Do you ever wonder how retailers get us to buy what we buy?  Pet rocks, for example. (What were we thinking?) Why do text messages cost money, while e-mails are free? Why do jars of peanut butter keep getting smaller while the price stays the same? The answer is simple, says author William Poundstone: prices are a “collective hallucination”.

Sonya Sobieski writing in Psychology Today looks at seven tactics that marketers can use to influence our purchasing decisions, based on the interesting work of Poundstone in his new book, Priceless: The Myth of Fair Value (And How To Take Advantage Of It). See if you can identify these seven subconscious cues (Poundstone’s answers at bottom of page):

1.  To boost sales, stores should encourage shoppers to move in what direction?

• a.  clockwise
• b.  counterclockwise
• c.  in a Z-shape
• d.  this couldn’t possibly matter 

2.  Why do luxury stores often carry only one of their most expensive item (e.g. a $7,000 purse)

• a. There will probably be only one customer rich enough to buy it.
• b.  It costs too much to make more than one.
• c.  Everything else in the store looks inexpensive by comparison.

3.  A person receives a $10 rebate. How much money would the person have to receive in order to feel twice as good?

• a.  $15         b.  $20         c.  $40

4.  The “bundling” of services, such as in a mobile phone plan, is done to:

• a.  offer the consumer the best deal.
• b.  make billing simpler for the company.
• c.  obscure the cost of each individual service

5.  Your favourite shampoo has a fancy new bottle. The most likely reason for this redesign is:

• a.  to hide the fact that the product now contains different ingredients.
• b.  to sell less shampoo for the same price
• c.  to make you so excited, you buy two bottles.

6.  Which would make somebody happier?

• a.  receiving $30,000
• b.  receiving $10,000 three times
• c.  They will have the same effect.

7.  Which of the following influences how much money a consumer will spend:

• a.  the relative shabbiness or chicness of the place of purchase
• b.  the retail website’s background wallpaper
• c.  the first dollar amount the consumer sees or hears
• d.  bargain options
• e.  all of the above

ANSWERS:

1.  b:   No one knows why North Americans may view shopping carts as cars and therefore drive them on the right side, where their usually dominant right hands more easily reach for impulse purchases.

2.  c:  They don’t expect any buyers. The mind rarely deals in absolute values – it doesn’t know how much a luxury handbag “should” cost – but is sensitive to relative differences.

3.  c:  Perception is non-linear.  A million deaths do not seem a million times more tragic than one.

4.  c:  Consumers can’t be bothered to wadie through all the numbers and spot surcharges and price increases.

5.  b:  A new look for a cherished brand often disguises a smaller amount of product.  Often marketers place a big dimple in the bottom of the container.

6.  b:  See 3 above.

7.  e:  All of the above:  a.  We are willing to pay more for a beer bought from a fancy hotel than at a run-down pub. b.  Online shoppers exposed to a background wallpaper of pennies will spend more than those who see a background of clouds.  c.  The first price a consumer hears serves as an “anchor”.  Even when told not to let a suggested number influence their thinking, a subject’s final determination of a fair price sways toward the anchor. If you’re bargaining, decide on a fair price before you aks, “How much?”  d.  Humans are averse to extremes.  An obviously inferior “bargain” option will make us feel more comfortable spending more than we intended on a middle option.

Poundstone’s book Priceless is rooted in the emerging field of behavioural decision theory. This new psychology of price, according to Poundstone, dictates the design of price tags, menus, rebates, sale ads, cell phone plans, supermarket aisles, real estate offers, wage packages, tort demands, and corporate buyouts. He declares:

“Prices are the most pervasive hidden persuaders of all.”

For example, people used to download music for free, then Steve Jobs convinced them to pay. How? By charging 99 cents. That price apparently has a kind of hypnotic effect on consumers – the profit margin of a 99 Cents Only store is actually twice that of Wal-Mart.

Find out more about William Poundstone’s book, Priceless: The Myth of Fair Value (And How To Take Advantage Of It.

See also: How A Menu Can Make You Order What The Restaurant Wants You To

What do you think?