Promoting big purchases (like private education) in a gift-card culture

http://www.theatlantic.com/doc/200905/gift-cards

Interesting article about how to promote buying, particularly of high dollar items and particularly in a down economy. “Myopia” refers to our short-sighted behavior of satisfying our immediate needs (eating chocolate) in preference to our long term good (losing weight). The “second mover” (our future self who hits the snooze button) almost always wins out over our current “first mover” intentions (to wake up early). Such things we’ve studied a lot.

But it turns out we often do the opposite, delay future pleasure in favor of current discipline, especially in down economic times. This pattern, economists, game theorists, etc., call “hyperopia.” To take a common example, tourists visit all of the local attractions that we as permanent residents never do. Why? Because we think we’ll always have time to do that later, so we do the chores today instead. In our JBU context, people delay going to that expensive college option today (JBU) because they say it’s better to save money now by going to a community college because the benefit of the more expensive purchase seems so far in the future that people assume they will have time to make up for what they missed out now.

So how do these theorists propose that we get people to buy now and buy expensive? Our gift card culture provides one possible answer. Turns out that when given the choice of a gift card that expires in two months versus one that expires in the 3 weeks, everyone says that they would prefer the gift card with the later expiration date and that they assume they’ll be more likely to use a later expiring card. In reality, in the test cases quoted in the article, people were five times more likely to use the card with the shorter expiration.

In other words, creating a shorter time horizon (as long as it seems a legitimate shortened time horizon) for a decision actually increases purchases. The article goes on to explain that you can leverage this pattern of thinking by connecting it to combined purchases (make a decision early for this purchase and you earn money toward another related purchase), short-term promotions, tiered shopping experiences, etc. Finally, people typically spend a little more than whatever the gift card is worth, so you increase purchases that way as well.

Okay, long way to saying that if luxury retailers are using such mechanisms to get people in the door and buying more in a down economy, perhaps we could think of similar things. What about for ERP/visit days gift cards to the bookstore that expire within a week or two? At the worst, they don’t buy anything or maybe leave with JBU paraphernalia that spreads the JBU image. At best, they buy books for their classes that help them lock in their decision. What about as an addition or a replacement to a deposit, we offer cards with amounts that they have to use for copies/cafeteria purchases within one semester. If they come to JBU, they get “money” that they may or may not spend, but it gives them added incentive to make the big purchase in order to be able to use the discount cards for their other costs at JBU?

Anyway, just some thoughts from my random reading.