Preferential Treatment May Impact Buyers
'Relative Mistreatment' of Customers Can Spark Attraction For Specialized Products
Envy is a powerful force in the human psyche — and a tool to be exploited in marketing.
While marketers have long been aware that consumers clamor for products endorsed by celebrities or people with whom they identify, new research suggests businesses can stoke the enthusiasm of some potential customers by giving preferential treatment to others.
The promise and perils of this slight-the-customer approach are explored in a recent Journal of Marketing Research article titled "How to Attract Customers by Giving Them the Short End of the Stick."
It draws on a half dozen experiments conducted at Duke University's Fuqua School of Business, where student volunteers from the master of business administration program were presented with a range of products and scenarios. The authors conclude that, under the right circumstances, "consumers judge the same offer to be more attractive when a seller offers a better price or more benefits to another group than when the seller treats everyone equally."
The article is based on the dissertation of Alison K.C. Lo, a recent doctoral graduate of Fuqua. She cites a number of examples of how the theory has played out in the real business world.
Swimwear maker Speedo International used the "relative mistreatment" of customers to its benefit when it stimulated demand for its Fastskin bodysuits by giving them away to Olympic swimmers. Millennium Import Co., which sells super-premium vodka from Poland, did the same when it launched its Belvedere Vodka by hosting free tastings exclusively for bartenders.
The Coop in Cambridge boosts sales of its Harvard and MIT sweatshirts and T-shirts by discounting them to alumni of those schools. "Doing this authenticates the brand," suggested Lo, who was a lecturer last year at the Massachusetts Institute of Technology's Sloan School of Management.
Lo, a Hong Kong native, currently works in Seattle as a consultant to Internet companies. She is a student of psychology who is fond of the Groucho Marx maxim, "I would never join a club that would have me as a member." This week, Lo is traveling to France, Denmark, and the Netherlands to discuss her research at academic forums.
"People always love to compare themselves to others," Lo said in an interview. "Companies can use this to their advantage."
At the same time, the marketing journal article, authored by Fuqua professors John G. Lynch Jr. and Richard Staelin, makes it clear that preferential treatment of some consumers is a risky strategy that can backfire easily.
Victoria's Secret provoked a backlash, for instance, when it distributed catalogs with different prices for the same clothing based on ZIP codes. And airlines have felt the wrath of passengers who wait while "gold club members" board early.
Lo said the successful campaigns set up their favored customers not as a class of prima donnas but as discriminating experts who send "a quality signal" to others.
"It's also about how people want to feel about themselves," she said. "For me, if I drive a Toyota Camry, I might not qualify for a free test drive of a BMW. But this doesn't mean I will never drive this car. If I hear that drivers of luxury cars are eligible for a free test drive, I may think that someday, if I have more money, I'll buy this car."
Andy Aylesworth, associate professor of marketing at Bentley College in Waltham, said creating advantaged customers is a form of the "aspirational marketing" that is growing in popularity.
"The idea is to try to associate a product with an expert or with somebody the consumer wants to be like," Aylesworth said. "The ultimate consumers want to be Olympic swimmers, even if they know they're never going to the Olympics. Nonstudents see the T-shirt and want to be associated with Harvard. They see the brand name rubbing off on them. If I buy Nike shoes because Michael Jordan endorses them, I get some value out of believing that swoosh makes me better."
A key factor in how slighted customers react to two-tier pricings or promotions is their own confidence as shoppers, according to the Fuqua authors. In general, envy is likely to overwhelm resentment in cases "when consumers are uncertain about quality and when quality differences are substantial," the article contends.
Many consumers are insecure about their ability to judge the quality of certain kinds of products, such as wine, jewelry, electronics, or financial services, said Lynch, a Fuqua marketing professor. When shopping for such products, he said, these buyers will tolerate favorable treatment for others regarded as authorities if they can use those authorities as touchstones to make more confident purchases.
"Consumers really want to identify with a target group of people who know what they're talking about," Lynch said.