Retailers use 3 psychological tricks to get you to spend more money
The retail landscape is more competitive than ever as consumers spend on experiences like restaurants and vacations more than material possessions.
This shift in consumer habits has led to a wave of discounting from retailers.
Aron Ezra, CEO of marketing software company OfferCraft, recently published a list of common psychological tricks retailers use to drive sales.
His piece, first published on industry newsletter Retail Touch Points, offers a glimpse into how brands get you to spend more money.
1. The "decoy effect"
High-end kitchen retailer Williams-Sonoma once struggled to sell a $275 "bread bakery" machine, finding that consumers were choosing to buy cheaper appliances instead.
To drive sales of the bread machine, Williams-Sonoma started offering it alongside a larger — and more expensive — version. Once consumers saw the more costly option, they began to believe the $275 version was a steal.
"This is a classic example of the 'decoy effect,' a marketing principle first demonstrated by Duke University researchers in 1982," Ezra writes. "They found that a product will be perceived as more valuable if the buyer can compare it to a less desirable model on the shelf or a web page."
2. Giving you a "gift"
Retailers use "gift psychology' to get you to spend more.
Ezra uses a story about belts to illustrate the point:
"Now say you're buying a pair of pants at this store. Typically the sales associate might try to upsell you by saying something like, "Would you also like to buy a $15 belt with your $60 pants?" That will work for some people, but not most of us.
But now imagine a different sales associate says, "These $75 pants come with a thank you gift: Your choice of one of these belts. You can take any of these, or you can give back the belt to reduce the price a little."
Instead of deciding to make an additional purchase, you're now asked to actively give back a gift. This enterprising sales associate will generally sell a lot more belts than his counterpart."
3. The illusion of choice
Choice can be a powerful factor in getting consumers to spend more money.
Ezra cites one company that ran a promotion offering customers a $100 credit toward specific products. Then, they offered them the choice of a $50 credit toward a different product.
One of our retail clients offers a fascinating example of the power of choice.
"The results were startling: more than one third (34.9%) of the customers swapped the higher value prize for the lower value prize on a different product," Ezra writes. "The customers were happier, while the retailer cut promotional costs significantly and generated invaluable insights about the preferences of their best customers."
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