We love a good sale, but can you shop smart? It’s easy to get lured in by those big “50% OFF” signs on store windows. Before you know it, you’re rushing through the aisles and manoeuvering your way to the cash register, your shiny new credit card wedged in your palm.
But are you really getting a bargain?
That’s what Dan Ariely, bestselling author and behavioral economist, investigates in Dollars and Sense, alongside financial comedian and writer, Jeff Kreisler. Using case studies and anecdotes, they team up and explore the relationship between our brains and our money – Including the seductive power of holiday sales.
The Emotional Aspect of Spending
Although we may view money in terms of numbers, values, and amounts, our approach to money is actually more emotional and less rational than we might think.
Our financial behavior is largely driven by emotions, and bargains appeal to our human nature. Shopping has been compared to hunting and gathering, and the urgency of a sale triggers our inherent fear of scarcity, impairing our judgment. In this case, we’re not just purchasing discounted items – we’re hoarding resources.
Retailers understand this and use it to their advantage.
Bargains and sales have a wonderful way of making us feel special. When we come across one, we believe that we’re saving money and finding value. But in reality, sales are just a method that stores use to boost their revenue. And they do so by employing a tactic, called “price anchoring”.
Price anchoring involves using an arbitrary price and labeling it as “original”, “regular”, or “suggested retail price.” These prices are intentionally higher, presenting the illusion of significant savings when compared to the sale price. However, the retailer’s initial plan was to sell those items at that sale price. Once they’ve made the sale, the retailer collects the profit while you get a “great deal”.
Luckily, there are ways that you can avoid these tempting tricks and shop smarter.
How to Shop Smart
Before you hand over your credit card or click that purchase button, remember these 3 simple steps:
- Do your research – The difference between getting a good bargain and overspending is the price. So plan ahead: do your research and compare prices to give you a better understanding of the market. Read product reviews and be aware of any return policies, as well.
- Avoid flash sales – Slogans, like “Won’t last long!” or “Don’t miss out!”, are meant to create a false sense of urgency and fuel impulse purchases. Ignore flash sales, so you don’t end up with an item that you really didn’t need.
- Make a shopping list – Whenever you go shopping, write down a list of items to purchase – and stick with it. This will keep you focused and less distracted, saving you both money and time.
It’s easy to get swept up in the flashiness of sales and discounts. But with a little planning – and maybe a little restraint – you can improve your financial choices, shop smart, and ultimately live better.