If your New Year’s resolution is to spend more wisely in 2020, you’ve got to do more than cut expenses. Making smart money choices means becoming a savvier shopper – particularly for the items and services you can’t avoid spending money on. Retailers employ a variety of shrewd techniques to influence your purchasing habits and increase your spending. Here are six tricks retailers don’t want you to know:
1. Price Anchoring
If you’ve ever watched an infomercial, you’ve probably seen price anchoring in action. They show the manufacturer’s suggested retail price (MSRP) and then offer the item at a much lower “sale” price, plus throw in extra items for “free.” This tactic creates perceived savings in the mind of the consumer. But do your research. You may find that item for even less elsewhere. And remember: just because it appears to be a good deal, think about whether you actually need it.
2. False Sense of Urgency
This is the sister to price anchoring. Retailers often advertise that lowered prices or special package deals are only offered for a short time and/or at a limited quantity. This plays on our psyches. If we think something will be gone tomorrow, we are more inclined to buy it today. Again, think hard about whether you actually need the item in the first place, and then shop around.
3. Product Placement, Packaging, and Marketing
People in the retail industry get college degrees in merchandising. How you see things organized and marketed in a store is no accident. These experts know how to package and position products to maximize buying potential. From the color of the price tag (often bright orange or yellow) to how they’re displayed in-store in relation to similar products, retailers want to make their goods look as desirable and valuable as possible. What’s more, just when you figure out exactly where your items are in the store to get in and out, they switch things up to try and keep you there longer. This increases the potential that you’ll buy something you normally wouldn’t have. Same goes for online shopping. You’ll typically see suggestions for other items you might want along with whatever it is you’re buying.
4. The “Left Digit Effect”
Retailers often price items just below the next round number. For example, if something is priced at $4.99, in your mind, you might tell yourself it’s $4, when, in reality, that item costs more than $5 after factoring in taxes (and shipping if you’re buying online). It works with bigger purchases too. A television that is priced at $1,999 will cost you well over $2,000 once you factor in taxes and any warranties. Underestimating the true cost of your purchases is a quick way to go over budget. Take your time to do the math before you get to the register.
5. One-Click Purchasing
How often have you made a quick purchase online and then forgot about it until it arrived on your doorstep? When there’s nothing to slow you down at the point of purchase, there’s no time to give what you’re buying a second thought. True, not having to painstakingly enter your credit card and shipping information each time you buy something online is a great convenience. However, the ease of buying something with the swipe of your finger could easily lead to overspending.
6. Free Return Policies
Plenty of retailers advertise “no risk” purchasing by offering generous return policies. They know it lowers the barrier for you to buy something you’re unsure about. Retailers know it leads to increased sales because you’re apt to buy more thinking you’ll just return whatever doesn’t work. But how often do you take the time to make that return? Sellers count on laziness and it’s a winning bet. Don’t fall for it.
There are even more ways retailers trick you into spending, but the lesson is the same. Stay alert. Keep an eye on your budget. And take time when making purchases to ensure you aren’t overspending or buying unneeded items.