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SD#45: IKEA’s tricks, cognitive scripts and discounting

Written by

Tomas Ausra

November 20, 2022

Hi friends,

Welcome to another edition of Seven Dawns, your weekly newsletter on marketing, productivity, psychology and more.

Our seven ideas this week:


1. (Marketing) 60% of IKEA purchases are impulse buys, how Ikea tricks you into buying more stuff

IKEA’s creative director has said that only 20% of the store’s purchases are based on actual logic and needs. 

How does IKEA trick you into buying more stuff? (1) Store layout. Inside, customers are led through a preordained, one-way path that winds through 50-plus room settings. The average IKEA store is 300k sq. ft.—the equivalent of about five football fields—and their typical shopper ends up walking almost a mile. This forces wider product exposure, creates a false sense of scarcity and creates mystery. (2) Low prices. IKEA often follows a “price first, design later” philosophy: It starts with a price target—say $6.99 for a new stool—then reverse-engineers the design process to meet that goal. IKEA seems to adhere to a “survival of the fittest” pricing model: If a product’s price can’t be reduced over time, it tends to get discontinued. 

(3) The IKEA Effect. We have a cognitive bias wherein we place a higher value on items we build ourselves, regardless of the quality of the end result. (4) Cafeteria. A survey of 700 shoppers found that those who ate at the food court spent an average of more than two times more on home furnishings than those who didn’t.

The Hustle
2. (Innovation) Don’t make something unless it is both necessary and useful; but if it is both necessary and useful, don’t hesitate to make it beautiful

The Shaker design philosophy is one of prioritization: their main priority is to be necessary and useful. Then, once that has been achieved, make something beautiful.

This philosophy has led to an amazing array of designs. The Shakers invented, among other things, the circular saw, the washing machine, and the flat broom. They are also well-known for their simple, durable furniture. The Shakers themselves were an interesting lot, an extremely religious group that started in Manchester, England in the 1700s. They moved (9 of them) to the Watervliet area in New York in the 1770s. The Shakers are very religious, and one of their strict beliefs hindered their growth as a community.

Bokardo
3. (Psychology) How to avoid unhelpful cognitive scripts

Although we think we are fully aware and in control of our everyday decisions, we often follow a series of cognitive scripts. These cognitive scripts often develop in childhood and are personal to you. However, as they are commonly based on a sequence of events that we expect to occur in given situations, many scripts will follow a common theme.

For example, when meeting someone new, we know we are expected to give our name, ask the individual about themselves, partake in some small talk, and then move on to deeper topics. Although cognitive scripts can save time and reduce the mental effort of deciding how to behave, they can also negatively affect our decision-making and productivity.

A few simple strategies can help you question your cognitive scripts and start overwriting the most unhelpful ones: (1) make time to journal. By journaling, you can take note of recurring scripts and the consequences they have. (2) Update scripts that fail you. Some scripts will only work at certain times in our lives before we outgrow them. If you experienced rejection as a child, and now keep others at arm’s length as an adult, this cognitive script that once protected you may no longer be needed and could be failing you. (3) Inject randomness and measured risk. If you’ve always wanted to set up your own business, learn to fly a plane or move to a new country, but have never taken action, it could be a good sign that a cognitive script is limiting your willingness to take risks. You can overwrite that script by experimenting with challenges outside of your perceived circle of competence, which will help you unlock new opportunities.

Ness Labs
 
4. (Marketing) Excessive discounting is usually a bad idea anytime, it’s a particularly bad idea at a time when prices are rising so rapidly

Price promotions on the face of it appear to be an incredibly powerful tool for stimulating sales. When you run a price promotion, you’ll see a spike in sales, and most of the extra volume appears to come from that. However, that spike is just an illusion, Les Binet has argued. Using econometrics, marketers will find the true incremental volume sales from price promotions to be considerably lower.

A big chunk of your promoted sales is just subsidising existing sales. You’re giving away discounts to people who would have bought you already, he said. Another chunk of your sales are just time-shifted. You’re bringing sales forward. You’re getting extra sales this week at the expense of next week.

Once these sales are removed, only a “tiny” proportion of promotional sales are shown to be incremental, which means most price promotions reduce profits. Indeed, data firm Nielsen estimates around 84% of price promotions are unprofitable.

Marketing Week
5. (Psychology) Nostalgia could be a powerful resource

In this YouTube video titled “Mindfulness isn’t the only powerful mental state” Dr Clay Routledge makes a case for nostalgia as a valuable psychological resource that can mobilise and motivate you to find new meaning in life. 

Nostalgia is making a comeback. Whether it’s movies, fashion, or music, people are turning the clock back a few decades. It makes sense. The world is going through a period of turmoil and uncertainty. When life feels chaotic, our minds naturally drift toward more comforting experiences from the past. Thanks to social media and streaming services, we can satisfy our nostalgic longings more easily than ever. Revisiting happy memories of the past strengthens self-continuity, connection and belongingness in the world.
6. (Society) We exaggerate the importance of breaking news but we also project illusions about the future. History really gets made in between the short and long runs

“Journalism by its very nature hides progress,” psychologist Steven Pinker argued in an interview, “because it presents sudden events rather than gradual trends … the press is an availability machine. It includes the worst things to happen on Earth at any given time.” But, he adds, “human progress is an empirical fact.” It’s certainly true that the mainstream media have a preference for bad news over good news. “If it bleeds, it leads,” is an old newsroom adage for good reasons. Pinker isn’t the only academic who has studied the cognitive biases that attract us to adverse events. Even the BBC on occasion admits that the media have a preference for negativity.

As for the newer forms of social media, it seems that our demand for “doom scrolling” is so enormous that it cannot be satisfied by the supply of real disasters. Much fake news consists of imaginary calamities. Trends are often optical illusions, born of extrapolating lines from the recent past into an uncertain future, or of imagining nonexistent cycles of history. In history, it is not so much that the trend is your friend; more that you can’t prevent the trend event.

Niall Ferguson via Bloomberg Opinion 
7. (Psychology) Embracing chaos to go from paralysing anxiety to thriving curiosity

“Better to be a dog in times of tranquillity than a human in times of chaos,” says an old Chinese proverb. We do, indeed, instinctively dread chaos as a threat to our stability; we fear the unpredictable risk and uncomfortable change it brings about, and we try hard to maintain a fragile equilibrium in our lives.

But nature shows us that life itself depends on chaos. And, because we’re human and able to override some of our instinctive behaviours, we can learn to embrace chaotic times, going from paralyzing anxiety to thriving curiosity. Norman Packard, a chaos theory physicist from the Santa Fe Institute, coined the expression “edge of chaos” to describe a transition space between order and disorder that’s fertile for adaptation and innovation.

The edge of chaos is a place for liminal creativity. It allows us to redefine the frontiers of our knowledge, to dance with disruption, and to reinvent ourselves. Instead of futilely resisting change by trying to stay stationary, this liminal space is an opportunity to respond to the threat of disequilibrium by constantly experimenting, learning, and adapting our ways of thinking.

Ness Labs

Fun things to click on:


A worksheet that helps you map the things that propel your passion. Watch the Sydney Opera House’s gorgeous lighting of the sails. The Ice-Cream Project features some bizarre ice cream flavors, like Heinz beans and Soy sauce.


Thanks for reading! If you have any learnings you’d like to share with me, or disagree with any of the ones above then do drop me a message.

Loving this newsletter? Then why not share it with your friends.

Speak soon,

Tom

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