Monday 14 April 2008

Why do offers work

I have searched long and wide for something on this, but found very little. Direct marketers are fond of saying that the offer accounts for 40% of any mailing's success, but don't appear to have thought too much about why offers work, and why some do better than others. I suspect the amount of testing, even in the West, is nowhere near as much as DM gurus would like us to believer. Otherwise, there would be more on this than platitudes and lists. But that's besides the point.

I was reading some interesting books lately, and a couple of them made threw light on offers. Investment expert Michael J. Mauboussin's More Than You Know discusses the principle of reciprocity. In commercial terms, it means if someone gives you something for free (say, a clothier offers you a soft drink while you are taking a look at his ware, before you have spent anything), you make it a point to reciprocate his gesture, usually by making a purchase.

This is most gratifying, because he uses the same as I did in my presentation on offers (http://pachatterjee.com/pdfs/offer.pdf), Influence: The Psychology of Persuasion by Robert B. Cialdini.

On the other hand, in Predictably Irrational, economist Dan Ariley talks about the amazing power of 'free', it's de-risking effect, and the way that switches off normal rational choosing.

I had included the de-rsiking bit in my presentation too, though I didn't know then about the amazing experiments and explanations that Dr Ariley writes about.

I'd very much like to know more about offers, especially about price-offs (5% off), 'bulk' discounts (buy 1, get one free) and gifts (refill free with pen). Would you know of any books, articles or research papers?

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