10 Sales Tactics That Trick You Into Spending
For many, the activity of shopping is a stress-relieving dopamine kick that makes us feel temporarily happy with shiny new items. But little do we know that companies have spent decades studying the habits and behaviors of consumers in the pursuit of parting us from our hard-earned money. Here are just ten ways that brands keep us spending. Hopefully, you will save more for things you need after catching these tactics.
- Subscription Boxes
In the last few years, consumers have seen the rise of the subscription box, an e-commerce service that allows shoppers to receive products from companies on a recurring basis through the mail. Now, customers can receive meal kits, makeup, and more weekly, monthly or bi-monthly. According to McKinsey and Company, subscription boxes market has increased by over 100 percent per year over the past five years. However, there are significant drawbacks to subscription boxes. If you’re trying to watch your spending by paying for the element of surprise, subscribers lose control of what they’re purchasing and can end up with many items they don’t need. Many subscription boxes come with stiff return policies, and many companies purposely make it difficult to cancel the subscription.
- Paid Memberships
More and more companies, from e-commerce giants to furniture shops and grocery chains, rely on a fee-based membership model to win customer loyalty. These paid memberships promise steep discounts, free shipping, exclusive member events, and other perks, but they can cost the member much more in the long run. Customers may buy much more than they need to offset the cost of their membership or automatically purchase from the brand without adequately shopping around for better deals. Before signing up for a membership, shoppers need to consider just how many purchases they intend on making per year at that store and how the benefits will help them.
- One-click Ordering
One-click ordering was introduced by Amazon in 1999 as a means of collecting credit card information, addresses and consumer preference data from customers to push more products and curb what marketers called “cart abandonment.” According to a study by the Baynard Institute, almost 70% of shoppers abandon their carts at checkout, citing reasons such as a complicated checkout process, high shipping fees, and having to create a profile. Close to 60% of shoppers reported abandoning their carts because they were simply not ready to buy. One-click ordering streamlines the checkout process, and readily supplies the customer card information so that customers can complete the transaction so quickly that they don’t even have time to consider whether or not they were ready to buy in the first place. Nobody likes laborious checkout processes, but they do make it easier to think clearly about whether or not you need the item in the first place.
- Elaborate Checkout Displays
Ever wonder about the labyrinthine path lined with small, lower-priced items that lead to the checkout counter at stores like Ross and larger discount department stores? Or why every supermarket seems to have racks of magazines, gum, and candy bars near the cash register? Retailers have long known that checkout displays are incredibly effective at getting shoppers to squeeze in that last impulse purchase before leaving the store—and shoppers are very susceptible to impulse buying. CNBC reported last year that, on average, American consumers spent a total of US $5,400 annually on impulse purchases. After about of shopping, shoppers may be in such a state of decision fatigue that they’ll be more likely to grab a candy bar than if they had seen it on their way into the store. While we all fall for last-minute purchases, just recognizing how grocery stores and shops try to trick you into buying will help curb spending money on unwanted items.
- Charm Pricing
Charm pricing has been around for so long, most shoppers almost expect items to be priced just a few cents or dollars below a round number (like $4.97 or $499). The reason is that shoppers associate this odd figure with the lower rounded number—for example, if a customer sees an item priced at $4.97, their brain will tell them it’s closer to $4 than $5. And this theory is backed up by evidence: an experiment conducted by researchers at the University of Chicago found that women were 40 per cent more likely to purchase a dress for $49 despite being offered cheaper options at rounded price points. While the ubiquity of this marketing strategy makes it a hard tactic to avoid, customers should remember that this type of pricing only distracts them from understanding the real cost of an item.
- Prestige Pricing
The opposite of charm pricing or decoy pricing or deceptive discount pricing, prestige pricing operates on the assumption that shoppers will be more likely to buy an item if the price is higher, regardless of the actual production costs or quality of the product itself. While it sounds counterintuitive, this pricing strategy works for well-known and high-end brands, from car makers to designer labels who know that the consumer is really shelling out for the brand value rather than the item itself. In fact, luxury retailers take their brand value so seriously that last year, companies Burberry, Louis Vuitton and Richemont were roundly criticized for purposely destroying unsold luxury goods to avoid having to sell them at a discount and thereby diminishing their brand value. It’s recommended that shoppers think clearly and carefully about what it is that they’re actually paying for when considering purchasing a high-end luxury product at full price, because that ‘full price’ is likely more inflated than it should be.
- Deceptive Discounts
High-low pricing—the system of pricing items at high everyday prices to give customers the illusion that they’re saving a lot of money with coupons and sales that deeply slash that initial price—is a popular tactic used by many mainstream retailers. However, a paper by the Harvard Business School found that customers are equally liable to fall for “fake discounts”—that is, retailers applying a so-called “discount” to an item that was never priced at its initially stated price to begin with. Outlet stores are more likely to push this false discount by providing two prices on the tag—the “original” price acts to reinforce the item’s projected actual value. In contrast, the “discounted” cost increases the customer’s sense of urgency to purchase the product.
- Mail-In Rebates
Companies love enticing customers to buy their products with the promise of a mail-in rebate—that is, cashback for proof of payment sent through the mail. Often that rebate can cover up to 80 percent of the cost of the product itself, making this a tempting proposition. However, according to Consumer Affairs, rebates totaling over US $500 million are unclaimed every year. In addition, the rebate process is confusing and overly complicated for the customer, or the customer simply forgetting to send in their proof of payment. As a result, when considering purchasing a product, it’s very rarely beneficial to factor in a potential rebate as a reason to buy.
- Offering Free Trials
Companies offering continual products or services (such as subscription boxes, streaming entertainment services and more) are increasingly hooking new customers in with the promise of a free trial. Though they won’t bill you for this free trial, they may request your credit card information in case you wish to continue the service. As tempting as it sounds, often these companies will make it very difficult to actually quit the service, or allow the trial end date to pass without notifying the purchaser. In fact, the investigative study by the Better Business Bureau found that many free trials actually come at a heavy cost to the customer by burying hidden information behind links and making it difficult for the customer to contact the seller, eventually becoming “subscription traps.” The study also reported that losses associated with this type of fraud totaled over US$1.3 billion over the past 10 years.
- Product Bundling
Product bundling is no new thing to either consumers or sellers: everything, from fast food to video games, has been sold in bundles for so long, it’s now expected. However, depending on the transparency of the prices and the bundled items themselves, this strategy could end up costing buyers more money for services or things they didn’t want to begin with. Strategists have found that bundling favors the sellers more often when the bundle is priced at a higher cost than the value of its items. Buyers will also feel the pinch when a variety of items for one tidy price is offered even though only one or two of those items will be used (which is often the case when it comes to computer programs or video games). When looking into bundled items, customers should always request a cost breakdown of the individual entities or consider how much mileage they’re likely to get from the products offered in the bundle.
- Subscription Boxes