Cognitive science tips for New year shopping: Really!

You might want to tell your significant other what the marketers know that you don't about New Year shopping and sales. They know cognitive science, and it's easier to understand than you think. Let an expert save you from the scams

Your brain is what the marketers are after
On 30 December 2013 10:55

According to standard economic theory, the way prices are presented or ''framed'' to consumers has nothing to do with consumer decision making and consumer welfare. Importantly, people choose optimally; that is, they ''rationally'' make decisions based on perfect cost-benefit calculations. This 350-year-old theory of the mind, however, is highly contested.

The discoveries of second-generation cognitive science have shown that decision making is strongly influenced by how things are framed. That is, how prices are described has a profound impact on consumer choice.

Price frames include "sales" ('was $2 is now $1'), "complex pricing" ('3 for 2'), "time-limited offers" ('$1only today'), "baiting" ('$1 while stocks last' with the possibility that stocks are very small such that consumers are very likely to face a substantially higher price later), "compounding" ($9.99) and "partitioned or drip pricing" (in which the effective full price of a good is only revealed in 'drips', for example, with shipping and handling charges that have to be paid on top of the basic price).

All these frame prices are proved to have strong effects on consumer judgment and reasoning and to cause welfare loss. This holds true not just for the naïve and ignorant but also for the knowledgeable and informed. In short, we think in terms of the above price frames.

Three days ago, the Guardian Fashion Blog ran an article entitled, ''Boxing Day sale shopping tips''.

The interesting thing is, while the article says ''our fashion team reveal their shopping tips to help you drag a bargain,'' almost all the tips provided reflect false beliefs. In other words, like members of the public, the fashion team that provided the tips just think in terms of the price frames.

Below I quote (and with all due respect) some members of the team, emphasizing price frames in italics. 

"I love sale shopping, but I don't go until the last week. This means I don't know what I've missed, I don't watch things obsessively, and so have fewer regrets. When everything is 70% or 80% off, it might be luck of the draw, but that's part of the game. My best score was a Christopher Kane skirt which was 90% off at Harvey Nichols."

"I'd stalked this red Miu Miu dress on The Outnet for months. Then I got a notice they were having a 50%-off-everything sale starting from 10am on Thursday. So I was at my laptop from 9:50, put the dress in my size in my shopping bag and as soon as it was 10am pressed PAY. And that was how I did it! I got it marked down from £1,100 to £180 – result. Also I bought a Miu Miu blue mohair jacket marked down from £1,300 to £150."

"I bought a Burberry navy wool coat, a lifetime investment piece from Selfridges that should have been about £2,000 reduced to £595. I paid for it on my credit card and then cleared the payment in three months. I felt, even with the interest on the card, I got a deal and a timeless Burberry coat."

"Some of my best sale buys have been online, from the comfort of my bed. It's the only way to do it now. Given that I spend a large percentage of my time (window) shopping for a living, I can't really be bothered with the queuing, pushing, getting hot and bothered at the January sales, especially when there are copious amounts of Quality Street that need eating at home. I got … a pair of Proenza Schouler heels for £99 from that have proved to be both fail-safe and – that holy grail of heels – comfortable all day."

A quick look at the above quotes shows that firms encourage consumers to buy the good by using price frames. Price frames, in turn, change consumer behavior, for the worse. In the last quote, for example, consumers may regard the base price and surcharges (such as shipping and handling) as separate pieces of information.

Consequently, instead of calculating the mathematical summation of all the price drips (which may require some cognitive effort) consumers are anchoring to the first piece of information seen which is generally the base price and then attribute less importance to later pieces of information (the surcharges).

While some people do not passively accept price frames, the human capacity for irrational behavior is not disputed.

Now is the time for sale shopping. But before heading out into the fray, everyone should arm themselves with some understanding of price frames, and a little bit of cognitive science too.

A Contributing Editor to The Commentator, the writer, currently based in Europe, is an Egyptian poet, actor, and political intellectual. He is also pursuing doctoral research in cognitive science, which he usually employs for political analysis. He is also keen to get a good bargain in the New Year sales!

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