In these games played by marketers and retailers, you’re the puppet, and the puppeteers are artfully, stealthily steering your hand into your wallet where the credit card rests, waiting to be swiped.
How, exactly, can consumers be tricked into buying stuff or overpaying?
You’ll pay 50% more for stuff you can reach out and touch. A WalletPop post describes the findings of Caltech researchers who conducted a study to compare what consumers would pay for the same item presented as a text description, as a photograph, and in real life within arm’s length.
First, they used food. Test subjects said they’d pay about the same when the food was presented in the first two ways, but they’d be willing to drop 50% more money when the actual food was put in front of their faces. Next, the researchers tried trinkets from the school bookstore, and again, the test subjects said they’d pay 50% higher prices when they saw the items in person.
I suppose this means that from the business perspective, brick-and-mortar shops still have a leg up on online retailers. From the consumer perspective, you should be aware that you’re prone to overspending when you can touch, smell, and see an item up close. You’re likely to be a tougher customer online thanks to the distance and hands-off Internet experience—not to mention the ease with which you can quickly compare prices on the Web—though there’s plenty wrong with online shopping too.
You’ll buy when you think you’re getting a deal, even when you’re not. One of the oldest tricks in the book, according to a Pop Economics post at SmartSpending, is known as “anchoring.” You’re probably familiar with the idea, in which a high list price serves merely as a reference point so that the seller can grab the consumer’s attention with something like “50% Discounts!” The truth is that the seller never really expects to sell the item at that artificial “anchored” list price, and that it’d be happy to sell the item (at a decent profit) at the “sale” price. Constantly discounting stores where everything is always on sale play this game regularly, and the result is that many “deals” are not good values.
You’re suckered into buying expensive gadgets by way of “pricing decoys.” What’s a pricing decoy? Ben Kunz at BusinessWeek explains:
Decoys, in marketing, are products, services, or price points that a business doesn’t really want you to take, but rather use as a reference to make another product look better.
And what company is the modern-day master of pricing decoys? Apple. Kunz says that Apple sells products such as the $399 iPod Touch mainly to make the purchase of a $229 iPod Touch (with less memory) look like a better deal. These pricing decoys are closely related to anchored or high-reference prices, which Apple also utilizes to help it move merchandise:
Apple has played this game with itself by launching products such as the iPhone at artificially high reference prices—the iPhone cost $599 when it first hit the streets—and then rapidly lowering that price… You may be on the fence for a $499 iPad, but if it drops to $399 by Christmas, won’t you feel better?
You’re scared into buying via the “fear tax.” As pointed out in a WiseBread post, we’ve all bought something basically because we were scared—of not looking good, of falling behind in our careers and technological savvy, of being looked down upon by neighbors and colleagues, of missing out on the latest amazing entertainment experience, of putting our families in harm’s way, and so on. Marketers play up these fears, and society as a whole seems to willingly play along. But often, these fears are superficial and entirely unfounded.
If you buy something solely because you’re scared you’ll look foolish without it, then you are the fool.
But your preferences and choices don’t really matter anyway. Here’s another neat study, this one highlighted by SmartMoney. Researchers asked supermarket shoppers to taste jams and smell teas and state their preferences. Then, participants were asked to sample their favorite products again—only half of the time, the researchers pulled a switcheroo, giving the participants the tea and jam they preferred less the second time around. More than half of the samplers never noticed the switch. What does this say about all the thousands of little choices we make as consumer, from picking a flavored tea to selecting between 40 shades of white paint?
The results indicate not only that we consider such decisions trivial, but that we don’t even seem to know which choice we’ve made moments after we’ve made it. What’s more, we’ll defend a choice we didn’t even make, simply because we’re blind to the fact that we didn’t make it.
So why do we buy what we buy and do what we do? Clearly not because we are entirely rational creatures. One explanation has it that most of the time, our actions and consumer decisions come about because we are creatures of habit. Mostly, we buy what we buy and do what we do because it’s easy to stick with what’s familiar. But somebody with bad habits—a “habitual offender” if you will—is a consumer who inevitably overspends.