Orange County with Professor Suzanne Shu
In Newport Beach, CA, Professor Suzanne Shu helped the 60 UCLA Anderson alumni in attendance understand why we “postpone pleasure.” Why do we store great bottles of wine until they are undrinkable, put gift certificates away until they expire or delay visiting popular tourist destinations in our own backyard? When we save items like special bottles of wine, frequent flier miles, vacation days, or gift cards, what are we saving them for? Is it rational to save them? The longer we save something for a special reason, the bigger that special occasion has to be, and soon enough no occasion is good enough. Others hold on to things “just in case”, or are concerned that once they open that nice bottle of wine, they won’t be able to replace it. This is called anticipated regret.
In Professor Shu’s experiment inspired by the Wall Street Journal’s “Open That Bottle Night,” participants said their typical bottle of wine cost $16 but their “special” bottle was worth an average of $99. When asked at what price they would sell that special bottle, they wanted a lot more than they paid for it and 30% of subjects wouldn't sell it at any price. However, they also wouldn't bother to replace that same special bottle at its market rate.
In another study by Professor Shu, 200 respondents in major cities were asked about visiting major landmarks in international cities. Residents of the cities had a hard time finding an excuse to visit their hometown landmarks so they waited for out of town guests to go themselves. Visitors in a city for two weeks have seen four to five landmarks, while people who had lived in that same city for a year had seen only two. Visitors for three weeks were typically able to visit more landmarks than 20-year residents had seen. In a follow up study, Professor Shu discovered that a few months before people move away from a city, they suddenly go visit all the landmarks, and many of the visits occur in the final two weeks. Professor Shu also pointed out the power of expiration dates. In a different experiment looking at movie ticket coupon redemptions, 50% of the coupons were redeemed when there was a two-week expiration. However, when that expiration date was extended out to 3 months, under 10% were ever used.
There is a real implication for all of these trends today as gift cards remain a popular item, and in California and many other states they aren’t allowed to lose their value. However, it is highly likely that today more than ever these gift cards will never be redeemed. The “last in the package” phenomenon exasperates this and the longer you hold the items the harder it is to ever use them.
So how do you combat this human behavior? Commit to using deals in very specific occurrences. Disney’s former promotion where you could enter their theme parks free on your actual birthdate, and only on that date, was perfectly structured to get people to take advantage of the deal. If you are selling, or buying, gift cards for luxury items in particular (which are more likely to get elevated to the level of “specialness” where they may never get used), decide to use it for a specific upcoming occasion. When in doubt remember, “Carpe Diem,” and open that special bottle of wine, because the act of opening it is special enough!