The Psychology of Spending: Retail Tricks

It can be hard not to blow the bank in the run-up to the holiday season. To help you curb your spending, we’ve identified the top five retail tricks used by stores to get you to spend more money.

The start of the holiday madness seems to get earlier every year.

Most stores don’t even wait until the end of October anymore before they start advertising deals for Thanksgiving, Black Friday, Cyber Monday, or even Christmas. In fact, 15% of retailers had already begun their holiday advertising by the start of October in 2015!

And although it can become quite annoying, it’s easy to see why retailers put such focus onto this time of year. An estimated $3.19 trillion was made in sales over the holiday season last year – that’s 20% of the yearly retail spend.No wonder we’re all broke in January!

No wonder we’re all broke in January!

This isn’t purely down to customer recklessness at the cash register though. We all try to be a little wiser with our money, but retailers have developed a few subtle tricks that are designed to help consumers part with a little extra cash.

So in an effort to help you have a happy New Year free from crippling debt, we’re showing you some of the sneakiest ways that stores get you to overspend to help you find some savings.

1. Environment


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The layout of a store has a huge effect on the spending patterns of consumers. Everything is designed to encourage you to spend more!

To entice customers in, most retailers position discounted items (which can be a false economy themselves) near the entrance. This is the thin end of the wedge, designed to give would-be-buyers the little push needed to enter the store and spend some cash. Once you’ve opened your wallet, it’s much easier to justify buying more.

Some larger outlets also create ‘leisure spaces’ throughout the store. These seating areas are a prime position to advertise out of season products that the store wants to get rid of. Shoppers resting their weary feet are actually being advertised to as they relax, and are likely to pick up a product displayed close to them.Most surprising is the effect music has in

Most surprising is the effect music has in stores however. You might enjoy listening to Christmas songs as you shop in December, but did you know that consumers tend to spend 17% more when they’re rockin’ around the Christmas tree?

In his book Brandwashed: Tricks Companies Use to Manipulate Our Minds and Persuade Us to Buy, researcher Martin Lindstrom also proved that alternating between French and German music can also affect what type of wine was bought by customers in a supermarket!

So maybe bring a pair of earplugs next time!

2. The Price Comparison Effect


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The Price Comparison Effect is a psychological trick that allows stores to sell a particular item by encouraging shoppers to subconsciously compare it to another similar item.

In 1990, Williams Sonoma introduced a bread-making machine to the market that retailed for $275. It wasn’t selling as well as they would have liked however, partially because bread-making machines were new to the market at the time.

So they decided to introduce a $429 model which was only marginally better than the original model. Suddenly, the $275 model started flying off the shelves.

What had happened was that because consumers had never seen a bread-maker in the marketplace before, they had no idea if $275 was a ‘good deal’ or not. They had nothing to compare it to.

But once a more expensive model was introduced for comparison, shoppers instinctively began to think that the $275 model was a great deal!

They had subconsciously started comparing the price of the two items, and ended up buying the product at a standard price because they thought they were getting a good deal!

3. The ‘Left-Digit’ Effect


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This is a well-known ploy and one that’s quite easy to spot. Nonetheless, it works for retailers time and time again.

Prices that end in .95 or .99 are known as the ‘charm prices’, and they play on the human tendency to focus on the left-most digits of a price.

Most people in the Western world read from left to right. So if we see something advertised as $6.99 or $7.00, what we’re really focusing on is the ‘6’ and the ‘7’.

Research conducted for the Journal of Consumer Research confirmed this effect. Participants were asked to estimate how much stuff they could buy with $73. They were first presented with a range of prices ending in .00, then the process was repeated with products ending with .99.

Across all conditions, most of the participants estimated they could afford to buy more when prices ended in .99.

4. Membership


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On a regular shopping trip, how many times are you asked if you’d like to sign-up for a store credit card or membership?

Store memberships and credit cards might offer you discounts on some items, but in reality, they encourage you to spend far more money! Research has shown that customers will spend 30% more if they have a membership with the store they are shopping in.
It even works online. Amazon Prime members spend roughly 4.5 times more than non-Prime members.

What’s more, the store will now have access to your email address and possibly your cell-phone number, allowing them to send you promotions. They can also target these promotions directly to your wants and interests thanks to the information they get on your spending habits.

Undoubtedly, a lot of membership programs offer consumers some good discounts. But it’s important to keep in mind that you aren’t the only one set to benefit from these schemes!

5. Free Shipping


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The holy grail for the online shopper – free shipping!

Unfortunately though, if every company offered free shipping with no strings attached, there would be an awful lot of bankrupt companies.

The catch is the minimum spending threshold that is set with most offers of free shipping. Usually, a customer will have to spend $35, $50, or maybe even $100 before they can avail of free shipping on their order.

So what do they do? They buy more stuff!

We’ve all been in the same position. We go to pay for our items and the total falls short of the threshold for free shipping. So we rack our brains trying to think is there anything we need that will push our purchase over the line.

And even if we don’t need anything, we might just spend an extra $10 – $15 for the sake of getting the free shipping.

Consumers love free shipping for the same reason they love online shopping in general – it takes the hassle out of shopping. But remember, the shipping is never really free, and it consistently boosts the average price of your shopping basket.

 

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2 responses to “The Psychology of Spending: Retail Tricks

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