What a Deal!Read Now
"They were practically GIVING it away." "I couldn't afford NOT to buy it!"
Sound familiar? I have definitely said both of these things before...OK...maybe more than once. Although, sometimes it might be said in jest...see below Birkin "sale".
WOW...a whole dollar! Makes a $13,500 purse look like a steal (kidding!)
The principle is true, however. When you see the word "sale" or "clearance," shoppers are more likely to buy said product because they feel like they are getting a deal. Bartering without the hassle of actually negotiating.
Our brains are manipulated into thinking we are getting a good deal by a thing called "anchoring." Behavioral economist, Dan Ariely, asked a class of MBA students to write down the last 2 digits of their social security number. They then held a mock auction. Students with a high number bid 346% more than students with a low number. A completely random number manipulated what they were willing to spend.
Now think back to the last time you were in a department store. One pair of shoes were $400, full price. Another were $2,500 but had been marked down to $999...which do you choose? The cheaper pair or the pair where you feel you're getting a deal?
Just like in the movie, Confessions of a Shopaholic (can anyone believe it didn't win an Academy Award?) Isla Fisher and the crowd of women above, flock to a sample sale where things are supposedly, massively discounted.
Whereas if you were at a department store, you might take a step back and think about the item. If you are led to believe everything is an incredible deal, you are much more apt to throw down your card immediately.
This is true for designer goods, TV's, cars etc. The MSRP (Manufacturer's Suggested Retail Price) is just that...suggested. $87,350 is the MSRP for the above Range Rover. If the dealer was willing to sell it to you for $7,000 less than the sticker at $80,000, would you think it was a deal? What makes you believe this ride is truly worth that amount? Because the company said so? Because celebrities push them around L.A.?
A lot of this has to do with comparisons. An article by USA Today discusses how comparisons make us feel superior. Having a nicer car than friends, living in a nicer house than our neighbors, carrying more expensive bags, etc. Call it human nature and human flaws!
Money does not buy happiness, but it sure buys everything else. However, living beyond your means or constantly buying, solely to "Keep Up With The Joneses", will probably lead to an unhappy life and an empty wallet.
Remember these "anchors" next time you're in the market for anything, big or small.
Original Piece: Jeff Stibel, author of "Breakpoint" and "Wired for Thought"
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