Price awareness is a buzzkill, SFU Beedie research finds

Jul 05, 2017

Research undertaken by SFU Beedie’s Brent McFerran finds that awareness of a product’s price increases the decline in enjoyment that consumers experience

Everyone has experienced the excitement associated with acquiring something new—and the feeling of that novelty wearing off as the new item, whether a car, a song or a type of food, starts to lose its shine. But what factors affect how quickly our enjoyment declines, and our prized new possessions become ‘old hat’?

That question was raised in experimental research undertaken by professor Brent McFerran of SFU’s Beedie School of Business, together with Kelly Haws of Vanderbilt University, and Joseph Redden of University of Minnesota.

The investigators conducted a series of seven experiments in which consumers used a product over a period of time. Some participants were made aware of the price of the products, while others were not. Researchers found that enjoyment of the experience declined faster for people who were aware of price. These findings are available online in the Journal of Consumer Psychology.

In one experiment, two groups of participants selected five songs online and listened to each song three times. One group saw the song’s price of 99 cents displayed as they were listening, but the price was not listed for the other group.

The participants then rated the songs on a scale of 1 to 100. After listening the first time, both groups gave most songs a rating of approximately 80. After listening the third time, the group with price awareness had dropped to a rating of about 30, while the other group had only dropped to 60.

The researchers had similar findings from another experiment during which participants retrieved M&Ms from a gumball machine. When people saw the price of the M&Ms on the machine, their enjoyment of the snack dropped more quickly over time than when there was no price displayed, even though they were not paying with their own money.

“The effect of observing prices on enjoyment only emerged over time, not at the start of an experience,” McFerran says.

The research could offer valuable insights for businesses, especially those that focus on customer retention and repeatedly provide products or services to the same individuals.

“Businesses could look at different pricing structures, such as bundling prices, where a single price covers a set of goods; offering fixed price menus; or reducing pricing on in-store displays,” says McFerran.

For consumers, he suggests: “Buying goods through subscription services may help reduce the salience of costs, and prolong enjoyment.”