Consumers’ choices are prey to subtle discrepancies that arise in cognitive acco

Question

Consumers’ choices are prey to subtle discrepancies that arise in cognitive accounting. Learning how and when you are prey to these discrepancies is an important step in improving your decision making.

As the readings for this module demonstrate, people value gains and losses differently under different scenarios. For example, contestants in a game show might choose a guaranteed $10 prize over a 50 percent chance of winning $20 despite the fact that the expected values are the same.

As a marketer, how might you frame certain decisions to benefit from the disparities that arise in one’s cognitive accounting?

Explanation / Answer

Through cognitive accounting, a consumer mentally calculates the value of the action he is about to perform and checks for the benefits or losses of the same. Marketers use this phenomenon fairly frequently to shape consumer decisions. A prominent example of this is bundle packs of consumer goods. Once the consumer sees a 4-unit pack of a product like soap which mentions some amount of saving, he tends to calculate the usage of soap and whether the saving he is getting is considerable or not. Since soap is a daily usage product and has long expiry dates, consumer prefers the bundle packs over single units and hence the marketer is successful in selling more amount of units to one customer by targeting his cognitive accounting.Similarly offers like giving something for free or discount vouchers also use the same phenomenon.

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