Does Disclosure Affect Consumer Behavior?

A new study funded by The American Bankruptcy Institute and The Ford Foundation found that disclosure of credit card interest rates could have an opposite effect than intended.

“For many shoppers knowledge of interest rates and mounting debt was so depressing that it spurs them to binge to alleviate the gloom” -WSJ This Morning

The study found that emotion has a much greater effect on spending behaviors than awareness of interest rates. 1 in 5 people in the study stated they tended to shop to end a bad mood. One explanation was that most consumers don’t understand how moods influence their spending behavior.

The new credit card disclosure laws are based on the assumption that when consumers have knowledge of the actual rates they will act rationally, but this is a flawed assumption. Anyone who has studied consumer behavior knows that emotion often dominates logic, so awareness of credit rates alone will not be effective in preventing overspending.

Story from the WSJ This Morning Podcast from 7/18/07

Abstract of Study

Conspicuous Consumption to Conscientious Consumption

We are seeing an amazing shift in consumer behavior. More and more Americans care about their carbon footprint rather than their ego. Instead of wanting to buy a Hummer, more people want a Prius. Many good marketers have seen this trend and have implemented “green” marketing. But is being “green” enough to differentiate your company from the competition?

There is definitely an opportunity for this strategy as a study found that 64% of people surveyed couldn’t name a “green” brand. I don’t believe most companies pursue a sustainable strategy to increase sales but to adhere to their company values. Built to Last by Jim Collins found that most enduring companies pursued a strong set of values first and foremost, and then thought about the money. If firms seek to be responsible they will be rewarded with praise and conscientious consumption. If firms try to praise themselves as green to gain a competitive advantage people won’t believe it.

HP will take back any brand of computer and recycle it. SC Johnson built a power plant that runs off natural gas from a land fill. Goldman Sachs invested $1.5 billion in cellulosic ethanol, wind and solar (Fortune). Most people probably don’t know about these company’s good acts, but they probably feel like they are doing something substantial and this builds a better brand.


The reason the psychology test below is important in marketing is because of a concept known as eye movement research. According to this research described in The Tipping Point, the human eye is only capable of focusing on a very small area at any time, known as the perceptual span. This is because most of the sensors in your eye are clustered in a small area in the middle of the retina called the fovea. We can not take in much visual information unless we focus our fovea directly on an object or word. When we read, we focus on about 4 characters to the left and 15 characters to the right. In the basketball pass experiment (posted below) we focus on the small area where the basketball moves and don’t notice the gorilla come into the center of the screen.

If you can track where a person’s foveas are moving you can know, with high certainty, what information they are receiving. The Tipping Point uses the example of a beer commercial with a model. Advertisers would be very interested in whether the viewer focuses only on the model or if their fovea moves to the beer.

Marketing Obesity

According to a study at the University of Liverpool in the UK, obese and overweight children consume more than 100% more food after watching food advertisements on television.

Psychologist Dr Jason Halford said: “Our research confirms food TV advertising has a profound effect on all children’s eating habits — doubling their consumption rate.”

Seth Godin just wrote a terrific post about social responsibility in marketing in which he asks “are you responsible for what you market?”

Marketing can be partly blamed for the rise of the obesity epidemic in the US. When marketers choose to introduce more snack foods or show a food commercial to kids they are contributing to the problem. McDonald’s spent $1662 million on US ads in 2005, the 17th largest spend, to persuade people to eat extremely unhealthy foods.

Marketers have enormous power to influence the behavior of millions and that power can be used to make the world better or make it worse. Marketing is not about convincing people to buy things they don’t need. It’s about spreading great ideas that add value to the lives of as many people as possible. So my question for those who market obesity in this country is this: are you adding value to the world, or just adding value to yourself?

The Attraction Effect

Human behavior is so interesting because our choices can sometimes defy reason. Take this example cited in Made to Stick about a study by Shafir and Redelmeier.

Students were given two options to spend their evening…

1. Attend a lecture by an author you admire who is visiting just for the evening.
2. Go to the library and study.

21% of students chose to study.

They then added another option…

1. Attend Lecture
2. Go to the library and study.
3. Watch a foreign film you’ve been wanting to see.

40% of students chose to study.

Unable to choose between two similar “good” options, the students settled for the safe choice of studying. They were uncertain to which “good” option would provide them with more value, but knew that studying would at least give them some utility. The addition of a contrasting option can alter the decision making process. Consumers tend to be more likely to choose between two “good” options if a third inferior option is added.