Insulting customers good for sales? Maybe for those poor HENRYs

Morgan Ward (SMU)
Morgan Ward (SMU)

(A version of this story first appeared on CNBC.com, where I am a contributor.  See a collection of mys stories on CNBC)

If you plan on splurging for a pricey handbag, watch, or pair of shoes this fall, prepare to be insulted. Marketing professor Morgan Ward is pretty sure about this.

When she was a broke graduate student, Ward has an Achilles’ heel:  She was enamored of luxury brands. Of course, sales clerks at the handbag counter can spot a graduate student right away.  Here’s a typical exchange:

“I asked to see a bag behind the counter and (a salesman) said, ‘Well, I’ll show it to you, but it’s very expensive,’ ” Ward recalls. The message was clear.

See the original version of this story at CNBC.com

But a curious thing happened when she felt the head-to-toe insult.

“Despite the feeling of condescension, I noticed it didn’t send me running out running out of the store,” she said. In fact, that feeling made her want to buy the pricey bag even more, so she could tell herself, “I’ll show him…And I wondered if I was the only one.”

She’s not. Now a marketing professor of at Southern Methodist University’s Cox School of Business, Ward wrote a study that will be published in October’s Journal of Consumer Research called “Should the Devil sell Prada?”  Professor Darren W. Dahl of the University of British Columbia co-authored the study.

Their research found that, yes, snark is good for sales.  How good? In one test, consumers treated poorly by sales staff were willing to pay 10 percent more than others.

To simulate the dreaded disapproving up-and-down look, the researchers recruited consumers into a simulated retail experience and made one group suffer through a bit of snootiness.  Hired actors followed instructions like “Take a long look at the participant at the door. Appear unimpressed.” The researchers then measured both groups’ “willingness to pay” for items the actors described.  Consumers in the insulted group routinely said they’d pay more.  The effect was dramatic in one scenario, where insulted consumers said they’d pay $31,000 for a car that the other group found was worth only $24,000.

What’s going on here? A robust body of behavioral research shows humans are easily motivated to change their behavior through exclusion. Ward said that to understand the insult effect, think about high school.

“We are pack animals. We don’t want to be rejected by any groups,” she said.   .

Getting the cold shoulder often makes teen-agers fight even harder to be accepted by an “in” crowd.  Being rejected by “exclusive” brands taps into the same human nature, Ward said.  It just makes consumers work harder — in grown-up terms, spend more — to belong.

The effectiveness of insults has its limits – in the study, it didn’t work on brands like H&M or The Gap — but it’s not limited to luxury, Ward found.  Anything that helps consumers connect with an idealized version of themselves qualifies, products Ward calls “aspirational.” When she ran the test for eco-friendly products, for example, consumers who were treated poorly were willing to pay more for them, too.

Ward doesn’t believe sales staff at expensive stores are trained to behave this way; they are simply a product of pack mentality, too, she said.

“Once you become part of the luxury environment, it allows you to channel this feeling of superiority,” she said.

Pam Danziger, president of luxury brand research firm Unity Marketing, concedes that snooty sales staff is a reality in many stories, but she was highly critical of the message implied by Ward’s research.

“Luxury consumers are among the most empowered consumers because of their wealth and ability to pay, and they wouldn’t for a moment accept that kind of treatment…to me, I think it’s a huge disservice to luxury brands to lead them down that path,” Danziger said. Many high-end retailers have spent the past decade or so training staff to be less judgmental, she said. At one store where she consults, corporate myth includes a customer who arrived on bicycle, was mistaken for a delivery boy, and purchased a $10,000 watch.

Stores have also tried to be more friendly as luxury brands work to expand their market beyond the ultra-rich to so-called “HENRYs” – high-earners-not-yet-rich consumers  — who might be uncomfortable walking up to the glass counter.  HENRYs buy 90 percent of luxury goods, according to Unity research.

Being rude “could kill your business and scare off customers that really matter,” she said.

Danziger noted that Ward’s study focused on “aspirational” consumers, who by seemingly definition don’t feel like they belong in luxury stores, and suggested that colored the results.

So, armed with the knowledge of the subliminal snobby sales technique, can consumers avoid the trap of overpaying for shabby treatment? Is it as easy simply acting like you belong?

“No,” Ward said.  “Maybe you have this hope that you’ll be impervious to rejection, but it is so embedded in our nature as humans that it’s hard to resist it.”

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About Bob Sullivan 1600 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.