Most of us like to think of ourselves as smart shoppers. We compare prices of items on the shelves, compare sizes to see how much bang we’re getting for our buck, and so on. Yet we often find ourselves spending more than we mean to or buying items that we never intended to pick up. Why is that?
As it turns out, stores have a lot of little tricks to try to get us to spend more on their products.
Fortunately, Derek Thompson of The Atlantic has investigated these tricks to help you avoid falling into their traps the next time you go shopping. Here’s what he found.
Trick#1: The power of free.
We’re psychologically conditioned to light up when we see the word “free” even when getting something for free means paying more overall. Thompson describes the word “free” as “a skeleton key into our psychology,” but Professor Dan Ariely of Duke University has a different name for it: “The Zero Price Effect.”
In 2007, Ariely conducted a study wherein participants were presented with Amazon gift cards. They had a choice between two different types of card: a $20 gift card for $7 or a $10 gift card for free. The $20 gift card was the objectively better deal. Spending $7 for the card meant a net gain of $13 to the participants, yet, in spite of that, the $10 gift card was more popular.
It’s because of this effect that 60 percent of online retailers agree that free shipping is their single most effective marketing tool.
Most places that offer free shipping won’t just do it for any order. Consumers have to spend enough to earn free shipping. At Walmart the minimum is $35, at REI it’s $50, and at Anthropologie it’s $150 for special members. The basic take-away from all this is that free shipping isn’t free.
Trick #2: We do what we’re told.
Making things visually interesting can go a long way. Studies have confirmed that shining a bright light on a bowl of fruit in a school cafeteria makes kids more likely to eat something out of it, but adults fall for these tricks as well.
The highest margin products at restaurants are typically appetizers, alcohol, and desserts. This is why you’ll often find these items in eye-catching boxes on menus or on entirely separate menus you can’t help but look through.
Retailers do the same thing by putting their highest margin products where people are most likely to look.
A great example of that is those displays at the ends of grocery store aisles known as end caps. These end caps are almost always stocked with either the highest grossing or highest margin products in the store.
These can vary depending on time of year, which is why you’ll often find these end caps stocked with candy corn in October or sweet hearts in February.
Trick #3: Stores know more about you than you do.
“Gone is the age of one price,” says Thompson. “This is the age of personalized pricing.”
Amazon has figured out the prices you are willing to pay for something and exploited that to great effect.
One example of this comes from the items on the front page. For popular items, they often reduce the price, making them seem like the cheapest place around, but, for less popular items, they’ll raise the price.
Why would they do this? It seems to go against the fundamentals of supply and demand, at first, and yet, there is a method to their madness.
You see, these less popular items are often complementary to the big items they’re promoting. So, while you might save money on a new TV, you end up paying more for the cables and converters.
It creates the illusion of saving money when, really, you’re not saving anything at all.
“People used to think the internet would usher in this new age of transparency for retailers but really it’s just given retailers new ways to manipulate the same old fundamental bias,” says Thompson.
What is that bias? Well …
“People don’t know what anything is worth,” Thompson explains. “So we need clues.”
Unfortunately, the ones in charge of providing those clues are the stores exploiting this bias in the first place. It’s nearly impossible to avoid their traps completely, but hopefully this article has made you a little wiser about what’s going on with your local retailers.