Hedonic – Adaptation. impact on your marketing

Human Brain, Marketing

In yesterday’s post I wrote about the how you can benefit from this ability of the brain to easily adapt to the new normal. So if you get money automatically deducted from your account for a systematic investment, then your brain will quickly adapt to having less money to spend and you will be able to build a decent amount of corpus. While these two categories are considered as “sin” products, even in things like milk or bread or shaving blades you can see this “hedonic” adaptation play out.

Lets look at how this can also help you in your marketing and how some brands actually utilise this. If you look at alcohol and cigarette companies – they have been able to pass on price increases or tax increases to customers without any dent on their profits. This is because our brain gets used to the new price rise very fast and justifies the price to itself with the lack of taste in other brands.So someone who is used to having the Chivas Regal will have it at almost any cost and similarly someone who’s used to having Jack Daniel’s will have it even if they increase the price.

On the other hand in the B2B space, in IT, the cloud has been one of the key drivers for a lot of applications with a lot of software companies now offering their products on a pay per use model (also called SaaS offerings). Now once you get used to working one set of applications that you have subscribed to, then a two dollar increase on a per month basis, initially gets you thinking, but after couple of months you don’t even think about it. But the software company who has more than a million subscribers has suddenly increased its revenue by more than a million dollars a month with this minor increase. Some people who are really tight financially and find the existing price per month already on the edge of their spending capability may decide to close the subscription, but most will continue.

Therefore your agenda should be to figure out a way to get the customer, because once you have the customer and your product or service is good, then you have the ability to influence higher margins either on the same product or alien products.

Till ext time then.

Carpe Diem!!!

Hedonic – Adaptation, Treadmill etc.- How it impacts your finance

Fear, Financial Independence, Human Brain

This word is suddenly in vogue or I have suddenly started noticing it. I have come across this word in more than 6 books in the last two months. Initially this word sounded very dangerous to me. Even though I read the meaning, it didn’t register with me in one go.

Remember I have told you multiple times, that you should get the money automatically deducted from your savings bank account and deposited into your investment fund – a Systematic Investment Plan (SIP). This way your brain will not need to make decisions every month. If you try to do this physically yourself, your brain will always show you all the reasons, why this won’t be a good idea because of some fear it throws up.

Since your brain was designed to ensure your survival as its primary objective, you can’t blame it for throwing these curve balls at you to ensure that it save energy for an attack, when it will need to be in full action.

During my recommendation for these SIPs, I also mention that you won’t even realise after some time that the deduction has happened , because you will adapt to spending only from the money that is left over.

This adaption to the new normal which human beings undergo so easily has a term in the English language called “hedonic adaptation”. In simple terms it also means that we quickly get involve into a new inertia, based on our environment very quickly.

This is exactly what happens when you get a pay raise. When you get the letter with your raise, you are euphoric. Then you get your first pay which is at the increased level. The euphoric has turned down to happiness. By the second month your increased salary also gets completely spent like the earlier salary. Its because you adapt to the new salary and your expenses increase to match the new salary.

So use this human tendency to your advantage to move towards your financial independence.

Till next time then.

Carpe Diem!!!