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How to Make Your Product Less Enjoyable

Comedy Club Charges Per Laugh. Image via SpringWise.com.
image via SpringWise.com

[by Rohini Venkatraman and Kristen Berman]

Theatre attendance in Spain is dropping due to a new tax which makes shows more expensive. To combat this trend, one Comedy Club decided to try something radical.

Spain’s Teatreneu made entrance to their comedy shows FREE. Attendees could watch an entire show without paying a single cent.

Their business model is nothing to laugh about. There was a catch.

Free entrance came with the price of a “pay-per-laugh” model. You only pay if you laugh during the show.

Screens with facial recognition trackers on the backs of each seat monitored people’s reactions. Each time someone laughed, it was recorded by the tracker. For each person, the screen shows a running count of laughs and the associated euro amount. At the end of the show each audience member received a report of how much she laughed and the amount she owed (EUR 30 per laugh).

What happened to revenues at the pay-per-laugh shows?

The theater saw a 35% increase in audience members (presumably attracted by the “free” entrance and the novelty). Revenue per customer also increased to up to EUR 6 more per customer than what the theater experienced previously.

But did people actually enjoy the show more?

Likely not.

Research has shown that time between paying for an experience and consumption of it (in this case laughing) affects how much we enjoy the experience.

This is called the pain of paying. As described by Prelec and Loewenstein, parting with our money is painful. When we pair the parting of our money with the actual experience we’re paying for, the less we enjoy ourselves.

Imagine if we were charged a very small amount for internet access every time we did a Google search. Would we do more or less searches? Likely less. Every time we went to do a search, we would weigh the cost and benefits of our search.

Consider your last taxi ride. Watching the number increase on the meter probably made you resentful of red lights and traffic. Throughout the experience, you are reminded of the cost slowly increasing.

How can we decrease the pain of paying for a product or experience?

We can reduce the salience of a payment by separating the payment from the experience. This means paying in advance or paying after an experience. It means avoiding a payment model that gets people to contemplate the exchange every time they consume your product.

When we pay in advance, the pain is offset by the anticipated future benefit. When the event finally arrives, the cost is a thing of the past. When we pay later (as in the case of credit cards), we pay our bill after having bought, used and loved the goods.

Who does this now?

Homejoy is a cleaning service. They ask users to provide the size and layout of their home up front. Users pay once they accept Homejoy’s quote. Then, when it finally comes to cleaning day, people don’t have to reach into their wallet to pay the cleaner as he leaves.

Apple asks for your credit card information upfront. When you want to get a new app, all that is required in your password. We probably wouldn’t download as many apps if we were required to provide a credit card number each time we tapped to purchase.

Spotify has taken the model of paying for each song and turned it into a subscription service. Now each time you want to enjoy a song you don’t have to contemplate if it’s worth the 99 cents.

Pricing strategy is more than a dollar amount.

The comedy club made more money per show but will people come back? Will they recommend the experience to their friends? Many products think about a pricing strategy only in terms of actual dollar amounts. Given the pain of paying, this is short-sighted.

In considering the pain of paying, a product or service should map out a payment and consumption schedule. How much time is in between each of these events? When do you email your customers with a receipt? To use your product frequently does the user have to contemplate the monetary tradeoffs? To decrease the pain of paying, the more separation between paying and consuming the better.

So the behavioral advice for our pay-per laugh comedy club in Spain? If you choose to pair the two events closely, it may be that your customers have the last laugh.

Want to learn more about the pain of paying? Listen to Dan in a quick video.

 

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