Why do we end up making irrational purchases?
As today’s world is becoming dynamic, everything is becoming transparent, and knowledge is available at a click of a finger, we as consumers love to think of ourselves as highly rational beings who weigh our options logically before making a decision. But often, we end up buying more than what we need as a result of marketers and sellers employing psychological techniques to sell products. So let’s have a look at some of the popular psychological techniques:
1. The Decoy Effect
It is a phenomenon where consumers change their preferences when provided with a third not-so-appealing option simplifying the consumer’s selection process based on value addition (here price and quantity). Let’s understand it by an example, you arrived at a cinema hall to watch a movie and want to have popcorn, so you encountered 2 price options for popcorn.
Small popcorn: ₹ 30
Large popcorn: ₹ 70
Like most people, you’ll choose the pack of ₹ 30 by rationalizing you don’t want the large pack but your decision changes when an extra choice/third option is introduced.
Now, Small popcorn: ₹ 30
Medium popcorn: ₹ 65
Large popcorn: ₹ 70
In this case, most people would go for the large pack that is expensive just because the medium and large pack has a difference of ₹ 5 only.
This happened because medium popcorn, while seemingly 'useless' in the list, didn’t provide any value but was useful in getting customers to seek more value at less price, eliminating their bargaining behavior.
2. Anchor Pricing
It is a psychological pricing technique to
subconsciously generate a reference price in the mind of consumers, against
which they judge the price as being high or low. Sellers use this technique by
influencing that reference price to trigger a more receptive perception of the
actual price.
For example, you go to buy a pair of trousers at a
shop and on its board, ₹ 200 price is
crossed and ₹ 160 is
mentioned. This way, the old price of ₹ 200 is anchored in your mind, so ₹ 160 looks like a deal.
Sellers often use this effect by presenting a price table, showing the most expensive product first, so the buyer uses the first price as a reference for subsequent prices.
3. The Target Effect
Sometimes, customers go to shopping malls, retail chain outlets, and cafes, such as Target and Starbucks to buy a specific product but end up buying several other things as well. This happens because of the physical ambiance like lighting, bright colors, and soothing music, and the strategic positioning of products on aisles in an organized manner, to promote cross-selling (the practice of marketing additional products to the customers), with clever pricing strategies to psychologically induce the customers to spend more time, hence spending more money.
4. The Diderot Effect
Named after an 18th-century French
philosopher, Denis Diderot, this effect states that “obtaining a new possession
often creates a spiral of consumption, which leads you to acquire more new
things. As a result, we end up buying things that our previous selves never needed
to feel happy or fulfilled.”
This phenomenon works when we buy things, we want them to fit into our existing tastes and standards. However, when we bring or buy something new into our lives, we often compare it to the things we already own, which makes us look at the old items with a more critical eye and we end up replacing the other belongings to “match” it all.
5. Foot-in-the-door Technique
This technique works on the principle; Get a small
yes, then ask for the big yes. This technique is widely used by marketers by making
customers agree to smaller requests or propositions and asking for bigger requests
after they agree to the smaller one. The psychology behind the phenomenon is
explained by many factors like “compliance”, once people have performed the
first request, they get a new self-image as someone known to perform that kind
of action. They are then more likely to perform a large request in the same
line. Another factor here is “consistency” as people want to be consistent in
their actions.
Today, this technique is employed by offering free trials of a product, once a customer uses a product on a freeway, it’s easier to get them to upgrade or pay for it.
Conclusion
Although these techniques are widely used by marketers
and sellers, consumers fall into these traps and end up making irrational
purchases. At times one doesn’t need a particular offering, but they should be
aware of their needs and stick to them and carefully weigh the available
options, hence, making informed decisions.
Ultimately it is just acquiring knowledge of these
marketing techniques used by companies that can help us escape irrational
spending!
References:
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