If Americans are chronic overspenders, then retailers are part of the reason why. Companies have come up with a long list of psychological tricks that they can use to tempt consumers into excessive spending.
Here's a list of marketing gimmicks to watch out for.
Ever wonder why every supermarket is laid out in roughly the same way? Because that's the layout that generates the most money for the store. Products like milk, eggs, and butter -- the essential stuff that almost everyone buys -- typically sit at the back of the store. Bread and produce are usually along one end or the other. The aisles in between are filled with impulse purchases and other nonessentials. Customers are forced to walk through, or at least past, the middle aisles on their way to the products they need. This creates many opportunities for shoppers to buy items that aren't on their lists. Grocery stores also tend to put their bakeries and delis next to high-traffic areas, luring shoppers into paying extra for the convenience of ready-made foods.
While supermarkets are likely the masters of layout, other types of retailers have their own ingenious methods of convincing you to part with your money.
The "Baby Bear" effect
When consumers are thinking about making a purchase, they'll often look not only at the price of an item but how that price compares with the cost of similar products. Companies take advantage of this common-sense approach by placing an expensive item next to a very similar but slightly cheaper one. Buyers see that the two products are practically identical, so they choose the cheaper one under the impression that they just got a great deal. In reality, the retailer has usually inflated the price of the more expensive item to give the illusion that the cheaper item is discounted. This approach is used not only in brick-and-mortar stores, but on shopping websites as well.
Companies love to create a sense of urgency in prospective buyers, knowing that it can force them out of the research stage early and nudge them into making impulse purchases. Retail stores do this on a small scale every day by offering "sale prices" that last for a week or so. Companies that sell big-ticket items, such as refrigerators or automobiles, will offer a short-term, deeply discounted price or financing plan as a sort of loss-leader. The advertised item lures prospective buyers into the store, where salespeople can either divert them to a more expensive item or sell them the discounted item plus a mountain of upsells.
For example, if you go to an electronics store to buy a heavily discounted computer, the salesperson may try to sell you the computer plus a monitor, printer, software, and more. The retailer may break even or even lose money on the computer, but it will more than make up for that in the profit it gets from the tacked-on products.
Who hasn't taken advantage of a one- or two-month free trial of a neat new service? The free trial is a fabulous sales technique because it takes advantage of two basic psychological impulses. First, once you take the time to set up a new service and get it running, you probably won't want to go through the hassle of switching it off again once the trial period ends. This psychological inertia can lead you to keep the service even if you had never intended to use it beyond the free trial period. Second, it's human nature to feel indebted to someone who gives you something. If a company gives you free use of its service, you will feel a natural impulse to give them something back, and the obvious way to do so is to buy the service.
And that's not all
If you've ever watched a late-night infomercial, then you're familiar with this last approach. The infomercial host will say something like this:
This widget is normally priced at $50, but today you can have it for $19.95. And that's not all! If you place your order in the next 60 minutes, you get this beautiful case, at no extra charge -- AND free shipping.
By hitting you with an overwhelming string of discounts and freebies, retailers can override your mental filters and convince you they're offering the deal of a lifetime. This approach is often paired with the limited-time offer to give prospective buyers as little time as possible to think the purchase over.
A consumer's best defense
These tricks work by taking advantage of basic human psychology. Push a certain behavioral button, and people will naturally respond a certain way. The best way to defend yourself against these techniques is to give your brain time to kick into gear and respond with reason, not instinct. Before you buy something -- especially something large and expensive -- take at least 24 hours to think it over, do some research, and consider the alternatives. That way you'll be making purchases based on your own decisions rather than a retailer's sales techniques.