Influencing Investment

If there was to be one consistent theme that runs through all the studies about consumers that I find really interesting, it would be the way in which people allow something that shouldn’t make any difference to what their thinking change their actions or attitudes.

There’s no escaping the fact that this is something all of us are capable at one time or another and, the truth is, we do it far more than we would ever be happy admitting to ourselves. Whether it’s people finding a female researcher more attractive because they happen to be standing on a wobbly bridge, or consumers thinking that the same product is more desirable because of the music playing in the room, there are a host of studies that show that we’re routinely influenced outside of conscious awareness.

Of course, the fact that such influences are so easily demonstrated in properly controlled experiments and take place without our knowledge is one of the key reasons that market research is unreliable: we’re adept at making up apparently sensible justifications for our consumer actions, but we do so oblivious to the actual processing that has gone on in our minds.

Rarely is this aspect of our mental processing demonstrated better than when the subjects of the study are people we would expect to completely consciously focused on a particular task: it’s one thing to be a shopper, meandering through the aisles of your favourite store, who is influenced to spend more on a trinket, it’s quite another when the choice of treatment prescribed by a doctor is reversed depending on the way in which the expected outcome is framed.

Recently researchers have uncovered another example of misattribution amongst experts. This time it’s experienced investors who have been found to misattribute what should be irrelevant elements in their evaluations of companies. Although, to be fair to them, the non-experts were also influenced.

Participants in the study were given the same financial information (or an extract of it) from an annual report; however, some people received reports that had been designed to look more attractive than others.

The results showed that all three of the groups tested, experienced financial investors, finance students and members of the general population rated firms as being more attractive when the reports were more attractive.

How significant was this effect? Different measures were used for each group:
The finance students priced the shares of a company with a more attractive report almost 70 percent higher.

The general population rated the products of a company more highly when the annual report was more attractive.

The experienced investors responses, which centred on how likely they were to invest in the firm, showed that the consistent use of one colour throughout the report had the same impact on people’s likelihood of investing as a 20% improvement in revenue from the previous year!

The moral of the story is, I think, two-fold: as a consumer, never under-estimate how difficult it is to remain objective when making a purchase. On the other hand, if you’re involved in selling or marketing, getting the details right and building the right associations around a product is all-important. It’s easy to become fixated on the technical aspects of your offer, it’s an understandable pre-occupation. However, consider what your customers will encounter around what you’re selling: what shouldn’t matter usually does.

Philip Graves

Source: Claudia Townsend, Suzanne B. Shu. When and how aesthetics influences financial decisions. Journal of Consumer Psychology, 2010; 20 (4): 452 DOI:10.1016/j.jcps.2010.06.013

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