Through a series of carefully controlled experiments at a campus bookstore, researchers learned that consumers will, in every case studied, spend more money to buy a brand name item when someone they don't know is standing near them at the time they choose their purchase. Consumers also tend to spend more money when a group of people is standing near them but are more inclined to buy cheaper items when no one is near.
"We were shocked to find that the mere social presence of another shopper apparently has a huge affect on consumer behavior," said Dr. Jennifer Argo, a marketing professor in the U of A School of Business and lead author of the study, which is published in the September 2005 edition of the Journal of Consumer Research.
For her study, Argo hired students to go to a campus bookstore to purchase batteries, an item Argo terms "neutral" because no one will likely see you use it other than the time you buy it. The students were given a specific amount of money and told they could buy any brand of batteries they like and could keep the change. They were not told that their behavior was being monitored as a part of an experiment.
Argo also hired people to act as customers, and she placed them strategically around the store. Sometimes the consumers studied were alone in the store, other times one other person was near them in the batteries section, and sometimes there were groups of three people in the section. Elements of the experiment were videotaped, and the consumers studied also filled out surveys to describe their experience in the store. Conditions to set up the experiment were pre-arranged with the bookstore managers.
"The best situation for the store is one in which there is one other person standing close to a consumer," Argo said. "Consumers reported being most comfortable in this situation, and we saw them spending the most money in this state, as well."
"We found that high traffic around a consumer makes them anxious, but they also felt anxious when they were isolated, and we know that when a consumer is in a negative state of mind they tend to spend less money," Argo added.
Argo thinks the fact that consumers tend to spend more money when one other person is nearby may have something to do with consumers' level of comfort and their wanting to avoid being perceived as cheap. As for applying the results of her research, Argo thinks store owners could increase their profits if they avoid layouts in which products are placed in isolated corners or areas of high traffic.
For further comment, Dr. Jennifer Argo can be reached at 780-492-3900 or jennifer.argo@ualberta.ca.
Journal
Journal of Consumer Research