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Retail Tricks That Make You Overspend

http://www.fool.com/personal-finance/saving/retail-tricks-that-make-you-overspend.aspx

Dayana Yochim
April 23, 2008

Feelings and finances are as inextricable as the smell of popcorn and the craving for a salty snack. Over the years, we've interviewed psychologists, economists, CEOs, and investment analysts about the mood-money connection. Here are a few tricks the brain plays on our basic math skills, and a few examples of how marketers pull our heartstrings to loosen our purse strings. As the old saying goes, buyer beware.

You owe me one
When marketers tap into our natural propensity to return a favor, the money flows. That's how Tupperware-party participants (plied with friendly chitchat and free crudites) get swept up in a buying frenzy.

Bob Cialdini, professor of psychology and author of Influence: Science and Practice, calls this strategy "reciprocity," and he illustrates how powerful it can be in practice. When the American Disabled Veterans organization sent out its standard solicitation, it got an 18% donation-response rate. When customized address labels were added to the packet, the contribution rate jumped to 35%. "They become benefactors before they make a request," he says. "I've gotten this gift with my name on it. As soon as I begin to use it, I feel obligated to say 'yes' to their request in return."

Buy now or regret later
Flea-market shoppers must make split-second buying decisions. Savvy mass marketers also play on shoppers' limited-time-only emotions to encourage unplanned purchases.

Costco CEO Jim Sinegal reveale