New York, May 24 (IANS) People tend to buy pricy goods in order to avoid the feeling of regret they might have if the same goods become unavailable in future, researchers have found.
Consider someone finds a jacket in a store but due to its price, he thinks whether he should wait and hope it goes on sale in the future.
Then again, the jacket might go out of stock before that happens and he might never acquire it at all, regretting the decision.
So the consumer pays more to avoid that feeling of regret.
According to the team from Massachusetts Institute of Technology (MIT), not only do consumers tend to buy goods partly to avoid that feeling, but some retailers fail to notice this behavioural quirk and thus miss an opportunity to increase their revenues.
“The high-value customers will still buy the product,” said Karen Zheng, co-author of the study published in the journal Management Science.
“They want to [avoid] this feeling of regret, which would occur if they wait now and then cannot get it in the future,” added Zheng, who is also an assistant professor of operations management at the MIT Sloan School of Management.
According to the research results, for such items if retailers fail to recognise consumers’ emotions, they could stock insufficient amounts of merchandise and may forgo up to 14 percent of consumer demand.
Indeed, some retailers could have profits 7 to 10 percent higher if they pursued different pricing strategies.
That is, generally higher prices with occasional sales mixed in will yield more revenue than consistently low prices, at least for fashionable goods.
In the paper, the scholars used existing empirical research from behavioural economics to build a new model of consumer decision making.
The researchers wrote that “branded fashion items tend to induce strong stockout regret but weak high-price regret”.