4.17.2013

3 Psychology Traps to Avoid While Shopping

Hi everyone! Today I have a special guest blogging for me - my friend Vince Favilla! Check out his site where he teaches entrepreneurs how to find more clients, pursue their passions, and eliminate stress. He runs the positive psychology blog, Soon I Will Be Successful. He's going to be sharing some psychology traps that marketers use to lure us into buying things we don't need. I actually fall prey to these traps as well, but being able to recognize them will make it easier for me to understand why I'm wanting to spend and buy certain items that I don't need.

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As our understanding of psychology and the decision-making process continues to deepen, retailers will increasingly use underhanded tactics to get you to spend more money than you might intend to. What follows are 3 mental traps that you’ll start to see exploited everywhere once you understand them. And simply being aware of them can help — not always a lot, but sometimes enough to make you think twice before pulling out your credit card.

1. Anchoring



We’ve all had experiences with anchoring before. When you see a jacket marked down to $40 from $99, your brain screams at you that this is a great deal. How can you afford not to get it?! It’s 60% off! Plus you needed a new jacket anyway! (Kinda...)


This is an example of anchoring, and what’s particularly sneaky about it is that it works even when you know it’s happening. Not only that; you can become anchored to a number that’s not even related the price. A study by renowned psychologist Dan Ariely asked participants to write down the last two digits of their social security number. They were then asked to “bid” on a wireless keyboard. Those who wrote down numbers between 1 and 20 bid an average of $16, while those with numbers between 80 and 99 bid an average of $56.


Your brain is constantly being influenced by cues in your environment, and most of the time you’re not even consciously aware of them. Retailers will take advantage of this fact, and do everything in their power to convince you that something is a better deal than it actually is. But when you see a price markdown, it’s a flashing-neon-sign of a clue that you’re being manipulated. So step away from the jacket, and ask yourself if you’d feel the same way if it were marked down to $40 from $40.99.

2. Scarcity


Pull up a product page on Amazon.com and you’ll sometimes see a message like “Only 3 left! Order soon.” This is the psychological principle of scarcity at work, and it was originally described by Robert Cialdini.

The term “loss aversion” refers to our tendency to hate losing things. Let’s go back to our jacket example; what if this jacket was the only 40-dollar one left in the store? When every other jacket is much more expensive, it begins to feel like this your only opportunity to secure such a good deal. So what do you do? You buy it, of course.

It’s funny; we’re afraid of losing things that don’t even belong to us yet. And, not surprisingly, retailers employ scarcity to great effect.

What’s your best defense as an educated consumer? Take a moment to evaluate whether there actually is a shortage or not. Is Amazon going to order more books after they sell out? Or are these books the only ones they’re ever going to get? It’s probably the former, so don’t panic when retailers create artificial shortages. The world is an abundant place.

3. Consistency


Like scarcity, consistency is a psychological principle made famous by Robert Cialdini. It’s simply the idea that we don’t like to appear hypocritical. Whenever we take action or make a decision, it says something about us as a person. We tend to stick with that decision and do things that are consistent with it.

Consistency can be used in a variety of ways, and some are more ethical than others. Let me illustrate with an example of when I fell victim to consistency myself:

My keyboard story...


As a musician, I really wanted a professional keyboard several years ago. Not the kind you find at Best Buy; I wanted a Korg Triton, which costs 2-3 thousand dollars. But that was a lot of money and I wasn’t sure I could afford it.

Then one day I found a high-end refurbished model available for half price: $1500. Scarcity and anchoring kicked in to full effect; I whipped out my wallet and entered my billing information into the website as fast as I could. This was a heck of a deal and I wanted my Triton.

Then I got a call the next day saying they were sold out of the refurbished Tritons but could sell me the $3200 model for $200 off.

In my mind, I was already a serious musician and Korg Triton owner. I wanted that keyboard, and no one was going to stop me from getting it.

But that was still a lot of money. I grumbled and thought about it a little, but in the end I agreed to buy the more expensive model. I was behaving consistently with my past actions. Yet if, a week before, you asked me if I was interested in the top-of-the-line keyboard, I would have said there’s no way I’d spend that kind of money.

Some retailers use consistency in harmless ways and give their customers incentives to keep doing business with them. If your local coffee shop stamps your card every time you go in, you identify as a patron of that cafe and continue going there. No problem, right?

But other times, you might end up in situations like mine. Imagine ordering some custom jewelry and you’re quoted a price of $200. Then you get a phone call right as you’re expecting it to ship:

“Sorry, this is going to require more custom work than we expected, and we’re going to have to charge you $220 instead. Is that okay?”

Yeah, sure. It’s only 20 bucks, and you’re already committed to getting that ring. So you go along with it.

Fortunately, you don’t often see consistency used in a way that blatantly rips off customers. But when you do, it’s worth taking your business elsewhere. Try not to put too much thought into your past actions; they’re irrelevant now (and a “sunk cost” as economists like to say).

Summary
I’ve discussed three mental traps that cause you to spend more than you’d like: anchoring, scarcity, and consistency. And even when you’re fully aware of them, they can still overpower your better judgment. So what’s a shopper to do?

As we saw in the example of anchoring, it’s often useful to imagine a slightly different situation and ask yourself what you would do. Would you still buy this if it were marked down 5% rather than 50%? Would you still want this if they had 200 left rather than 2?

Let’s say you’re buying a used car and drive 50 miles to go check it out. The paint is a little chipped and there’s a stain on the seat. Would you still be interested in it even if you hadn’t made that 50-mile commitment?

Even if you can’t fully inoculate yourself to these traps, simply being aware of your thought processes can go a long way. So always ask yourself why you’re making that purchase.

4.03.2013

Sunglasses: A Status Symbol

Personally speaking, I don't believe in what a status symbol is "supposed" to represent. I don't believe in the idea that a status symbol should equate happiness and success, but I definitely don't doubt the idea that status symbols represent those things for many people.

As I was growing up, my mom was a single mother and also an immigrant to the USA at the age of 18. She was duped into believing in status symbols such as big house, nice car, and expensive clothes and shoes would make you look and feel rich. I don't think she went overboard, thankfully she is an accountant so she is very good with budgeting, saving, and investing. However, I think this notion of status symbols played a huge role in my life since my childhood in addition to the way the media throws it in our faces.

My mom had a huge closet with fancy dresses for when she would go out with her friends and go ballroom dancing, Vegas trips with her girlfriends, and business trips. We lived in a modest house that she bought herself when she first started working here, and she saved a lot for retirement. Somehow, the big house and nice car weren't status symbols that I considered necessary in my life, but one thing I've always wanted are a perfect pair of sunglasses. 

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Designer sunglasses have a way of making every woman look so glamorous to me. I'm not sure if it's the way my mom wore her sunglasses everyday, or the way the sunlight shone off the glossy lenses, or the way women look so fashionable with sunglasses pushed up against their hair when they aren't wearing them over their eyes. When I was younger, all celebrities had designer sunglasses and the sunglasses got even bigger and bigger (in size and in trend haha).

Today, I've learned that it's not about the brand of sunglasses that you are wearing, but more importantly, how they make you feel. I could be wearing the cheapest brand of sunglasses and no one would know! I could still do all of the things that I could do with designer sunglasses.

I think everyone has a certain type of "status symbol" that's personal to their lives, whether it's considered a status symbol to others. For example, my dad told me a story about how his dad carried a briefcase everywhere, even though he never needed to carry one. A briefcase made you look important, he said. My dad then grew up wanting a briefcase, and he of course snagged one as soon as he could....and he still has his first briefcase until this day!

Do you have something that represents a status symbol to you, but it may not be that big of a deal to anyone else?
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