The retail landscape is more competitive than ever as consumers spend on experiences like restaurants and vacations more than material possessions.
This shift in consumer habits has led to a wave of discounting from retailers.
Aron Ezra, CEO of marketing software company OfferCraft, recently published a list of common psychological tricks retailers use to drive sales.
His piece, first published on industry newsletter Retail Touch Points, offers a glimpse into how brands get you to spend more money.
1. The “decoy effect”
High-end kitchen retailer Williams-Sonoma once struggled to sell a $275 “bread bakery” machine, finding that consumers were choosing to buy cheaper appliances instead.
To drive sales of the bread machine, Williams-Sonoma started offering it alongside a larger — and more expensive — version. Once consumers saw the more costly option, they began to believe the $275 version was a steal.
“This is a classic example of the ‘decoy effect,’ a marketing principle first demonstrated by Duke University researchers in 1982,” Ezra writes. “They found that a product will be perceived as more valuable if the buyer can compare it to a less desirable model on the shelf or a web page.”
2. Giving you a “gift”
Retailers use “gift psychology’ to get you to spend more.
Ezra uses a story about belts to illustrate the point:
“Now say you’re buying a pair of pants at this store. Typically the sales associate might try to upsell you by saying something like, “Would you also like to buy a $15 belt with your $60 pants?” That will work for some people, but not most of us.
But now imagine a different sales associate says, “These $75 pants come with a thank you gift: Your choice of one of these belts. You can take any of these, or you can give back the belt to reduce the price a little.”
Instead of deciding to make an additional purchase, you’re now asked to actively give back a gift. This enterprising sales associate will generally sell a lot more belts than his counterpart.”
3. The illusion of choice
Choice can be a powerful factor in getting consumers to spend more money.
Ezra cites one company that ran a promotion offering customers a $100 credit toward specific products. Then, they offered them the choice of a $50 credit toward a different product.
One of our retail clients offers a fascinating example of the power of choice.
“The results were startling: more than one third (34.9%) of the customers swapped the higher value prize for the lower value prize on a different product,” Ezra writes. “The customers were happier, while the retailer cut promotional costs significantly and generated invaluable insights about the preferences of their best customers.”
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