Why We Seem To Be Okay With Buying Overpriced Items
Experts say the reasons could be emotional, or maybe we're just being duped
Thursday, September 20, 2012
So you’re walking down a street that has a lot of tiny shops with big display windows. Before leaving home that day you had a mental argument with yourself about saving money and the conversation when something like this:
"Okay, last night was the last time I’m eating out for a few weeks, I just have to buy groceries today," you think to yourself. 'Oh yeah, I also have to get a new cell phone contract because these rates for my data plan are killing me. And that darn cable bill, first thing Monday morning I’m going to call and renegotiate my’ ... then all of a sudden, before you can finish the thought, something catches the corner of your eye.
Is it? Could it be? It’s those darn shoes you saw the other week that you really wanted, and that conversation you were having with yourself is now replaced by a very vivid mental picture of you owning and wearing those shoes that cost way too much.
You then mentally proclaim "this will be the last spontaneous purchase I’ll make for quite some time" -- and you proceed into the boutique and buy what you know you can’t truly afford.
Has this ever happened to you? Chances are yes, and it also happens to a lot of us. What is it about buying expensive items that we can’t afford? Why does it seem so satisfying?
In a 2011 study lead by Cornell University, it showed that buying expensive items helps to lift moods of low self-esteem, and improves feelings of low self-worth, at least temporarily.
Researchers Niro Sivanathan and Nathan Pettit gathered a group of volunteers to determine why people buy expensive items even though they may not need them or can’t afford the cost. The participants were separated into two groups and each was given a computerized intelligence test.
Afterward, half of the group was told they scored well on the test and possessed a high level of intelligence. The other half of the group was told they did poorly on test and had a low level of intelligence. Both results were actually phony and the test itself was comprised of random questions that had no ability to gauge intellect.
Each group then viewed a snazzy new pair of designer jeans and researchers asked how much the participants would pay to own them. The group that was told they weren’t intelligent by scoring poorly on the test offered to pay 30 percent more for the jeans than the other group. Researchers also learned the group that was told they weren't smart was 60 percent more likely to purchase the product with a credit card.
According to the researchers, paying more for the jeans helped soothe the recent news of not being considered smart for one group. Paying for an item they considered to be luxurious and highly coveted, lifted the low-esteem feeling that was associated with the news of doing badly on the intelligence test.
Something called framing
Experts say another reason one may choose to spend money on an item is because they’re being tricked by a pricing technique called “framing”.
Gizem Saka, an economics professor at Wellesley College in Massachusetts, explained in her writings that manufactures will create an extremely overpriced product just so consumers will buy another product of theirs that’s priced lower.
For example, one day you walk into a Target let’s say, and notice two coffee makers. One is priced at $50 the other priced at $100, and in theory the pricier machine works better and is of higher quality.
Since you’re not a coffee enthusiast and you just need something to give you a morning jolt each day, you decide to by the cheaper coffee maker upon your next visit.
When you come back a few weeks later you notice the manufacturers have created a coffee contraption it calls La machine à café français, (the French coffee maker) and the price is $250. I mean, everything in France is supposed to taste better, right?
Now your’e stuck with three coffee machine options, and you decide the $100 product isn’t that bad compared to the $250 French coffee maker. So you buy it – and guess what – you’ve just been swindelled.
According to Saka, the $250 coffee maker would be what’s called a "premium loss leader" since manufactures already expected not to make a profit with the costlier machine.
See, it’s all a trick to get you to buy the medium priced coffee maker that you thought was way too expensive just two weeks prior. It’s Pretty sneaky, huh ?
Dont get me wrong, there are millions of reasons why consumers buy expensive products, and having low self-esteem and being duped by manufactures with framing schemes are just among two of them, but a very popular two reasons they are.
A good way to stop impulse spending according to financial experts is by limiting yourself on the amount of store deals you’ll take advantage of.
Every brick-and-mortar along with every online retail store has some sort of sale, deal, special, or low-price offer to get you to buy a product directly on the spot. Simply put, you don’t have to take advantage of all of them.
Also, be sure to carry a set amount of spending cash and leave the credit and debit cards at home, experts say. This technique will also weaken impulses to purchase items you may not really need or even want.
Of course these are just some of the suggestions from experts, but I would say common sense supersedes both of these rules. If you can’t afford it leave it alone and think of the financial reprucussions you’ll have to face in the weeks and months to follow.
It’s like anything else you do on impulse, like eating an unhealthy meal for example. It’s tasty and satisfying at first, but afterwards, the feelings of ‘why did I do that’, overtake that feeling of satisfaction.
Use the comment form below to begin a discussion about this content.
Please review our Policies and Procedures before registering or commenting