The Psychology of Price

The Psychology of Price - An episode of CBC's "Under the Influence" with Terry O'Reilly

A lot of thought has been put into how to capitalize on those that are in situations where they are prepared to spend money. If you are at a restaurant or in a shopping mall, you can bet that persuasive forces are acting upon your will, trying to take advantage of routine cognitive processes without you noticing.

The above article covers various examples. The most ubiquitous of these is the almost magical power of the number 9 on our willingness to consume. People perceive far more difference between $19.99 and $24.99 than they do between $20 and $25. They are also more likely to buy something priced $39 than $34. People have just been conditioned to associate the number 9 with a bargain. Now they are willing to spend more money for that 9 because it feels like spending less money.

When an item, especially an item that's difficult to value objectively such as an article of clothing, receives little attention from customers, one way to potentially boost interest is to double the price. People tend to attach more value to things that are expensive. When your item of clothing is more expensive than the other ones, it stands out as superior, the 'deluxe' option, so to speak.

Or, instead of doubling the price, you could just as easily claim that the item used to be far more expensive. An item that says "$19.99 - used to be $59.99" will sell much better than the same item with a price tag that just says "$19.99." Retailers often take items that don't sell and pretend as if they were on sale from much higher prices. This increases sales drastically. When JC Penney attempted a revolutionary marketing campaign that dumped this trick and refused to end prices with "99 cents," their stock dropped by 55%. They then had to release a commercial apologizing for their mistakes and asking customers to come back.

Anchoring is a familiar way to make sales more appealing. If people won't buy a basic item for $30, they might be more willing to buy it when the $30 option sits on the shelf beside a better, $60 version of the same item. Often these more expensive items are placed on the shelves simply to make the inferior option more desirable.

Menus are also carefully designed to optimize profit. Menu designers assume that the first place people look when they open a menu is the top right corner. The restaurant's most expensive dish should sit in that spot as an anchor that makes everything else seem cheap. Near this option will be the restaurant's most profitable dishes, the ones they really want you to buy. The least profitable dishes are usually located at the bottom of a menu, often in smaller type. Fun fact: diners are willing to spend more when dollar signs are not listed next to prices.

Associations are also very important in determining how much to value products. Wine poured into a wine glass will be compared to wine prices but wine poured into a champagne glass will be compared to champagne prices. Wine poured into a whiskey glass will be compared to whiskey prices - even though whiskey costs eleven times the price of wine.

Wine, like clothing, is an item that most people do not know how to value. Some clothing and some wine is far more expensive than other items that appear almost identical to the average consumer. These are the sorts of products for which consumers can really be influenced by anchors and associations. Most people, including top wine experts, cannot distinguish between cheap and expensive wines when the labels are removed. In an experiment where participants tasted $5 and $90 wine, subjects unanimously preferred the $90 wine, even when they were lied to by the experimenters and were actually drinking the $5 wine. Similarly, people told that they were taking more expensive pain-relieving drugs (whether they were taking the expensive ones or not), claimed to have received quicker-acting and longer-lasting pain relief. To be clear, these participants weren't lying about what they preferred because they wanted to be the type of people that prefer expensive wine - MRIs actually scanned more activity in the pleasure regions of the brain during drinking.

Another common pricing technique is bundling. In bundling, multiple products and/or services are bundled together under a single price. This makes it very difficult to compare packages with those offered by alternative companies. Cell phone service providers are notorious bundlers. If everyone offered the same package, it would be very simple to identify the company offering the cheapest deal.

Pricing is a huge driver of consumer decision-making. In some cases, it is perhaps even more influential than the item itself. When you're in an environment where you're expected to spend money, keep an eye out for the traps in place to influence you. Most of them aren't working in your favour.

CIA Interrogation Psychodramas

In 1996-97 several CIA interrogation manuals were de-classified by the Pentagon. These manuals, which were labeled "The Torture Manuals," provided interrogators with tools for getting information and confessions out of prisoners.

The interrogators were instructed to stage "psychodramas" - carefully constructed plays utilizing insights from the psychology of persuasion to maximize the odds of a confession. This post will list these various psychodramas and describe them in the words of Douglas Rushkoff in his book Coercion: Why We Listen To What "They" Say.

"Nobody Loves You" - "The subject is told that other detainees are denouncing him maliciously."

"The Witness" - "Leads the detainee to believe that someone else is confessing. A secretary simply emerges from the 'witness's' interrogation room and pretends to type reports from her notes. As she does, she asks the subject how to spell certain words closely linked to the activity of which he is accused. Then the interrogator emerges and tells the frightened subject he is not needed anymore. A desperate confession usually follows."

"Ivan Is A Dope" - "Involves making the hostile agent's boss or organization look like they don't care about him: 'Sell the agent the idea that the interrogator, not his old service, represents his true friend.'"

"Spinoza and Mortimer Snerd" - "The interrogator asks lofty and confusing questions for which the subject could not possibly have answers. By the time the interrogator asks a question that the subject does know, he is relieved to be able to answer correctly."

"The Staged Escape" - "Interrogators pretend to be agents from the prisoner's own country. They 'kill' the captors, bring the prisoner to 'safety,' then ask him to tell them what he did not reveal to the enemy."

"Alice in Wonderland" - "Interrogators ask silly nonsensical questions and use bizarre vocal inflections that make the prisoner think he is hallucinating."

"Under the Spell" - "Subjects are convinced they have been successfully hypnotized. The interrogator suggests to the subject that his arm is about to become very warm. What the subject does not know is that the arm of his chair has been heated. If the subject believes a great force is controlling him, he has an excuse to surrender."

"Mutt and Jeff" - "This routine is just a version of the good-cop/bad-cop technique employed by the boys on 'NYPD Blue.' The CIA manual describes the script:

The angry interrogator accuses the subject of... offenses, any offenses, especially those that are heinous or demeaning. During the harangue, the friendly, quiet interrogator breaks in to say, 'Wait a minute, Jim. Take it easy.' The angry interrogator... says, 'I'm going to take a break, have a couple of stiff drinks. But I'll be back at two - and you, you bum, you better be ready to talk.'

"After the 'bad cop' is gone, the 'good cop' offers the prisoner a 'fair chance to tell his side of the story...'"

Social Cognitive Theory and Entertainment-Education

Entertainment-Education (also known as "edutainment" or E-E) is entertaining media content produced with the explicit intent to teach values, provide important information, and provoke healthy behaviour change. In other words, as the name suggests, E-E is programming that tries to entertain and educate audiences at the same time. Some familiar examples of E-E are Bill Nye the Science Guy and Sesame Street, but examples aren't limited to children's programming. I'm interested in learning how to maximize the influence of E-E and similarly persuasive narrative content.

I've previously written about the extended elaboration likelihood model (E-ELM) of narrative persuasion that understands transportation into a story and identification with characters to reduce counterarguing and thereby increase persuasion. At the time, I was writing about these facts within the context of false belief absorption from fictional narratives. That may have given the impression that transportation is an enemy to do-gooders. But producers of entertainment-education can capitalize on these realities of the human brain to make content that does a better job of teaching values and provoking behaviour change.

The E-ELM isn't the only model used to understand entertainment-education, nor is it the most commonly used. Social Cognitive Theory (SCT) is a theory of observational learning, in which individuals adjust their behaviour according to how reliably the actions of others lead to successes and failures. If I see you cross the street without looking both ways and then get hit by a bus, I'll make sure to look both ways when it's my turn to cross the street. Similarly, if a character on a TV show gets lung cancer as a result of smoking, that will cement the connection in my head between the action and the consequence. When we watch a drama, we vicariously simulate the experiences of the various characters, taking note of which ones safely cross the street and which ones get run over by buses. We want to be more like the ones that get rewarded and less like the ones that get punished.

But not all characters are created equal. We're especially likely to learn vicariously from characters that we identify with. Identification is the cognitive and emotional process of adopting character goals, understanding plot events in relation to those goals, and experiencing the characters' emotions as a result of them succeeding or failing to meet their goals. If a character is boring, alien, or unlikable to me, I won't care all that much that they get hit by a bus. "Oh, he did something stupid and died? I never wanted to be like him anyway." But if your favourite character suffers a bad fate as the result of some tragic flaw or succeeds due to some change of behaviour, then you'll be more likely to start taking notes.

Characters that are both identifiable and self-efficacious make for even better protagonists. Self-efficacy is the feeling that you are capable of achieving something. Could you run for 10 kilometers without stopping? The higher your confidence, the higher your self-efficacy. As you may have noticed, levels of self-efficacy vary quite drastically across people. Several studies have confirmed the importance of self-efficacy in motivating people to accomplish their goals and to, yes, change behaviours, as well. Self-efficacious students have been shown to participate more, get higher marks, be better at solving conceptual problems, be more likely to take on difficult tasks, work harder and longer, and experience fewer negative emotions when facing setbacks. Increased self-efficacy has also been shown to boost willingness to exercise more, quit smoking, and lose weight. Watching a self-efficacious character achieve his or her goals can be a powerful source of inspiration to viewers.

In the 1970s, a Mexican researcher named Miguel Sabido developed a methodology for producing entertainment-education grounded in social cognitive theory. A series of highly successful television dramas were then created based on this methodology. The basic idea, as already discussed, is to ensure that actions have consequences. Having unprotected sex leads to pregnancy. Smoking cigarettes leads to cancer. In these stories, good characters tend to do good things and get good results, while bad characters do mainly bad things and get bad results. Meanwhile, there are transitional characters that gradually reform toward story-consistent values as the show unfolds. Audience members are meant to model their own behaviour after these transitional characters.

More on The Sabido Method and SCT is provided on the Population Media Center's website. 

Appearance in Aeon Magazine

I have been featured in an article written by Rhys Southan for Aeon Magazine.

The article talks about the tension between art and effective altruism. It features quotes from about a dozen different people associated with the effective altruist movement.

I think the article is fair and well-written but unfortunately, the title expresses a viewpoint no effective altruist agrees with. I think EA can benefit from public scrutiny, however, so the misleading title may not be so bad. My impression is that so far, EAs have mainly argued among themselves and have yet to face the criticisms of people that don't fall within their narrow demographic. I personally don't have much confidence in EAs to respond to those criticisms in ways that actually persuade people. They mostly strike me as so far removed from "the masses" that they don't know how to communicate with people outside their in-group.

Communication Cache

At the completion of my thesis paper, I was planning to publish my bibliography on this blog. I've been assuming that that post would instantly become the greatest resource on media effects, communications, and persuasion available on the internet.

I am no longer certain of that.

Communication Cache is a website storing hundreds of academic articles on these issues. I discovered it by noticing it in the URLs of many of the articles I found on Google Scholar. The categorization system is a little sloppy but this site is a massive addition to my arsenal of resources.

BCC vs CFSC

On this blog, I've been writing about subjects as I teach myself about them. This is a way of leaving behind a trail of breadcrumbs for newcomers to optimal mass communication - so that they can see how to learn the subject from scratch. But in so doing, I have used language sloppily without realizing it, kind of like a philosophy newb that says "that's a valid point," not knowing the word "valid" has a technical meaning in philosophy.

I've often referred to terms like "behaviour change communication," "health communication," "social marketing," "communication for social change," "media advocacy," and "media interventions." But although I've acted as if these words are interchangeable in many situations, they can actually refer to pretty distinct approaches, models, and strategies of communication.

The main line I need to draw is between two distinct camps: behaviour change communication (BCC) and communication for social change (CFSC). Although most scholars think the two approaches should be combined, most uses of media fall more into one camp than the other.

Parks defines the two schools of thought as follows:

1. "Communication approaches based on modernisation theories and information-persuasion strategies used by Western governments and industrial sectors. Examples include: Diffusion of innovations, Social Marketing, Information-Education-Communication (IEC), Behaviour Change Communication (BCC);
   
2. Communication approaches based on critical theory, collective learning, information-sharing and dialogic processes forged during social and political struggles against colonial and dictatorial powers imposed on poor communities and countries. Examples include: Participatory Communication, Communication for Social Change."

So while the former approach focuses on the top-down transmission of information, products, and services to individuals, the latter approach targets the more fundamental systemic problems that cause other issues such as illness and violence. In the case of a million kids with malaria, the first approach is to disseminate messages teaching people how to avoid malaria and to distribute insecticide-treated bed nets so that people have the means, as well as the desire, to change their behaviour. The second approach is to increase press freedom, change totalitarian policies, and stimulate cultural change through the use of interpersonal communication. According to users of the second approach, the first approach focuses too heavily on disguising symptoms when it should be targeting the underlying issues that trigger those symptoms.

CFSC is a bottom-up approach whereby professionals mobilize groups of people toward better outcomes. Rather than tell people what they need to do in order to become healthier or happier, they stress the dialogue process through which people identify values, obstacles, and goals. One way of understanding this is to see researchers as helping people go from preferences to idealized preferences.

Personally, I'm more interested in BCC, as it's more quantifiable and closer to the kind of conversation I'd like to be having about mass communication. I suspect that in CFSC it can be difficult to tell the difference between useful and useless conversations. So far, I've yet to find much useful writing on CFSC although I think the approach has merit in theory.

Attacking Issues From Multiple Angles

When it comes to using media for achieving social good our uncertainty is high enough that we can't bank on a single strategy to save the day.

Mass media effects are small and quantifiable. They do not generally turn good kids into school shooters or launch social movements, but they do have small effects on very large audiences. Due to the amount of people media messages can reach, even a small impact can have significant consequences.

For instance, let's say 10% of X-itis patients die and 10% of Rwandans that don't sleep under ITNs get X-itis. If the message you disseminate through the media reaches 1 million Rwandans and gets 5% of them to start using ITNs, you'd now have half as many cases of X-itis and half as many deaths from X-itis. If the original number was 250,000 cases of X-itis, you now have only 125,000. Rather than 25,000 deaths, you'd have 12,500, a difference of 12,500 lives.

Saving 12,500 lives is nice but how can we maximize this number?

Media interventions don't always outcompete interpersonal and other interventions. There are also multiple ways to use media for social change (entertainment-education, health communication, social marketing, farm radio show, etc.) and not that much known about which methods are the most effective. These methods are also based on divergent models of communication and social behaviour. Usually, many methods are used in unison and usually, this yields pretty good results.

I once made the analogy to a sculptor that can never see the entire sculpture from one vantage point. In order to make an aesthetic evaluation, she must circle the object and synthesize the input from multiple angles. Similarly, no theory simple enough to put into words will ever accurately describe the complex movements of cultural phenomena. It is less productive to try deriving a comprehensive theory than to utilize multiple perspectives.

In his incredible Family Tree of Theories, Methodologies, and Strategies in Development Communication, Waisbord proposes a "tool-kit" conception of strategies:

"Practitioners have realized that a multiplicity of strategies is needed to improve the quality of life of communities in developing countries. Rather than promoting specific theories and methodologies regardless of the problem at stake, there has been an emerging consensus that different techniques are appropriate in different contexts in order to deal with different problems and priorities. Theories and approaches are part of a “tool-kit” that is used according to different diagnoses. There is the belief that the tools that are used to support behaviour change depend on the context in which the program is implemented, the priorities of funders, and the needs of the communities."

Waisbord also calls for the integration of top-down and bottom-up theories, personal and environmental approaches, and multimedia and interpersonal communication. Basically, we don't know exactly how to optimize our media use for saving the most lives possible but we know that media interventions are helpful and attacking problems from multiple angles is even more helpful. At the moment, I think it makes more sense to target according to health areas and geographic regions than it does to target according to media strategy.

Dan Pallotta on Charity

In past blog posts, I've mentioned that turning charity into a business where people have the potential to win big could help send way more money to the poor. Sacrifice is the world's worst meme. If you want people to focus on more altruistic projects, then find a way for them to benefit from focusing on more altruistic projects.

Dan Pallotta's TED Talk is along these lines. He points out some of the double standards we hold about charitable organizations (e.g. that investing in overhead or capitalizing is immoral) and how these double standards put the non-profit sector at an extreme disadvantage to the for-profit sector.

One of Pallotta's examples is that charities are shamed into spending minimally on advertising and marketing. There is no reason to expect advertising and marketing to work less effectively for charities than for businesses. Ads and marketing work. If organizations trying to maximize their profits find it to be a great investment of their resources, why shouldn't organizations trying to maximize donations?

Alcohol Advertising Works

Alcohol advertisements don't just get consumers to switch from one brand to another. They also increase total drinking among youth aged 15-26.

The average amount of alcohol advertising in one's media environment is related to greater alcohol consumption. Teenagers and young adults in these environments also increase their drinking levels over time more than other youths.

This may be problematic given that alcohol use media interventions work better on adults (r = .11) than on youth (r = .07).

Saying True Things

It's harder than you may think to just say true things.

When people enjoy a book, they probably believe that it comprises mostly true statements. They agree with the main arguments, share the author's point of view, and only rarely disagree with something he says. But if a book makes thousands of claims, it's impossible for an author to get more than 90% of them right. The book just has to be littered with a mix of truths and falsehoods. When people say untrue things, it's usually because they used sloppy wording to say a thing that actually is true.

Case in point, the above paragraph was generally correct but it contained no true sentences. (Look back. After every sentence, ask yourself if the statement is true or not. I wrote each one to be at least somewhat questionable.)

A really bad writer says almost no true things. I Google Scholared "post-structuralism" and this was the first paragraph of the first available essay that popped up:

"For many contemporary feminist theorists, the concept of woman is a problem. It is a problem of primary significance because the concept of woman is the central concept for feminist theory and yet it is a concept that is impossible to formulate precisely for feminists. It is the central concept for feminists because the concept and category of woman is the necessary point of departure for any feminist theory and feminist politics, predicated as these are on the transformation of women's lived experience in contemporary culture and the reevaluation of social theory and practice from women's point of view. But as a concept it is radically problematic precisely for feminists because it is crowded with the overdeterminations of male supremacy, invoking in every formulation the limit, contrasting Other, or mediated self-reflection of a culture built on the control of females. In attempting to speak for women, feminism often seems to presuppose that it knows what women truly are, but such an assumption is foolhardy given that every source of knowledge about women has been contaminated with misogyny and sexism. No matter where we turn-to historical documents, philosophical constructions, social scientific statistics, introspection, or daily practices-the mediation of female bodies into constructions of woman is dominated by misogynist discourse. For feminists, who must transcend this discourse, it appears we have nowhere to turn."

I underlined every second sentence to make it more apparent where each sentence begins and ends.

The paragraph begins with a couple of sentences that may well be true, but it soon turns into a bunch of claims and implications that are either clearly false or just plain incoherent. But criticizing post-structuralist theory is too easy. Let's take another example, one that is less obviously nonsense.

Take this paragraph from the opening chapter of Kalle Lasn's Culture Jam:

"A free, authentic life is no longer possible in America today. We are being manipulated in the most insidious way. Our emotions, personalities and core values are under siege from media and cultural forces too complex to decode. A continuous product message has woven itself into designer lives--sleep, eat, sit in car, work, shop, watch TV, sleep again. I doubt there's more than a handful of free, spontaneous minutes anywhere in that cycle. We ourselves have been branded. The human spirit of prideful contrariness and fierce independence has been oddly tamed. We have evolved into a smile-button culture. We wear the trendiest fashions, drive the best cars industry can produce an project an image of incredible affluence--cool people living life to the hilt. But behind that happy mask is a face so ugly it invariably shocks the hell out of my friends from developing countries who come to visit, expecting the giddy Americana depicted on TV and finding instead a horror show of disconnection and anomie."

This is a typical paragraph in the book. Although if one were to steelman this paragraph, it would be possible to identify some good observations and arguments, it's shocking how difficult it is to simply find a true sentence. In the above paragraph, barely any sentence is actually true. Despite it arguably being more or less on the mark regarding the superficiality of American culture, almost no sentence in the paragraph says true things.

When reading or writing, a good habit is to go sentence by sentence, asking yourself whether the sentence in the hot seat is true or not. This is a way to improve your ability to reason clearly, notice bad arguments, and clean up your own writing.