It is the marketing, stupid

This post will expose some clever marketing tricks which we, as consumers, often fall for.

From my youth I remember Golf and Polo as small German cars with a reputation for reliability. They had a basic finish and few extras but were nonetheless popular among the enthusiasts of budget motoring. When in 1998 a tiny 2-door Lupo was added at the bottom end of the VW market offer it made me take a fresh look at the Golf and Polo. Both had grown considerably in size since 1970s and acquired a much better fit-out. What struck me was that the austere Lupo looked much like Polo had when it first appeared and Polo became more like Golf. What was the reason for this shift?

The answer lies in the marketing. Imagine yourself looking for a new car. You come across the glossy brochures describing two new, face-lifted models. One reads “it has more headroom and boot space than the 2013 model” and the other “it is smaller than the 2013 model”. All other things being equal, which one would you be instinctively inclined to buy? Of course the first one. More space has a positive ring to it and the marketing departments know it. We all want a compact, agile and economical Golf or Polo but we also want it more spacious – for convenience and comfort. This is why both have grown in size over the years, making room for the tiny Lupo. Of course the Lupo fans would also prefer a bit more headroom so the cycle will continue…

The second example I am going to present today is even more puzzling. A while ago some gas stations in New Zealand introduced EFTPOS-at-pump. Bank card readers were installed on petrol distributors and the transactions could be finalised on the forecourt, without entering the building. From my perspective this looked like a winner. The stations could do with less staff because the clients no longer required personal assistance. The clients saved time being able to pay at the pump and drive off. But, somehow, the system never took off. In fact, after a while, the card readers gradually disappeared. Think about why that might have been before reading on.

The answer is as surprising as it is logical. Gas stations do not make money on petrol but rather on all the other merchandise they sell. When clients paid at pump they could not habitually grab the overpriced MORO bar lurking on the shelf next to the counter inside the building. In effect, the station owners were worse off financially and EFTPOS-at-pump was canned. Now the petrol stations have higher operating costs but the margins on candies and Coke more than make up for it. And yes – filling up takes longer than before but no-one cares.

MORO bars are surely not good for you but what about the healthy snacks? Like the ones advertised as 97% fat-free? Well, this is another way of saying they have 3% of fat in them. But which snack would you be instinctively inclined to choose – a 97% fat-free or 3% fat variety? The fat-free line sounds healthier so it is a no-brainer. That your selection makes no difference to the amount of fat you will end up consuming is immaterial here – it is all about feeling that we are doing the right thing. Shampoos and deodorants take this marketing ploy to a new level. You will often learn from the packets that they are 99.9% aluminium-free or phosphorous-free. They are also probably 99.99999% cyanide-free and plutonium-free so the selection of the marketing slogan depends mainly of the health scare whipped up by the media this month.

But what about the claims that a particular product is “natural”? Well, what does it actually mean? Smallpox is natural. As are scorpions, cockroaches and box jellyfish. On the other hand clean, potable water which has gone through giardia filters is not – “natural” water may have “natural” giardia in it. “Natural” long-drop toilets cause bacterial pollution of groundwater. Would bottled water be marketed as containing “natural” E.coli? The information value of the “natural” label is precisely zero – it has no meaning.

The last issue I will touch on in this post are interest-free loans. Whenever I read about 36 months interest-free loans offered by say Harvey Norman I am tempted to just borrow the money from them. They clearly must have access to interest-free funds and should be able to pass the deal on, subject to me paying the admin costs. On the other hand if the interest is included in the price of the wares on offer then the “interest-free” claim is incorrect. The marketing slogan should read “Interest on 36 months loan included in the purchase price”. This is simple, really – either something is free or it is not.

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