible for collecting student fees, and offered them one of two raffles:
When asked how much they would be willing to spend to enter a raffle to win $1,000 in cash, half of the class responded.
The other half was questioned about how much they would be willing to spend to enter a drawing for a $1,000 scholarship.
These kids were only willing to spend roughly 93 cents for a ticket if they were offered the $1000 cash raffle, but if they were given $1000 off their bill, they would have paid more (which seemed very significant given where they were),
They gave an average price of $1.52. By only informing the kids that the award money would go toward a pertinent aim, the increase was increased by 60%.
In contrast, when the authors offered students in line at a cafeteria the chance to purchase raffle tickets, they discovered that on average, they would pay $1.12 for the chance to have their tuition fees waived. The students did not regard the raffle as much this time because they were not in a situation where paying their bill was particularly relevant (as opposed to the bursar’s office).
Value of the Effects of Valuation
There are a few straight-forward uses for the valuation and devaluation effects. First, they advise that you should constantly make an effort to present your merchandise or advertisement to a customer who is already considering a pertinent objective. An approach like this is already supported by many internet advertising tactics, for instance by connecting website content or search terms (like Google AdWords) to the product or product aim.
Finding patterns or moments when customers are more likely to be thinking about the desired goal and appealing to them at these times is a similar method for utilising the Valuation Effect (this is similar to the strategy of targeting the Fresh Start Effect, which is also driven by customer goals). However, more crucially, the Devaluation Effect argues that showing an advertisement to consumers when they are considering objectives unrelated to your product could have unfavourable effects. They will appreciate the popcorn considerably less if they see an advertisement for it when all they want is a smoke.
Focusing your message on the desired result or aim rather than the product itself is a more subdued strategy (although this is also popular in advertising). Even if a consumer had not been considering it prior to seeing the advertisement, by emphasising a goal, they become more immediate and relevant. In fact, unless they are specifically reminded, people frequently overlook their goals (weight-loss goals are a prime example). When a goal is achieved, the Valuation Effect takes effect, making your product appear more alluring.
For instance, many house owners have a general desire to make improvements to their properties, but this desire is rarely at the forefront of their daily thoughts.
An advertisement that reminds your target clients of their home improvement aims will elevate the worth of your products in their eyes if you’re trying to sell home renovation products.
The Valuation Effect also contributes to the explanation of why people genuinely truly enjoy gift cards when it comes to money (as in the studies on raffles discussed above). Customers may believe gift cards to be more subjectively valued than cash since the “purpose” of the money is made extremely obvious, even though a $50 gift card may appear like merely a constrained version of $50 in cash. This also applies to non-monetary items, like Apple’s desire for users to upgrade from the 16GB iPhone to the 32GB or 64GB iPhone.
Takeaways
Customers will overvalue a product if they think it will aid in their success.
Customers pay attention to the objectives that are most clear to them or that are now most important to them. Even if someone has a long-term objective, they might not follow through on it until they are reminded.
To make your product more appealing, make an appeal to the pertinent aims of your clients.