Blog

LivingSocial Psychology

April 4th, 2011

Internet Strategy, Marketing, Social Networking

Like most young people living in a city, I opt to receive emails from GroupOn and LivingSocial. In a world in which receiving and checking emails is a borderline hassle, it means a lot when someone willingly participates in these offerings, particularly if they arrive daily.  Over the past 6 months of my membership, I’ve been pretty unexcited by the deals.  50% off Botox injections.  2 for 1 movie tickets. $20 for $40 at Thai Place.  65% off Kertain treatments.  And the list goes on.   

See, the truth is, I don’t really care about Botox injections, Keratin treatments, or discounted movie tickets.  Botox is a little ways off, I hope, and I already dip into the discounted movie pool, authoritatively wielding my expired student ID every time I approach the blatantly uninterested face at the ticket counter.  Part of the disinterest also lies in the guilt I’d feel purchasing these indulgences.  My generation is busy grappling with rent, student loans, and the overwhelming feeling that even if we have a job, it might somehow just disappear, like so many have, leaving us to become like most of our other friends: unemployed and living at home with our parents, believing the only options are grad school, backpacking through Asia, or begging.  

But the other week something curious appeared in my inbox from LivingSocial: Ziplining and Beer Tasting.  And, despite all the internal angst and staunch stances against frivolous purchases, I, along with a vast majority of my friends, bought it.

Why?  How did LivingSocial move me through the sales funnel so quickly and effortlessly when I had been resisting for so long?  My initial thoughts were drawn to clever marketing tactics but, after some informal interviews with friends, a little research,  and some soul-searching, I realized the purchase was much more psychologically complicated than I had imagined, and that all those feelings I mentioned before (disinterest, guilt, desire to skirt the system) were manifestations of my subconscious.

To frame this, we first need to think about the term “marketing” as a euphemism for “psychological targeting.”  Anyone who’s taken Marketing 101 knows the relationship between the two: find out what people want, appeal to their emotions on a visceral level, and craft products and experiences that meet those emotional needs.  As consumers, though, we rarely think about it like this.  I buy Tide because my mom buys Tide.  You buy Downy because a crush once said you smelt great after you put on a freshly washed shirt.  Do you think, however, that I would buy Tide if I had a poor relationship with my mother?  Would you purchase Downy if your crush had said you smelt like a frat house dumpster?

The point is, our initial response to a product’s messaging rarely indicates the full reason behind our attraction or repulsion to it.   So when I saw “LivingSocial Adventures: Ziplining and Beer Tasting for $79” and I thought, “Ziplining? Awesome! Beer tasting? YES!”  There was a lot more at play psychologically than I had time or interest in considering before I purchased the package 2 minutes after it landed in my inbox.

Before we get into the deal itself, it’s important to know that LivingSocial purchased NYC-based Urban Escapes this past November. With the acquisition, LivingSocial launched into its third vertical market: trips.   

Urban Escapes is a travel site offering unbeatable savings on curated, unforgettable adventures. Just as LivingSocial lets people discover new services, experiences and attractions at deep discounts in their hometown or places they visit, LivingSocial Escapes helps anyone find one-of-a-kind day trips, packaged nearcations, quick escapes that don’t require air-travel or weekend excursions they might not typically pursue.  LivingSocial Escapes offers discounted local getaways and unique day deals that offer rare opportunities to explore places outside the city.

Since the purchase, LivingSocial has started sending out two different kinds of emails.  The first, “LivingSocial Deals,” presents the classic 50% off type of thing.  The second, “LivingSocial Escapes,” details these “nearcations” and day trips. (“Escapes” offers are far less frequent than the daily deals) LivingSocial Deals also encompasses “Living Social Adventures,” which is the third branding technique the company is testing out.  The ziplining event was a daily deal, but also described as an “adventure” in the email heading.  It’s unclear whether the “adventure” is also an “escape,” but after chatting with some LivingSocial coordinators, I’m told they’re actively working on the branding.  I think these various marketing messaging tactics are extremely important in encouraging consumers to click on the link.  Before even knowing the event details, one can be persuaded by the thought of an adventure (exciting!) or an escape (please!)

Now let’s talk about the word “ziplining”. In “The Psychology of Language,” David Carroll explains how we recognize and process letters.  Those with similar shapes –K and R, E and F – perceived in isolation, leave us uncertain.  We may have a fleeting image of an R, or was that a K? Perhaps it was even a P, but it certainly was not a Z.  Similarly within words, particularly at the start of a word, a unique letter can lend a word a specific feeling.  The Z in ziplining jumps out because it is horizontally unmatched in the following letters (iplining). Z is also the least frequently used letter in the English language. When all these nuances are combined, we literally can’t help but perceive ziplining as unique, regardless of our understanding of what ziplining is in the first place.  Someone learning English might stumble across the word ziplining and not know what it means, but would certainly know it was different. 

Our attraction to unique activities is more complicated, but is well addressed in an article in the Journal of Youth and Adolescence, which found that life satisfaction and overall happiness among adolescents is higher in those participating in extracurricular activities.  While the LivingSocial demographic isn’t adolescents, the findings are easily translated to older generations.  People tend to be happier the more non-work activities play a role in their lives.  It’s easy to see how an adventure like ziplining can make us think of our youth and the contentedness we derived from playing outside of school and parental constraints.

Word choice is not the only thing at play here.  Threshold price point, the psychological fixing of prices to entice a buyer, is one of the cornerstones of the LivingSocial business model.  A study by the Association for Consumer Research found that consumers have a range of prices we will pay for a product, bound by an upper and lower limit.  These limits are strongly influenced by the degree of our market price knowledge.  Our lower limit is set at a certain point above which we think we’d be getting “too good a deal.”  The upper limit is less elastic, as we are more inclined to think things are too expensive than too cheap.  According to the study, the more we know about a market, the smaller our price range.

One of the reasons I had been so uninterested in the previous deals from LivingSocial ($20 for $40 at Thai Place, for example) is because I have a psychological aversion to spending $20 on dinner, when I know I can make something better and more filling for a lot less.  I have extensive market knowledge when it comes to dining, and the experience of eating out is not enough to override my acceptable price limit. 

Having never paid to go ziplining, I don’t know how much it costs.  I do, however, have a general understanding of how much these types of activities go for having looked into similar adventures (let’s say rafting, horseback riding, etc).  Beer tasting, on the other hand, while maybe not a typical weekend activity, can be easily processed and set within a price limit.  The vast majority of people subscribing to LivingSocial know how much alcohol costs, especially alcohol in volume.  We also know that a night of too much alcohol can leave us eating Ramen Noodles for the next two weeks.  So, combining our general albeit vague market knowledge of ziplining with our well-versed knowledge of alcohol prices most likely leaves us psychologically hovering around a three digit cost for the combined adventures.  So when my friends and I saw $79, we registered the package as a steal and something we’d be remiss to pass up.

Cox (1986) astutely contends that buyers may not bring rigidly formed price limits (acceptable price range) into a purchase situation, but that the acceptable price range is to some extent “shaped or shifted” by the prices that the consumer finds when s(he) becomes a potential buyer. This may have a pronounced effect on consumer willingness-to-buy at specific product price offerings.

It’s easy to underestimate the power marketing has over our emotions, especially when we are hurriedly making a decision.  LivingSocial works within the classier bounds of scarcity marketing (i.e. the opposite of Vince Shlomi spastically hawking ShamWows at 4 in the morning), but still manages to induce that “act now” feeling, especially when it comes to such a cleverly concocted event.  And maybe that’s all this is: a riotously disjointed event that can cause even the most seasonally depressed to smile and think of care-free times.

But I don’t think so.  I think the messaging is tactful, purposeful, and genius.  LivingSocial hit a home-run with this one.

In total, 672 people purchased “LivingSocial Adventure: ZipLining and Beer Tasting.” The event sold out within hours of its posting.