She's On The Money - Trick or Treat: The Psychology of Discounts

Starting point is 00:00:00 Hello, my name is Natasha Nabanunga-Bamblett. I'm a proud Yorta Yorta, Kernai, Wolperi and Awadjuri woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on Awadjuri country, acknowledging the elders, the ancestors and the next generation coming through. As this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow. Let's get into it. She's on the money. She's on the money.

Starting point is 00:00:37 hello and welcome to she's on the money the podcast that turns your wallet from ghosted to gloat up. I'm your host, Victoria Devine, and today in this spookiest week of the year, Halloween week, we're diving into one of the most hauntingly effective traps retailers set for us, which is the psychology of discounts. And I couldn't think of a better time to dive into this topic, to be honest. Once spooky season wraps up, we're about to be haunted by a different kind of monster, Black Friday. And trust me, it's not just Black Friday. Boxing Day sales are also creeping up right behind it. But don't worry, because I am here to see you through all of the tricks and only come away with the real treats. So let's jump straight in. My trick number one

Starting point is 00:01:42 is scarcity tactics. Have you ever seen on a website, there's only two left in stock or this is the last day for you to save 50% and then you get a little pang of panic? That's what's called a scarcity tactic. And it's actually a massive psychological trigger that retailers are using to get hold of your money. And here is how it works. So a retailer creates what we call a false sense of urgency to trick your brain into thinking that you need that thing right now, because otherwise you'll miss out, right? And I'm a FOMO girl, let's be honest, who hasn't felt FOMO when they say it's a limited time offer. And the truth is a lot of these, and I think this is so sneaky, a lot of these low stock warnings are actually just purely marketing, which is designed to rush

Starting point is 00:02:28 you into a purchase. And I'm stats gal, so I have another stat for you. Did you know that 42% of Australians admit to making impulse purchases that they later on regretted because they fell victim to an urgency tactic? Obviously, that really sucks and I totally get it because I have fallen victim to those traps before. But next time you feel rushed by a limited stock message, have a think about it. Take a deep breath and then wait 24 hours before making that purchase. If you still want it tomorrow, then maybe it is worth it. The next trick that I want to talk about is called anchoring. And this is something that I think is relatively funny because anchoring is something that I actually use to stay on track. But when it comes to marketing, anchoring is something that

Starting point is 00:03:14 you've probably seen on TikTok, on Instagram recently, because in Australia, it has been all over the news because the big supermarkets have been doing it and they've actually been called out consistently for it. And I think they should be, but they've been called out for what's called illusionary discounts, which is where they inflate the price for a couple of weeks, only then to slash them back down to what they actually could be. And if this sounds familiar, there are a lot of TikTok videos flying around at the moment where the price of, let's say, dishwasher tablets has gone up over a few weeks and then they discount them back to the original price. So it's not really a discount at all. And you think you're getting a good deal because when

Starting point is 00:03:56 you're walking through the supermarket, you see the little yellow flag and go, great, this product's on sale. I'll purchase it. But we're not thinking too deeply about what the actual price is. Well, in psychology, this is called the anchoring effect and it's literally everywhere. It's designed to make you think that you're getting a really good deal. But in reality, you're just paying the regular price and it's wrapped up in a shiny discount bow. And I think that that is trash because your brain is being tricked into thinking that you're getting a steal when it's actually just back down to the normal price. And historically, you were getting an even better discount before. And this trick creates what's called an anchor in your mind. And that high

Starting point is 00:04:32 price makes the sale price look absolutely irresistible, even though it wasn't really a deal to begin with. As I said earlier in the show, I'm stats gal. I love to read. I love to do some research, but there was a study done recently in Dan Ailey's book, Predictively Irrational, and it actually showed that the anchoring effect is so strong that people will pay up to 50% more for items when they see the original inflated price tag. It's so rude. It makes me so mad. So before you get too excited about seeing a discount, I think it's important to do a little bit of detective work that, let's be honest, we shouldn't have to do. But check the price history online or better yet, see if other stores are offering it cheaper. Sometimes the sale

Starting point is 00:05:17 isn't that much of a treat. It's actually a massive trick. All right. So we've covered two tricks that retailers absolutely love to pull on us. But trust me, the spookiest of ones is still lurking right around the corner. After the break, I'm going to reveal the trick that can get you to spend up to 150% more. How rude. It is frightful. So don't go anywhere unless you want your wallet to scream. Welcome back, my friends. I hope you've been finding my commentary as cringy as I have been, but I have been having the best time with this. So get ready to be haunted by this next trick because it can have you spending up to 150% more than you planned. And no, it's not a ghost emptying your bank account. It's the infamous buy one, get one free deal. And it's coming to

Starting point is 00:06:06 trick your wallet right about now. So buy one, get one free. Sounds like a no brainer, right? Because double the goods for the same price. But my friend, do you actually need two of those things? This deal actually plays on our fear of missing out. It goes back to that concept of FOMO. If we don't grab that extra item, we feel like we're losing something valuable. But in reality, You're just buying more stuff that you didn't need in the first place. Back to being stats gal, I love to read. And when I was researching this episode, I was reading the Journal of Retailing and Consumer Services and research in that journal showed that buy one, get one free promotions can

Starting point is 00:06:44 increase sales by up to 150% because consumers are tricked into perceiving that there is more value in receiving something for free than in receiving a discount of equivalent monetary value. So here's a quick tip when it comes to buy one, get one free deals. Often they're just a way of retailers to actually clear out additional stock. Like think about it. Why would you give an additional product for free when you technically don't have to? It's probably because they overbought that product or have too much of it in stock or it's going off soon. So before grabbing that free item, I want you to think to yourself, would I buy two if they weren't bundled together

Starting point is 00:07:21 or am I just helping them clear their shelves and get rid of some stock? Retailers are genuinely, they're banking on you grabbing items that you don't really need. So don't let them cash in on that impulse that you are currently having because they're tricking you. All right. Another trick I want to talk about is social proof. And this one is, I would argue, one of the most powerful ones ever. Have you ever noticed down the bottom of a website, like when you're shopping online, there's a little pop-up that says, Beck just bought this, or 10 people are viewing this right now. Or maybe you've scrolled through a sea of glowing product reviews online and thought, well, everyone loves it. Like this is validating the fact that I want it. It must be great. I need it

Starting point is 00:08:03 too. My friend, welcome to the world of social proof, where retailers are using the power of the crowd to get you to purchase their products. So my friend, how does it work? Social proof, it actually taps into our instinct to follow the herd. So whether it's those little pop-ups on the website that show us that other people are buying this or a flood of five-star reviews, retails are playing on our fear of missing out again and our natural tendency to just trust what other people are doing. I mean, if everyone's doing it, it can't be that bad, right? They know that we assume that if something is popular, it must be worth it. Those bestseller tags or those tags that say as seen on TikTok or maybe notifications that say, Jane in Sydney just bought this. They're

Starting point is 00:08:47 actually all designed to make us feel like we need to join in on the purchasing. So again, research that we were doing while making this episode led me to a study from Bright Local, which found that 88% of consumers trust online reviews as much as they trust personal recommendations. And I think that that's really dangerous because sometimes they're paid. Sometimes they aren't disclosed that they might even be made up. So next time you're tempted by glowing reviews that you see online or you're seeing a pop-up notification, I need you to ask yourself, do I actually want this or am I just starting to fall for the hype because everybody else is doing it? Everybody else seems to have it, so it must be good. Just because something's

Starting point is 00:09:32 popular doesn't mean it's the right fit for you. So, my friend, do not let FOMO control your spending. All right. One last one before I let you have your Saturday back, my friends. Free shipping thresholds. We've all been there. The cart, it's just under the free shipping threshold and they're smart about it, right? So, you add a few extra items just to hit the magical number so that you don't have to pay like $10 or $15 in shipping. But are those extra purchases worth it? like be for real, my friend. Are you adding a $40 product to your cart to save $10? No. Retailers often offer free shipping when you spend a certain amount, which often nudges you to add a few more things to your cart than originally planned. This then taps into your desire to avoid what feels

Starting point is 00:10:18 like a penalty, like I don't want to pay for my shipping, by making you overspend on products that you don't actually need just so that you can avoid the fee. And it's actually insane. And there's so much research that goes into this, right? Like go on your favorite address website and have a look at what the average price of a dress is. I can almost guarantee that average price is, let's call it like $119. But the sign up the top of the website that says spend over $120 and you get free shipping. I see what you're doing there. And so do you now, my friend. Again, we were doing some research when putting this episode together. And according to a study by Comscore, 58% of online shoppers add additional items to their cart just to qualify for free shipping, which means that

Starting point is 00:11:01 they are often spending more than they would on the shipping itself. So before you decide to add a few extra items to your cart so that you don't have to pay for shipping, what I would do is compare the cost of paying for shipping versus buying things that you literally do not need. Often paying the small shipping fee is a more budget-friendly option, even though in the moment it feels like the wrong decision. All right. I feel like we have taken an arguably terrifying tour through some of the spookiest tricks that retailers are using to spook your wallet from scarcity tactics to anchoring, buy one, get one free deals, social proof, and even free shipping thresholds. But here's the real trick. To stay safe during sales season, I want you to

Starting point is 00:11:45 have a plan. I want you to stick to it. And as I've said a million times before, I sound like a broken record and I am not sorry. Put 24 hours between you and your purchase. Maybe I'm saying this because I need that advice. You know how you sometimes tell your friends things that you actually need to hear yourself? That's me. Because it is so easy to be distracted by all of the shiny things and feel like you are scoring a win when you see a sign that says it's a limited stock or there's free shipping or this sale ends on Monday. But if you don't need it or it wasn't on your shopping list to begin with, my friend, it's not a treat. It's just a trick and it's another way for your retailers to be luring you in. So having a budget and knowing exactly what you want before

Starting point is 00:12:29 you go shopping is going to help you avoid falling for these tricks. The other thing I want you to do is just take a breather. If you're in this situation that I have found myself in a million times where I've got this urge to buy something because it's on sale or I'm feeling really stressed because I don't want to miss out. Back to that 24-hour trick, right? Put it on your notes app. Take a screenshot of it. Don't forget it. You don't have to forget it at all. But if you then still want it tomorrow, it might be worth it. But if you've already forgotten about it, oh, you've probably dodged a trick. And how many screenshots have you taken, my friend, that you've completely forgotten about? I am so guilty of doing that. I always go,

Starting point is 00:13:10 oh, I'll just screenshot that because I need to save it for later. I don't need it later. I've just got FOMO. I have literally a graveyard of screenshots in my phone. So before we wrap things up, if you've been loving these episodes and want to stay ahead of the money game, don't forget to hit subscribe to She's On The Money. We've got heaps more tips coming your way to help you navigate sales, spending and all things money. Well, I'm off to make my Halloween costume because Miss Jessica Ricci is expecting nothing less. I think I'm going to go as a gender pay gap because I think that's really scary because what is scarier than women earning 22% less than a man for the same job? Anyway, me having a little bit of a rant about

Starting point is 00:13:52 the gender pay gap again. Anyway, wishing you a fantastic weekend. And for those of you who do celebrate, have a spooktacular Halloween, my friends. The advice shared on she's on the money is general in nature and does not consider your individual circumstances. She's on the money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs. Victoria Devine and She's on the money are Authorised Representatives of Money Sherpa Pty Ltd ABN 321 649 27708 AFSL 451 289

She's On The Money - Trick or Treat: The Psychology of Discounts

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