Everything about your common store — from the humble coffee shop to the glitzy supermarket — is designed to make you shell out cash. Some of the tactics used are obvious, like the way bookstore owners display their “New Arrivals” near the entrance. Others are much more subtle, insidious, and effective at pushing your “Buy” buttons — unless you’re aware of them, of course. From large, aisle-wide banners to the new and hipper tech displays, there is a plethora of platforms to attract eyeballs.
The Anchoring Effect in Action
Let’s say you’re ordering pizza over the phone. After confirming that you want the $10 supreme pizza, the agent on the phone sweetly asks: “Would you like to order some (random side dish) with that, for only $3? It would go great with your pizza!” Thinking that spending a little more wouldn’t hurt, you say: “Yeah, sure. I’d like some of that, please.” This is the anchoring effect at work.
If the agent asked you right off the bat whether you wanted the side dish, you probably would’ve said “No”, because you’re comparing $3 and $0. But since you initially ordered something that’s thrice as expensive, the side dish looked cheaper by comparison, so you’re more likely to buy the latter.
Car dealers use a similar tactic: They don’t try to sell you accessories until after you’ve purchased your car. After all, when you’re flushed from the high of having a newer, flashier means of transportation, you’re more susceptible to messages like “Hey, maybe I can spruce this up a little more.”
The Cost of Discounts
With the ubiquity of tags shouting “X Percent Off!” in stores, you’d think store owners everywhere would be closing up by now. After all, isn’t it counter-intuitive to give discounts to customers, when you could just charge more instead?
Actually, discounts are pretty brilliant. Sellers know that customers can’t resist bargains, so they shave a few bucks off the MSRP (manufacturer’s suggested retail price), but not to the point that they won’t make a profit. In other words, if an item was initially priced $200, then got cut down to $100, that discounted price still incorporates a markup. For all you know, the actual value of the item could be $50, but there’s no way to know that for sure, is there?
The Magic Number 9
Ever wondered why some items are priced $4.99, instead of $5? Some say that we tend to look at the large difference between 4 and 5, instead of the tiny difference between 0.99 and 1. Others say that we’re naturally wired to like discounts, even if they’re literally worth only a penny. Whatever the real reason, there’s no doubt that .99 pricing is effective: According to a French study, pizza marked down from 8 euros to 7.99 boosted sales by 15 percent.
The Scarcity Principle
“Limited Offer Only!” “Available While Stocks Last!” These are just a few of the phrases we see on travel booking sites, restaurant leaflets and the like. And, as you may have guessed, they’re not what they’re cracked up to be.
That’s because they’re rooted in a powerful psychological principle: When we think something is scarce, we tend to overestimate its value. For example, if a certain flavor of French fries is available for only a limited time period, we’re going to try it now and pay a premium, because there’s no telling when that particular flavor will come back in the future — assuming it’ll come back at all.
The Gift of Giving (Back to the Store)
If you look at them from another angle, gift certificates actually make your purchases more expensive. You always have to buy something higher than their face value, because (1) the store won’t give you change for less; and (2) it’s highly unlikely you’ll find an item with a price equal to the aforementioned face value. So the only one who’s really getting a “gift” is the one who offered the gift certificate in the first place!
The Lies of Layouts
When we said “everything” in a store is designed to make you buy, we mean everything — from the smells greeting you at the entrance, to the music blasting out of the store’s PA system. All of that is designed to overload your senses and increase the likelihood that you’ll buy on impulse, according to researchers from the National University of Singapore and Penn State. If you want more in-depth information on the psychology of store layouts, you can read more about it here.
The Myth of Free Lunch
According to marketers, “free” is one of the most powerful words in the English language. And it’s true: For instance, tasting free samples makes you want to buy the real thing, because deep down, you feel bad about taking advantage of the seller’s “kindness”. Likewise, “Buy Now, Get One Free” offers are designed to make you buy things you don’t really need, on account of them being “free”. As economists would always say: “There’s no such thing as free lunch”.
While there’s not much we can do about how stores choose to sell their wares, it’s still possible to minimize the effects of these tricks on your wallet. For instance, you can:
- Bring a complete, well-thought out grocery list.
- Shop when you’re well-rested and full.
- Take time to calculate the effective cost of a purchase, after accounting for coupons, gift certificates and the like.
- Go window shopping once in a while, so you can get to know a store’s layout without spending a cent, and be able to shop faster inside it in the future.
- Be more alert to the instances when stores are playing tricks on you.
As in-store marketing tactics continue to evolve, we can expect to see more sophisticated tactics in the future. But for now, our knowledge and understanding of those tactics are enough to protect us and our wallets.