Breaking Down Money Mind Games
Ever notice how price tags usually end in .99?
It’s no accident – like when your coworker says they “have no internet connection” right before the online meeting. In fact, there’s a psychological reason why retailers do this.
For example, would you buy something priced $3.99 or $4.00? With just one penny difference, we would go for the $3.99, right? This is called the “left-digit effect”. Our minds go straight to the first number, thinking we’re getting a bargain.
But this isn’t the only trick retailers use to make us spend more. Here are three of the most popular tactics according to Simon-Kucher and Partners, Strategy and Marketing Consultants:
The Anchoring Effect
We, as customers, have a certain price range in mind for most things. Maybe we get it from all those years watching The Price Is Right with abuela. The trick retailers do is create a reference price that is higher than the final price. In an experiment, a group of customers were asked if they would be willing to pay $189.99 for a new air-fryer – and the majority said that was way too much. The next group were given a different scenario: they had the opportunity to buy a $500 air-fryer at 62% off – which came to $189.99. Both groups were offered the same exact air-fryer for the same price, but the group that was offered the discount was much more willing to buy it. This proves we all crave value!
The Decoy Effect
Sometimes retailers will offer a product they know nobody will buy, just to get you to buy something else. This works well for upselling bundles. For example, a newspaper offering “online only” and “print+online” subscription packages realized that the majority of its readers preferred the less valuable, online-only package. However, when they changed “print+online” to “print only”, the popularity of the less expensive package dramatically increased. If one price option clearly takes over the other, it’s easier for us to make a decision.
The Value Effect
Imagine you’re at the beach on a hot day and you want a cherry-pineapple raspado (snow cone). Your cousin offers to bring you one from the only nearby place where raspados are sold. This could be either a fancy ice cream parlor or a raspado man with a push cart. How much are you willing to pay for each raspado? You are probably willing to pay less for the cart, and more for a raspado from the shop. Customers are willing to pay a higher price for a comparable product if they think it’s acceptable – like when you spend way more than you should for sodas and beer at sporting events and concerts.
At the end of the day, we all want a bargain. And getting the best bargains requires research. So before you go spending your hard earned dinero, do your research and make sure you’re getting a good value.
And for more money saving tips, click here to download the SUMA app. We’ll show you ways to help you take charge of your money and budget your dinero so that you can learn how to save more.
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