Posted April 14, 2014 5:36 pm by with 0 comments

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livingsocial exampleYou have a choice of two daily deals that are five hours old.

A: $15 for $30 GC to a local restaurant –  10 have been purchased

B: $20 for $30 GC to a local restaurant – 200 have been purchased

Which one would you choose? A is a better deal but after five hours only 10 people bought into it. Why? Do they know something I don’t know about this place?

Restaurant B is a little more expensive but 200 people can’t be wrong – right? Must be something to this place.

According to new research published in the March issue of the American Marketing Association‘s Journal of Marketing, offer B is going to keep coming out ahead because the more popular the deal, the more likely people are to buy it.

The researchers say that it’s the perception of quality that makes people jump on the bandwagon. If a deal is popular, the product or service must be good. In other words, they see those 200 previous buyers as recommendations from other consumers.

What’s funny is, those 200 people could be just as clueless. They bought because a friend bought, or they read a review on Yelp or because the company had a great marketing campaign. There’s nothing to say that any one of those buyers has ever tried the product or service so everyone could be headed for disappointment.

Give me a second to put on my psychologist hat.

pink_freud_psychoanalysis_sound_edition_hatI think it’s not so much about the perception of quality as it is the fear of losing out. So many people want this deal. What if I skip it and then find out that all my friends bought it? I’ll feel terrible.

FOMO (Fear of Missing Out) is what motivates us to check our Facebook page four times an hour. It’s what makes us check the text message while we’re driving. (No! No! No!)

As a marketer, you can use this fear to your advantage. Tell your customers how many have been sold, how few are left, how many hours until it’s all gone – too late – you missed out.

And if it works for daily deals, it can work for you. Why do you think the Girl Scouts only sell cookies a few times a year. Would you pay $4 a box if you could buy them whenever you wanted? McDonalds is also famous for their “limited time only” and “back by popular demand” deals.

Let’s go back to the daily deals and the research. The study shows that popularity not only influences buying, it influences redemption. The more popular the deal the sooner people are likely to redeem it. What’s that all about? That can’t be about quality. That has to be about keeping up with the pack.

Now, this part of the equation is both good and bad for the deal provider. On one hand, a fast redemption means you might have a new customer for life. And that customer might go tell his friends – free advertising! But in the daily deal game, businesses make the majority of their profit on deals that are never redeemed. We’ve all read those horror stories about business who lost a ton of money when a daily deal became too popular.

The best takeaway from this survey is that showing people how popular an item is can help sales of that item. It’s why Amazon has best seller lists on the front of every category page. What are your best sellers? Put a widget on your ecommerce store or put a top 5 list in your next email blast. Personalization may be all the rage but clearly people are more interested what everyone else is buying.