May 05 2020

The Psychology of Buying More

When I was in college I had just finished a course on social psychology (certainly one of the most memorable courses I took in college), and while back home I was visiting with my then girlfriend. When I arrived they were in the middle of dealing with a door-to-door textbook salesperson. That’s right – the product was a mathematics textbook that combined the K-12 curriculum into one giant tome. My girlfriend’s parents asked my advice, so I sat down to listen to the spiel.

The salesman was sitting in their living room, sitting on one side while the family members were all opposite. He had a velcro cast on one of his legs (the kind that can be removed and put back on) and was sporting crutches. His tactic was largely highlighting some feature of the book, then asking someone specifically if they thought that feature would be helpful. “Do you think it would be helpful to all this information in one location?” The answer, of course, was always yes. He mentioned that a neighbor down the street had just purchased the book for their high school student.

It was a fascinating experience for me, because I had just learned about all of the techniques the salesman was using. He was garnering sympathy with the cast. Using peer pressure by mentioning their neighbors. Getting them to agree that the product was useful, so they would feel inconsistent if they then decided not to buy. He positioned the family all on one side so they could not make eye contact with each other during his presentation.

After the pitch, while the book salesman was still waiting in the living room, I told the parents not to buy the book. I explained all the manipulative techniques he was using. Further, they simply did not need the book, and it was expensive. They understood, but bought the book anyway. They felt he had invested so much time in the sales visit they could not say no. His emotional manipulations worked – even when they knew they were being manipulated. It would have been simply too socially awkward to send him away with no sale.

My interest in the psychology of marketing and getting people to spend money has continued since then, and dovetails nicely with skeptical activism, which has a large component of consumer protection. This is also definitely an area where knowledge is power. If you are acutely aware of a specific technique someone is using to deceive or manipulate you, that knowledge will provide some layer of protection (although not invulnerability). Some of the techniques are so simple it is amazing that they work, but they do. Marketing psychology research is a vibrant area, because there is a lot of money to be made in even nudging people to buy a little more.

Here is a fun infographic I recently came across that reminded me of all this. It goes over common techniques retailers use to sell you more stuff. Some examples include playing with numbers, such as changing a price from $3 to $2.99. I always mentally round up such prices, and so was skeptical that this transparent manipulation would actually work. But it does.  This is due to what psychologists call the “left digit bias”. We are more affected by the left most digit in a number than the other digits. Why? This is probably a heuristic that allows us to simplify our quantity or value assessments. The left most digit is the more important mathematically in determining quantity. Heuristics are all about sacrificing a little detail for a little convenience and efficiency. This works in a world where numbers are randomly distributed.

If, for example, I am comparing 3XX of something vs 6XX, using the heuristic the former is about 300 less than the latter is good shorthand. Chances are the more precise answer will not deviate significantly from 300, and so it’s not worth the mental effort.

The problem is that heuristics can be manipulated. Prices are not random, they are deliberately set. And so a retailer can discount a price from $600 to $399, giving you the false impression you are saving $300 when in reality you are only saving about $200. And damn, it works. Your brain wants to take the path of least resistance, do the least amount of mental work, and just look at the left most digit. You have to make a specific mental effort to counter this tendency. But doing so will allow you to make better decisions.

Retailers also use all kinds of anchoring, making the price they want you to pay seem like less. Anchoring is basically the heuristic of setting the standard based upon some arbitrary recent example. A common demonstration is to show the exact same product to different groups of people, let’s say a house. You ask group A, is this house worth more or less than $100,000. You ask group B the same but with $500,000. You then ask both groups to guess how much the house is worth. Group B will consistently guess much more than group A, because the first question anchored them to an arbitrary price.

This is why you always want to open a negotiation with your own offer, to anchor the starting price high or low, depending on whether your are buying or selling.

I will give another anecdote of my experience with anchoring in marketing. When my wife and I were shopping for the current house we are living in, we started with a real-estate agent who, in retrospect, was terrible. The first house she brought us to was a rundown shack. The floors were not even level. This was clearly a waste of time, not at all what we told her we were looking for. Why did she do this? – to anchor our expectations to a really low bar, so every house she showed us afterwards would seem better by comparison. Her manipulations continued, until we finally had to dump her (our next agent was awesome, btw).

A more straightforward example of this is the pricing of different sizes of things, like popcorn at the theater. You have probably noticed that the large (drink or popcorn) is much bigger than the medium but only costs slightly more. The medium is priced to make the large look like a good deal, so in the end most customers will buy the large, which is what the retailer wants in the first place. I also remember the days when theater concessions came in large, huge, and giant sizes. It was so frustrating to order a “large” and get a small. The practice was eventually dumped (thank goodness), I guess because it did not work as well as the anchoring pricing they use now.

Another way to use anchoring is by listing the “suggested retail” price, which is higher than the actual price. Or you can have everything on sale, reduced from some artificially high price. Many states and countries have laws against abusing this technique – if you are going to list an original price, the item needs to actually sell for that price for some amount of time. Sales have to be actual sales. But then, you just have your inventory in rotation, with items at regular price long enough to then promote them on sale, but something is always on sale.

Take a look at the infographic, and also I highly suggest you look up some resources on marketing psychology and manipulation. I also recommend every book by Richard Wiseman, who is a great popularizer of social psychology. The basic reality is that humans are easy to manipulate (statistically in the aggregate). You are likely exposed to many attempts to manipulate or influence your behavior every day. Having a basic working knowledge of how this works is an essential survival tool in modern society.

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