Every year there are pictures on the television news of the people queuing outside shops with tents and sleeping bags in order to be one of the first through the doors at the January sales. Thousands of us shake our heads at them in disbelief before driving slowly through heavy traffic, battling to find a parking space, and then hunting for our own bargains. Clearly the appeal of the January sale is at some powerful psychological level, but what exactly is going on? Even more importantly perhaps what can we do to stop ourselves leaving the January sales with “bargains” that we never use?
The first thing to remember is that people are generally quite poor at assessing value, and will look to price to give them a guide. This is why a bottle of wine that costs £30 will taste better to most people than exactly the same wine from a bottle costing £10. We get caught up on the initial price as a marker of value, which is why a £350 pair of shoes will be seen as intrinsically better than a pair for £75.
If those £350 shoes were marked down to £150 a second psychological quirk would kick in – our tendency to focus on the “saving” rather than what we are actually spending. Every year people come back from the January sales with a very clear idea of how much they “saved” but a much vaguer idea of how much they actually spent. The “savings” of course are entirely notional – they don’t exist in any way that is real, unlike the money we spent on them.
In the example of the shoes discounted from £350 to £150 people would focus on the £200 “saved” and let it outweigh the £150 spent. And if it were a choice between the shoes reduced from £350 to £150, and a pair reduced from £140 to £60, most people would see the latter pair as being intrinsically of less value – £140 compared to £350. Not only that but they would also let the “saving” of £200 carry more weight than original cost of £150 for the other pair.
Another common behaviour that sees people coming away from the January sales with “bargains” that they never use is the “sunk cost” fallacy. This doesn’t just apply to money, it can also apply to time and effort. This is why having queued in traffic, struggled to park, and pushed through crowds people are loath to leave empty handed. It’s at this point that they start to justify “aspirational” purchases (clothes in sizes that are too small, tools and kitchen gadgets that will be used once if at all) in order to make sure that their time and effort have not been wasted. The irony of course is that in attempting to justify their time and effort people end up wasting their money as well.
Ideas about perceived value, the weight given to “saving” rather than spending, and not wanting to have wasted our efforts all heighten our desire not to miss out. This is why when people see clothes that they wouldn’t normally wear with 80% off of the recommended price they feel compelled to buy them – because they cease to be thought of primarily as clothes and are regarded instead as trophies, with their value being the saving that they represent rather than their use as clothing.
Finally we take all of these skewed ways of thinking about value and then apply them in a competitive atmosphere. Our fear of missing out, whether it be on an item we value for its original price or the scale of the “saving”, is experienced in the midst of other people who we know are compelled by the same psychological forces that we are. As a result people fight over items – in some cases items that they only became interested in because they saw other people valuing them.
How then can we make sure that we don’t come back from the January sales with items we don’t need or like, and only the haziest idea of the actual amount we spent? The first practical tip is to go to the sales with an idea of what you are looking for, rather than just wanting to get a “bargain”. If you can’t find what you wanted and find yourself looking at something else ask yourself if it’s essentially a consolation prize and a way of not going home empty handed.
Secondly consider the current price of the item, not the original price – ignore the “saving” and concentrate on what you’ll be asked to pay. Then when you do pay as far as possible pay by cash – have your budget set and if possible have that in cash. This will concentrate your mind far more effectively on what you have spent rather than what you have “saved”. Finally, when you find yourself picking up a newer version of the gadget that you bought two years ago and never used, ask yourself why. If like Edmund Mallory the answer is “because it’s there” then it’s probably time to stop.
Thinking about shopping for presents? Read my blog post on the surprising psychology behind presents. Thinking about getting out of the house after a tense family Christmas? Read my blog post on avoiding family arguments at Christmas.