This article will probably make you upset. But don’t worry, it’s for your own good.
Marketers play tricks on consumers, and they work way too well. These marketing tricks make us spend more money on expensive products even though we think we’re getting a deal.
For instance, are you surprised that most stores place toys near the bottom of the shelf (exactly where your kids will see them)? Or why soft drinks and candy bars are conveniently placed at the register, encouraging impulse buys?
Some of the marketing tricks are pretty clever and, so far, legal.
Ready to find out how businesses use psychological traps to keep you spending more money?
5 Marketing Tricks That Make You Spend More Money
1. The Price Hike + Discount Combo
This is a tricky one to spot, and you'll see it around Black Friday and other times of the year when people spend a lot of money.
Marketers secretly raise the price of products shortly before a sale or the holidays, so the sale discount seems like a better deal than it is.
I'll show you how this works.
Suppose a pair of shoes costs $120 most of the year. Before a sale, marketers hike the price to $150, then offer a bigger discount during the sale so customers think they are getting a screaming deal.
$30% off of $150 sounds like a better deal than $20 off of $120.
- 20% off of $120 = $24 savings
- 30% off of $150 = $45 savings
Woot! $45 off sounds like a great discount!
But wait (and here's where it gets super interesting).
Let's look at the total price you'll pay after these discounts. Don't be surprised if this makes you juuuuuuust a bit angry.
- You'll pay $96 at the 20% off price.
- You'll pay $105 at the 30% off price.
That's right. Clever marketers just tricked you into spending more money by:
- hiking the price, then
- coupling it with a larger discount
2: The Left Digit Bias
Ever wonder why so many products end with $.99 or $.95? Humans mainly focus on the left digit when we evaluate pricing. This is also called “Charm Pricing.”
Instead of $5.00, it's $4.99.
Even though it's only a penny less expensive, our psychological bias makes the $4.99 price seem considerably more palatable.
Believe it or not, research shows most of us mentally round $4.99 DOWN to $4.00, not up to $5.00.
3: The Decoy Price
Marketers use the decoy pricing strategy to influence consumer decisions by introducing a third, less attractive option alongside the main two.
The decoy option is strategically priced to make the main option appear more appealing and create a sense of value.
By presenting the decoy, consumers believe they are getting a better deal when choosing the main option. This tactic exploits the principle of relativity, where consumers compare products based on the presence of other alternatives rather than evaluating the absolute value of each product.
4: Limited-Time Offers
The fear of missing out (FOMO) is a powerful motivator, and marketers know how to exploit it through limited-time offers.
Creating a sense of urgency, such as “Limited Time Sale,” “Today Only,” or “Act Now,” prompts consumers to make a quick decision to avoid losing the opportunity.
Consumers are more likely to impulsively purchase a product they may not have considered otherwise simply because they fear losing the chance to get it at a discounted price or with additional benefits.
5: The Center Bias
We tend to lean toward the one in the middle when presented with three different pricing plans.
This works so well that many businesses will highlight the center plan knowing most customers will choose it.
For instance, Big Scoots‘ pricing page for their shared web hosting plan is here.
Notice the 155cc Plan is clearly highlighted as the one to buy. It works.
Marketers can leverage human psychology to influence consumer spending through clever pricing strategies and marketing tricks.
Charm pricing tricks the brain into focusing on the first digit, creating an illusion of affordability. Decoy pricing exploits relativity to make the main option seem more valuable. Limited-time offers exploit the fear of missing out, leading to impulsive decisions. The price hike + discount tactic tricks people into thinking they are getting a better deal, and the center bias is a clever tactic businesses use to get people to select the plan they want them to select.
As consumers, it is essential to be aware of these pricing tactics and to make informed decisions based on our actual needs and the true value of the products. By understanding the psychology behind pricing, we can become more conscious shoppers and resist the allure of these marketing tricks.
Steve Adcock is an early retiree who writes about mental toughness, financial independence and how to get the most out of your life and career. As a regular contributor to The Ladders, CBS MarketWatch and CNBC, Adcock maintains a rare and exclusive voice as a career expert, consistently offering actionable counseling to thousands of readers who want to level-up their lives, careers, and freedom. Adcock's main areas of coverage include money, personal finance, lifestyle, and digital nomad advice. Steve lives in a 100% off-grid solar home in the middle of the Arizona desert and writes on his own website at SteveAdcock.us.