Thursday, 3 September 2015

* The hidden benefit of setting air conditioners at 25°C

Leonard Lee is Associate Professor of Marketing and Dean’s Chair at the National University of Singapore Business School

In Singapore’s ever-more-competitive retail landscape, stores have been pulling out all the stops to entice shoppers and their wallets.

Aside from promotions, it is common today for retailers to use methods that appeal to shoppers’ senses. Stores such as Shanghai Tang and Abercrombie & Fitch, for instance, use scent to cultivate a certain mood, providing shoppers with a pleasant experience while browsing, and subconsciously enticing them to buy. Some home-furnishing boutiques use lighting that exudes warmth to enhance the shopper’s experience.

This is because such environmental factors, irrelevant as they may be to the product, can influence shoppers in their assessment of product quality and decision on whether to buy.

Temperature, however, is not always in the picture. Yet, setting the thermostat right can bring benefits — not just in terms of energy bills.

In recent research published in the Journal of Consumer Psychology, my co-authors and I ran a series of studies and found that, consistently, temperature can affect a person’s perception and evaluation of products.

In one of the studies, which we conducted in collaboration with a popular online-shopping portal in Israel, we examined over six million clicks made by its customers over a 24-month period for purchases in eight product categories, including books, cameras, mobile phone accessories and watches.

At the same time, we recorded the daily temperatures. We found that as the temperature rose, so did the number of “to purchase” clicks. This effect persisted even after taking into account the day of the week, seasons, and holidays.

In another study with 109 participants, we observed that people were willing to pay more for nine of 11 products when they were in a warmer room of 26°C, than in an 18°C room. The price premium resulting from the warmer room temperature ranged from four per cent (for a computer mouse) to 21 per cent (for a cup of coffee) and 25 per cent (for Dove bath gel). Overall, the ambient warm temperature increased product valuation by 10 per cent.

Similarly, another study with 46 participants found that when consumers felt physically warmer, they were willing to pay about 44 per cent more for a slice of chocolate cake, and 29 per cent more for a six-pack of batteries, compared with those who felt physically cooler. Beyond a willingness to pay more, we found that people were more interested, enthusiastic, delighted and captivated when they feel physically warmer than colder. They were also more willing to recommend products to their friends.

Our research findings raise some questions for Singapore’s malls. For instance, do the findings mean that switching off the air-conditioning in our humid, enervating weather would make shoppers more willing to pay?

Perhaps not. The warmer temperature we used in our studies — 26°C — is cooler and more comfortable than Singapore’s average room temperature on most days. But what is the optimum ambient temperature that shopping malls should operate in, then, so they can both provide shoppers a comfortable experience and encourage consumers to buy more?

This is where our findings are useful, because like malls in colder climates, shopping malls and offices in Singapore often have ambient temperatures closer to the 18°C that we used to define “cold temperature” in our experiments. Our findings lend support to Singapore Power’s recommendation to set thermostats at 25°C for air conditioners to run efficiently.

But in addition to saving energy, our findings suggest that keeping temperatures closer to 25°C could go a long way towards bringing in sales and revenue, while keeping utility bills down and promoting a greener environment.

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