When figuring out what presents to get your loved ones this holiday season, keep in mind that more isn't always better. A new study shows that, when giving an expensive present, adding on a cheaper stocking stuffer as an extra gift actually diminishes the perceived value of the overall package in the recipient's eyes.
Say you have the choice of giving your significant other a luxury cashmere sweater, or the sweater and a $10 gift card. Although it may seem that adding the smaller gift and therefore giving them more presents is the way to go, researchers found that giving only the sweater would be the better option.
That's because the gift recipient is likely to perceive the gift of just the expensive item alone as more generous than the combination of the costly item and the cheaper item, according to the researchers, who conducted several experiments.
Presenter's paradox
In one experiment, 54 consumers from an online marketing research panel were divided into groups of "presenters" or "customers." Presenters were asked to put together an iPod-product package for customers. Subjects had the choice of creating a package of either an iPod Touch with a cover or an iPod Touch, cover and one free music download.
The participants were instructed to put together a package that would seem the most valuable to customers. Study participants in the customer group were shown both the packages and asked to estimate how much they would be willing to pay for each product bundle.
Although 92 percent of the presenters chose to include one music download in the product bundle, the customer group indicated they were willing to pay substantially more for the smaller package.
Dubbed the "presenter's paradox," the seemingly counterintuitive reaction of favoring one expensive item over that same item combined with a cheaper object results from the way consumers evaluate item clusters, according to the researchers. Rather than seeing the cheaper item as an added bonus, the consumers "make judgments that result in an averaging pattern," the researchers wrote in the study.
By averaging the value of both the expensive and the cheaper item, the overall value of the package is lessened, in effect diluting the perceived worth of the highly favorable item.
More isn't always better
In another experiment for the study, researchers split 227 students at the University of Michigan and Princeton University into "presenters" and "evaluators." Presenters were asked to pretend they were hotel owners getting ready to list their hotel on Hotels.com. In the advertisement, they had to choose whether only to reveal the hotel pool's 5-star rating from an outside agency, or the pool rating plus information about the hotel's three-star restaurant.
The evaluators, who were asked to pretend they were planning a vacation, were either shown a Hotels.com ad featuring only the 5-star pool or the 5-star pool and the 3-star restaurant.
As the researchers expected, the evaluators who saw the ad featuring both the pool and the restaurant were willing to pay significantly less per night than those who saw the advertisement featuring the 5-star pool only. Even so, 72 percent of the presenters had chosen to include both the 5-star pool and 3-star restaurant in their ad.
"Fortunately, there is a simple remedy: Take the perspective of the evaluator and ask yourself how the bundle will appear to someone who will average across its components," Weaver said. "Doing so will alert you to the fact that others will not always share your sense that more is better."
The study will be published in the October 2012 issue of the Journal of Consumer Research.
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