Wednesday, November 10, 2010

Rerun for the Holidays: Loss Leaders and Human Psychology

Do you ever get a feeling of superiority when you hit a sale, use a coupon, or whip out your store savings card? Did you know that’s what the store managers intended for you to feel, carefully crafting their ads and displays to make you think you’ve conquered the food budget?

Some examples of store tricks used to make us think we’re getting a real good bargain:

· Green beans were being sold for thirty cents per can, and they weren't selling at all. The price got changed from thirty cents to 3/$1.00 (that's a price INCREASE). The green beans started selling like hotcakes.

The following week, some of these same green beans were moved to the end of the aisle in a special display—no sale price or anything—just moved to a new location with the regular price on them. The end display sold more green beans than the regular shelf stock AT THE SAME PRICE.

· On another occasion, a store was trying to get rid of some Swanson potpies. On the sign with the price, they wrote "Limit 3." People started buying them up. They even saw people buying three, going out to their cars, then coming back in and buying three more.

To really make them seem special, some of the potpies got moved to a small freezer display on the aisle end with the same sign. Guess which ones sold fastest?

Stores do stuff like that all the time, and that’s why it's a good reason to know general prices of things you usually buy.

Why do they bother to put limits on loss leaders? To limit their own loss on these products…same for coupon cards, membership cards, VIP cards, coupons, rebates, etc. Giving a feeling of exclusivity to some customers makes them feel more important, and thereby giving them all the psychological fuel they need to spend more. The store is already taking a loss on the product by discounting it, but they can further reduce the access to that discount by throwing a hurdle in your way through store discount cards, coupons, rebates, etc. Meanwhile, your “discount” experience is boosting your feeling about going there and spending more—about 26% more—than you planned to, even with a list in hand.

Why put limits on regular-priced merchandise, such as the potpie example above? To imply scarcity--the feeling of getting them now while they’re hot. Nothing moves slow-moving merchandise faster than implied scarcity these days.

With rampant unemployment, don’t we have enough to contend with while trying to feed our families? Now we have to watch out for implied scarcity and exclusivity tricks while we try to shop!

Remember that we’re not special and we don’t care if they run out of something at the regular price or higher.


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