Psychology + Self-Development

5 Tactics That Get You To Spend More Money

black and white image of person holding cash
In a world heavily infiltrated by advertising and the convenience of online shopping, it can be hard resisting the allures of consumerism. Like health and wellness, financial literacy plays a crucial role in everyday life and is an aspect that can impact the success and foundational stability of one’s future. Understanding the psychological tactics and marketing strategies that drive your purchasing decisions can help you manage your spending and become a more conscious consumer.

Here are 5 common psychological tactics and marketing strategies being used by companies and retailers to influence you to spend more money.

Social Proof

gif of Kim Kardashian and money
The psychological concept of social proof was introduced by Dr.Robert B. Cialdini, which states our tendency to rely and follow the advice or actions of others that we trust and look up to such as our family, friends, to industry experts, celebrities and influencers. Social proof comes in many forms from word of mouth, celebrity and expert endorsements, referrals to user reviews and testimonials.

Companies that are able to prove that other people use and enjoy their product or service is one of the most influential marketing assets because it increases their credibility and sales. Whether you’ve been persuaded to watch a popular show that people have been raving about, from the clothes you wear to the smartphone you use, or just about anything you’ve interacted with or bought, social proof was most likely at play.

False Sense Of Urgency and Scarcity

bill burr talking about black friday
Black Friday in the United States has especially been known to have had its share of madness, from the gathering of massive crowds all stampeding and rushing to secure the best deals. Creating a false sense of urgency and scarcity, through well-known events like Black Friday, Cyber Monday to Boxing Day, and other “exclusive or limited-time offers or promotions” are hard-sell pressure tactics that many marketers use to increase sales.

This can get you to spend money on things you may not need, all for the sake of not wanting to pass up on a good deal. But buyer beware, it’s been found that more than 60% of discounted deals on Black Friday can be bought for the same price or even cheaper during other times of the year.

Discounts

oprah discount
Discounts are everywhere and if you’re like most people, you’d rather save a few bucks on an item, rather than paying for its full price. Almost all retailers and brands use discounts and other promotional offers to appeal to its customer’s mind and create a sense of scarcity and urgency, in order to influence and boost sales and purchases.

Discounts come in many forms including:
  • BOGO, short for “Buy One, Get One Free”
  • Dollar Or Percentage Discounts (i.e., 20% or $20 off)
  • Quantity Discounts (i.e., receive $20 off your $100 purchase or purchase 3 items, get the 4th free)
  • Free Shipping (i.e., Amazon’s “order $25 or more to qualify for free shipping” discount)
 
A study in 2012 lead by neuroeconomics professor Dr. Paul J. Zak that found that discounts, coupons and exclusive offers had a positive impact on a person’s happiness, health and stress levels. Those who received a $10 voucher were reportedly more relaxed and less stressed, experiencing a 38% rise in oxytocin levels, a 5% decrease in heart rate and sweat levels that were reportedly 20 times lower than their peers who received nothing.

Loss Aversion

We are hard-wired to avoid losses. Psychologists Daniel Kahneman and Amos Tversky were able to confirm their assumption that losses evoke a greater emotional impact on an individual compared to winning or gains, known as the Prospect Theory or Loss Aversion Theory, that describes a person’s tendency to favour avoiding losses over acquiring gains. This suggests that most people will feel twice as bad by losing X amount of money, as it feels good to win X amount of money.

Loss triggers much stronger pain than equivalent gain. Most studies show that losses are twice as powerful as gains on our psyche.”

How do companies use loss aversion in their marketing strategy? Netflix, for example, is one of the many companies that offers new customers a free trial with their service, in hopes of converting customers into long-term, loyal paying subscribers. If the service is being used enough by the consumer, they become more reluctant to cancel their membership because doing so means the loss of the service being offered. In regards to Netflix, this means no longer having instant access to hundreds of films and shows.

Depending on the consumer’s attachment to media consumption, the loss of the membership can evoke a stronger emotional reaction than the monetary, monthly price of a Netflix subscription.

Installment Payments

Consider this: $400 For An Online Course Or Rather 5 Payments Of $80.

Before making a purchase, people often gather and compare options from similar competitors. Companies anchoring its potential customer with a lower installment price can influence their buying decision compared to a competitor’s lump sum offering (i.e., $400) which is a fairly big difference that can make that offer all the more appealing.

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