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Should You Buy Stocking Stuffers?

We all enjoy stockings but those extra little gifts can diminish the value of other presents you bought.

It’s Christmas morning, and you open a box to find a cashmere sweater. The sweater feels plush and expensive, and you feel grateful. But then, underneath the sweater, you find a packet of Hershey’s kisses. Technically, you have been given more, but now the sweater may seem a little less exciting. Why?

An academic team based at Virginia Tech has dubbed this phenomenon The Presenter’s Paradox. The team of three psychologists — led by marketing professor Kimberlee Weaver — demonstrated the paradox recently in several studies set to be published in the Journal of Consumer Research. In the first one, a group of 54 consumers was given a choice between an iPod Touch or an iPod Touch with one free song download. On average, the consumers were willing to pay $108.41 for the iPod Touch but just $86.16 for the iPod Touch and the download.

…What’s happening here? Weaver and her colleagues theorize that we average our choices. “Mildly favorable information dilutes the impact of highly favorable information,” they write. When you receive multiple gifts, you engage in what the researchers call “piecemeal processing”: you evaluate each gift separately. And so anything chintzy brings down the perceived value of even the nicest present. In short, buy something nice and let it stand for itself.

Or consider this example from Weaver’s paper:

At the beginning of a journey, one of this article’s authors was sitting in a crowded airplane, awaiting take-off. After a two hour wait, a mechanical issue was announced, necessitating a switch to another aircraft. All passengers had to disembark, and many were visibly irritated. The airline did its best, or so they thought, to accommodate the disgruntled passengers by issuing the following gift packet: A $35 discount coupon for future travel, an amenity coupon for a meal, premium beverage or mileage bonus, and a 25-cent phone card. At the time, our author thought to herself that the phone card, which amounted to about 5 minutes of free long distance, looked quite cheap. It may not even be enough time to arrange alternate transportation given the two hour delay. Is it possible that the airline thought the thrifty coupon would add to the customers’ evaluations of their damage-control efforts, but that from the customers’ perspective it actually detracted from their evaluation of the package as a whole? Could one of the world’s largest airlines be spending thousands of dollars each year on phone cards and inadvertently be hurting rather than helping their image?

The phone card example is an illustration of a more general question:

Do people who are presenting information correctly anticipate how the information they put forth will be combined in the minds of those who evaluate them? Taking a step back to analyze this scenario, we can see that there are two perspectives that must see eye-to-eye for the coupon booklet to be effective. There is a presenter, in this case the airline, who is making a decision about whether to include something in a presentation—in this case a thrifty coupon. There is also an evaluator, the airline customer, who is evaluating the information presented.

Three questions of interest follow. First, how will customers combine their evaluations of components of the coupon booklet when forming an impression of it? Second, how does the company itself think about the components when deciding what to include in the coupon booklet? And third, are there important divergences between the two perspectives.

Customers can combine the information either by a process that results in an adding pattern or a process that results in an averaging pattern, with differing consequences for how mildly-favorable information (a thrifty coupon) will affect judgments when it appears alongside highly-favorable information (a higher value item like a $35 travel coupon). Additive patterns predict a positive effect, since the mildly-favorable information increases the total amount of positive information – after all, the addition of 25 cents to the overall package does increase the value of the package. Averaging patterns predict a negative effect, since the mildly-favorable information dilutes the impact of the highly favorable.

Weaver concludes:

When considering which information to include in a presentation, presenters follow a “more-is-better” rule that results in an additive pattern. They assume that every favorable piece of information adds to their overall case and hence include it in the bundle they present. Unfortunately, presenters fail to recognize that the holistic information processing mind set of evaluators leads them to make judgments that result in an averaging pattern, under which the addition of mildly favorable information dilutes the impact of highly favorable information. Hence, presenters’ more-is-better strategy backfires and they would be better off if they limited their presentation to their most favorable
information

I think Steve Jobs intuitively grasped this concept.

Sources:
Cloud, John. Why You Shouldn’t Buy Stocking Stuffers. Time Magazine
Weaver, K., Garcia, S.M., & Schwarz, N. (in press). The Presenter’s Paradox. Journal of Consumer Research