Study on Why You Will Overspend This Season 22 Comments
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My wife Sam and I took a trip to the outlets to â€śbrowse around.â€ť I needed a new winter coat and we had seen some deals for Sam to look through, but didnâ€™t want to rack up a ton of credit card debt.
We end up, however, in a small, popular (expensive) fashion store which happens to hold Samâ€™s dream purse. I had been trying to put off the purse purchase for a while, but there was no escape this time.
Looking around at the high-end purses, I sneak peeks at the prices: most are over $400!
Iâ€™ve been wanting to get her one of these for a while, but I never knew the price got that high. So we look around some more, the eager salesman complimenting her with every purse she touches.
A couple go for low-$200â€˛s but we find one for a little over $300 that she likes. Iâ€™m surprisingly comfortable with that and we head out.
Next, we head over to look for a winter coat in another store. Instead of being my usual frugal self and looking at the $30-$50 winter coats, suddenly Iâ€™m picking up $150+ coats without a care and then leaving with one.
What just happened is what Robert Cialdini (from his book â€śInfluenceâ€ť)calls the â€śperceptual contrast principle.â€ť
A guy, who normally wouldnâ€™t dare spend more than $50 on a winter coat, pays $150 for a coat without a thought. Why? After shopping for purses where we found prices over $400, getting a coat for $150 pales in comparison to $400. At the purse store, after seeing prices over $500, whatâ€™s the difference between a $200 purse or a $300 purse? It becomes a triviality in your mind at this point.
This principle will happen millions of times over this season and most wonâ€™t even know it hit them!
I was intrigued so I asked Sam, who sells tuxes and expensive suits at her work, if she notices this principle in action. She pondered for a second then observed, â€śWell, we have these $90 plain button-ups that never get sold individually, men only buy them with the suit.â€ť
No one will go into the store and just buy a $90 shirt, but once he buys a $400 suit, a $90 shirt seems like an afterthought.
This principle can eat away at your budget, so what can you do to avoid the â€śperceptual contrast principle?â€ť
When you need big-ticket items, make sure you buy the cheapest items first. Donâ€™t go buy the 60â€˛ HDTV, then go look for gifts for your kids. Youâ€™ve just bought an expensive item, so anything you see after that would be a huge contrast; so a shopperâ€™s tendency is to buy more expensive items at this point.
Map out what big purchases you plan that day and go from there. If you spend too much on the smaller items, you will more likely spend less on a big ticket item as going over our initial budgets usually tug at us for a while.
For once-a-year purchases, make sure you set a budget for how much you wish to spend, then go look in that price range. Donâ€™t set a budget than go peruse in the over-budget section because the perceptual contrast principle will automatically begin.
If youâ€™re shopping online, set the price ranges right off the bat. If you go in the store, perhaps get an idea first online and present it to the salesman.
Foresee this happening so youâ€™re aware. You will be able to catch yourself if you are aware it could happen to you! Youâ€™ll then start catching yourself all the time which could add up to $100â€˛s!
When youâ€™re shopping this season, make sure you think about the impact of each and every purchase. If you find yourself creeping over your budget, stop, refocus, and look behind you because the perceptual contrast principle could be right behind you!
Author Bio: Joe Cassandra, a Personal Brand Equity Strategist, is the Founder of the 7Minute Entrepreneur, where he shows you how to attack your life with the Mindset of an Entrepreneur in the areas of personal finance, careers, entrepreneurship & more. You can follow him on Twitter.