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Today’s Top Three Consumer Mistakes

This article was written by in Consumer. 11 comments.


This is a guest article by Kimberly Palmer. Kimberly Palmer is the author of Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back, which was published by Ten Speed Press this week. The following post has been adapted from the book.

I’ll admit it: I was recently suckered into spending more than I should have on a can of paint. I fell victim to one of the classic mistakes of modern-day shoppers: Believing the posted price was the actual price. So when I purchased the $45 can of sea-green paint for my daughter’s bedroom, I neglected to ask for “the contractor’s price.” Those three little words would have gotten me at least a 10 percent discount.

Retailers use all kinds of trickery, including lying about prices, to get us to spend more than we otherwise would. It’s tight times for them, too, so they’re resorting to increasingly extreme measures, sometimes lifted from the pages of psychology experiments. As I was researching my book Generation Earn, I discovered these three most common ones. Luckily, as long as we know what to look for, we can beat companies at their own games:

  1. Offering us a reward that’s really not so rewarding. It turns out those credit card rewards, even an enticing $200 gift certificate, aren’t free, after all, because we spend more in order to get them. Behavioral economists even have a name for it: “purchase acceleration.” Because we’re so excited to get our free iPod or airline ticket, we spend more on our credit cards. Since reward credit cards typically carry an interest rate that’s about two percentage points higher than non-reward cards, anyone carrying a balance is paying a steep price for those rewards.

    It’s not only credit card companies employing this technique. Ever been offered a loyalty card at your favorite coffee shop, or salad joint? It turns out purchase acceleration applies there, too. In one study by a Columbia University professor, people bought ten coffees five days faster than they would have otherwise in order to snag their free cup. Just say no to loyalty cards, and you’ll end up saving money – and simplifying the paperwork in your wallet.

  2. Hypnotizing us with sounds and smells. It sounds like some kind of dark magic straight out of Harry Potter: Stores have discovered that wafting a sweetish scent of citrus at us or manly smell of Rose Maroc can actually entice us to spend more money than we otherwise would. That’s why Sony Style uses a citrus scent with vanilla overtones in its stores. (In that case, the company is trying to make its electronics less intimidating to women.) More recently, Sony Style started using a bamboo scent to send the message that the company is going green.

    They might be onto something; research from Washington State University shows that using Rose Maroc in men’s clothing stores and vanilla in women’s can increase shopping time, number of times purchased, and dollar amount spent. Research has also found that music can have a similar effect.

    So be aware of the smells coming your way when you’re out and about, because researchers say they work on an unconscious level, sort of like pheromones.

  3. Posting an inflated price that’s just for the most gullible shoppers. In the case of the paint, that gullible shopper was me. But I’m certainly not the only one. The failure of customers to negotiate prices, not only at places like farmer’s markets but also retail stores such as Best Buy, which have been known to accept competitor’s prices, can cost us hundreds of dollars a year. So don’t be afraid to stand up for yourself. And if you’re in the market for a can of paint, I hope you can learn from my mistake.

Published or updated October 2, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Kimberly Palmer is a senior editor at U.S. News & World Report and publishes the blog Alpha Consumer. She is the author of the new book, Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back. To learn more about Generation Earn, visit Generation Earn's website. View all articles by .

{ 11 comments… read them below or add one }

avatar Echo

This is especially true with hotels and airlines. Their posted rates are rarely charged, and just used to show value and savings for their promotional rates (i.e. $50% off the rack rate).

I’ve also been guilty of buying something at the grocery store to get bonus airmiles, when in fact you need to purchase multiple items that you may not use, and the 25 bonus airmiles in reality are worth about $2.50.

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avatar Edward - Entry Level Dilemma

Re: #1 I keep my loyalty cards in my wallet at all times, as a just in case, but they don’t entice me to go to that store more often. Even though I have a RewardZone card for BestBuy, the points usually expire because I just don’t spend enough in there. The only loyalty card that probably induces me to go there more often is HuHot, a Mongolian grill. My wife and I love eating there and earning 10% is an added bonus. We don’t eat out more often because of it, but when we do eat out, we are more likely to eat there.

#3 While I knew that Best Buy accepts competitor prices, I had never thought about the fact that that would mean their prices were inflated to rip off gullible shoppers. Usually if something is cheaper elsewhere than BestBuy, I just buy it at the cheaper store (one reason my RewardZone points are always expiring).

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avatar Stevedh

Why in the world would anybody be in a Sony store? I would never purchase anything from them that had any means of communication (internet, phone-lines, wireless) or even trust them with my personal information. Remember their “rootkit”? They should add “closed-up locker room” to their store’s ambiance – it’s more fitting.

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avatar Edward - Entry Level Dilemma

Sony is a very big company whose divisions often don’t communicate well with each other. I wouldn’t hold the actions of Sony BMG against the rest of the company. And the rootkit was on CD’s, an item not usually associated with having a “means of communication.”
I absolutely love my Sony Reader and PlayStation 2. A PS3 is on my wish list.

A partial list of companies owned or part owned by Sony:
Columbia TriStar
Jim Henson Productions
BMG
Music Choice (the music channels on Comcast Digital Cable)
Cinemax

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avatar Stevedh

But the rootkit was placed on your PC (means of communication) and “could” have been a very effective backdoor into your system and personal data. I too have a Sony reader (Christmas Gift) but I won’t hook it up to the PC with my personal information on it. Sorry Sony, but the trust is gone.

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avatar Kimberly Palmer

Interesting Sony debate! I have no problem shopping with them, as long as I’m prepared for the scent! And I agree with Echo re: promo rates. As for Edward’s comment, sounds like Mongolian bbq is well worth the price for you!

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avatar Jenna

What a great list. My number four would be, feeling like we’ve earned or deserved something, so we go out and buy it, even when we can’t afford it or don’t really need it.

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avatar Khaleef @ KNS Financial

We all fall for these tricks once in a while. Another one is when a store posts a sale that forces you to buy more than you need. Such as “buy 3 get 1 free” – and you only need one. It’s hard to pass up that free item, but you end up paying more than you planned!

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avatar Ninja

It’s crazy how much sneakiness goes in to all this marketing strategy. Fake rewards and phony smells are just the beginning I’m sure. Always gotta figure out if the deal is “too good to be true”

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avatar Doni

Or, idk, don’t be an idiot? If it’s too much don’t pay for the damn thing. Is it that hard?

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avatar ib ♦174 (Cent)

sadly (for me & some others) the scent deluges in stores are not subtle nor subconscious — they either provoke my allergies or at least provoke my disdain for the heavy scents and the whole rude intrusion of it. i hardly go to the local mall anymore because not only does A&F pump way too much scent (i have never shopped in there but other stores smell like it, it’s so strong and travels into main mall areas) but we have found that other stores have unnecessary scents like this as well. no matter what stores we avoid, someone’s got the scent that plasters to us. i hate it when the smell continues in my nose long after we have left. sometimes it doesn’t go away till i wake the next morning.

i have entered and then quickly left other (non-mall) stores that have had way-too-strong scents. can be anything from balsam, scented candles, strongly scented soaps, etc etc. unfortunately it’s not a joy for everyone to be overwhelmed by the smells (and many of us have reactions) especially if ventilation is poor. at times i will shop for as long as i possibly can stand it and then bolt when the headache that began in the store gets too bad, usually empty-handed. my boyfriend usually doesn’t even last as long.
guess i’m trying to say, for myself, the hypnotism isn’t working, it’s actually repelling me.

i do carry the discount tags, as well as coupons, but they seldom if ever *initiate* a purchase.

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