In this article, I’m gonna giving you five scientifically proven psychological mind tricks that retail stores both online and offline use to make you spend more money. Now, some of these tricks work by making it more likely that customers who actually walk into the store will purchase something rather than just walk away. Other strategies work by making customers spend more money by tricking them into paying higher prices.
In this article, not only will I be explaining how these psychological mind tricks work, but if you are reading this and you have your own online store, I’m also gonna be giving you tips on how you can implement them as well.
1- They Price One Product Absurdly High and Expect No One to Buy It
Whenever I go to eat, I always like to look at the wine menu because wines have some absurdly price. Now tell me if this has ever happened to you. You’ll be browsing the wine menu and then bizarrely, you’ll see one bottle that costs $3,000, Which is more than 10 times the cost of the next most expensive bottle on the list.
Well, whenever I see this, I like to show this to my friends for fun because they pretty much always exclaim, “Who on Earth is buying that? This is not a Michelin star restaurant.” And that’s a good question, and the truth is is that probably no one is buying it. It’s most likely there for show, and also to make you pay higher prices for the other bottles of wine on the menu.
This is a tactic by menu engineers, and it’s actually a twist on something called price anchoring. And a fun experiment can show us this in action.
A team of researchers lead by Drazen Prelec, a professor at MIT, decided to hold a mock auction. He gathered together a group of 55 MIT students and then held up a bottle of wine. “Look at this lovely 1998 Cotes du Rhone Jaboulet Parallel,” he said. “It’s received 86 from Wine Inspector. “With flavors of red berry, black chocolate, and mocha, “this is a medium-intensity, nicely balanced wine, absolutely delightful, only 8,100 cases made.”
After making his pitch for the students, he then held up another bottle of wine and gushed about it, and after that, he held up a cordless keyboard and mouse, and a pound of Belgian chocolates, and a designer book, and pitched their wonders to the students. When the pitch was over, he handed a piece of paper to each student that listed the items for sale.
He said, “I want you to write the last two digits “of your social security number at the top of the page. “And then, write those same two digits “next to each item for sale in the form of a price. “So if the last two digits of your social security is 35, write $35 next to each item. “When you’ve done that, write yes or no next to each item, “whether you’d be willing to pay that price for them?”
When the students were done with that, he said, “Okay. Now write down the maximum price you would pay for each item next to it.” When finished, the students were shocked to discover that their social security numbers had influenced the maximum bid price. Students with social security numbers ending in the upper 20% placed bids between 216 to 346% higher than students whose social security numbers ended in the lower 20%.
Without even realizing it, those with high social security numbers had been subconsciously using it as an anchor for being able to figure out what price they would be willing to pay. You see, pricing is subjective. If I show you a bottle of wine, you probably don’t know how much it’s worth unless you know a lot about the brand.
So for most people, if you see this on the menu, the way that you figure out how much you’re actually willing to pay for it is you look at the cost of the other bottles of wine on there. And so when you see the $3,000 bottle of wine, this $100 bottle of wine doesn’t look so bad.
So how can you implement this tactic in your store?
Well, one thing you can do is you can add premium-price products even if you don’t people to actually buy them.
So let’s say you’ve got a print-on-demand store, and you’re selling leggings, or perhaps you’ve created some new limited-edition, limited-print-run space leggings. Well, because of the fact that they are limited-edition, special-print-run leggings, you can realistically high-cut the prices of them so that your other, normal leggings look cheaper in comparison, even if no one will actually buy them.
2- They Give New Customers Coupons to Trick Them Into Being Happy
These days, it can be harder and harder for new stores to launch and get customers in, and that’s because, increasingly, shoppers are becoming more and more skeptical about advertisements.
In 2012, the Nielsen’s Global Trust in Advertising Report surveyed 28,000 people and asked them, what forms of advertising do you trust?
92% said they trust friends and family recommendations. 70% said they trust online consumer reviews. But online video ads? Just 36% trusted them.
It’s a chicken or the egg situation. To get customers in, they need reviews and recommendations, but to get reviews and recommendations, they need to actually have customers come in first.
But don’t worry. Stores have tactics to overcome this problem, and one of them is coupons. Yes, coupons. So why coupons?
Well, as science has shown, coupons can actually change the chemical balance of our brains and trick us into feeling happy so we can overcome our initial skepticism.
In 2012, a study by Dr. Paul J. Zack looked at how coupons impact our happiness, stress, and health. He split the test subjects into two groups. Group A received a $10-discount coupon, and Group B did not. Group A experienced a 38% rise in oxytocin levels and rated themselves as being 11% happier than Group B, who did not get a coupon. But that’s not all. He also noticed that Group A’s respiration rates dropped by 32%, and their heart rates decreased by 5%. Receiving the coupon made them feel more relaxed and less stressed.
Giving new customers a coupon takes them from a skeptical mindset into one where they are more relaxed and happy. And as science has shown, this has an impact on impacting shoppers’ buying behavior and making them spend more.
In 2013, a global survey of over 10,000 people by RetailMeNot revealed that 51% of consumers admitted that they were influenced when presented with deals, discounts, and coupons when shopping online.
Statistics revealed from vouchercloud backed this up. 57% of new shoppers in a store become motivated to complete their purchase so that they can redeem a coupon.
So how can you implement this if you own your own online store?
Simple. Create a one-off discount coupon code and then add a popup to your store that offers it to new customers in exchange for an email address.
One of the most effective Shopify apps that dropshipping stores use to do this is the Spin-to-Win app. This works on another scientifically proven conversion method, curiosity.
When shoppers see this popup, not only are they driven to enter their email to get a bargain, but they’re driven to satisfy their curiosity, and find out which bargain they’ll get.
3- Give Away Free Products With a Buy-One-Get-One-Free Offer
It’s pretty debatable to try to figure out which is the most iconic brand in the world. Maybe it’s Disney. Maybe it’s Starbucks. Maybe it’s McDonald’s. Or maybe it’s Coca-Cola.
In 1886, Coca-Cola was an unknown soda company. When its creator John Pemberton wanted to boost the soda’s fledgling sales, his bookkeeper Frank Robertson came up with a genius idea: give away thousands of vouchers to potential customers that would entitle them to one free drink. And it worked.
Coca-Cola kept the promotion going for years. Between 1894 and 1913, an estimated one in nine Americans had received a free Coca-Cola.
This voucher is credited as being the first ever coupon created, and it’s believed to be a big part of how Coca-Cola came to be the giant it is today.
But Coca-Cola’s innovative marketing strategy didn’t just show the power of coupons and special offers. It also showed the power of one word, and that word is “free”.
In 2012, a team of researchers at the University of Minnesota’s Carlson School of Management conducted a study to see what shoppers prefer more: getting a discount or getting something for free. The researchers offered two offers, Offer A, a bottle of hand lotion with a percentage discount; Option B, a bottle of hand lotion that came bundled with a bonus free bottle.
The result? The research sold 73% more hand lotion with Offer B. As I’ve said before everybody loves free. So why does everybody love the word free?
Well, it turns out that when we get something for free, we actually value it more than if we had paid for it. As the behavioral scientist Dan Ariely observed,
“Consumers perceive the benefits associated with free products as higher. People appear to act as if zero pricing of a good not only decreases its cost, but also adds to its benefits.”
How can you implement free offers in your own online store to make more money?
Simple. Create your own buy-one-get-one-free coupons and test them against discount coupons to see if it’s more effective than a straight discount.
The Spin-to-Win Shopify app is a great way to test this in a dropshipping store. Inside the settings, you can set it so 50% of people win a discount coupon and 50% of people win your free item coupon, and you can see which ends up being the most effective.
4- They Trick You With Volume Bonuses to Think That You are Getting a Better Deal
Remember that study that showed that consumers reacted better to that buy-one-get-one-free deal? Well, those researchers decided to dig a little deeper. Yes, the word free is extremely powerful, but could there be another reason why these offers work so well? And yes, it did indeed turn out that there was. Quite simply, most of us can be easily tricked into being really bad at maths.
After their initial test, the researchers decided to run a new one. This time, they took a group of undergraduates and gave them two offers: Offer A, a bag of coffee beans with a 33% price discount;
Offer B, a bag of coffee beans with 33% extra beans.
The results? Students as a whole viewed them as an equally great deal, even though they were not an equally great deal.
Let me show you. Let’s take 100-gram bag of coffee beans that normally costs $10. If we apply a 33% price discount to it, it now costs $6.70. That means that each gram of beans now costs just 6.7 cents.
Now let’s take that same original bag of coffee beans that costs $10 for 100 grams, but this time, we’ll bump up its volume by 33%. So now it costs $10 for 133 grams of beans.
If you do the maths, that works out to be 7.5 cents per gram of beans. You see, the reason why these intelligent students, who are probably way smarter than me, made this simple mistake is because of the fact that they saw the same number, 33. And their brains go, “Oh, 33% discount versus 33% increase in volume.
5- They Use Prestige Pricing Instead of Decimal Pricing
So this is a trick that has worked its magic on me and made me spend more money than I probably should. So I’ve got to admit, I’m quite a big fan of Burberry. The strange thing about the Burberry website is that they don’t use decimals in their pricing. There is no $489.99 here. And here’s the thing. Burberry are the rule, not the exception. If you go to other luxury clothing brands, you’ll see the same pricing strategy.
The reason why they do it isn’t just so that they can be different for the sake of being different. They’re not being hipster. The reason why they do it is because the types of people like me who are buying their clothing are doing that based on feelings. We aren’t doing it as a strategic choice.
The 2014 study, This Number Just Feels Right, explains why. When we see a decimal price, such $489.99, our brains struggle to process that number quickly, and so to compensate, our brains tap into the cognition mode to try to logically evaluate it, often poorly. Because we don’t process it very well, decimal pricing often leads our brains to think that things are cheaper than they are.
On the flip side, when we see a rounded number like $490, there are no tricks. Our brains very easily process it and understand it. But the flip side is that because our brains aren’t distracted by trying to evaluate the price, not only does it feel right when we look at it, but our feelings and emotions to the forefront of our decision making.
Luxury brands that benefit the most from using this pricing strategy, and that’s why it has the name prestige pricing.
For most reader this article are running their own online stores, and you are unlikely to be targeting the luxury shopper, so you should avoid this pricing strategy and stick to decimal pricing.
But it can be confusing when you launch a store and you see other types of shops using different pricing strategies, and you might think, “Oh, Burberry used that. Should I use that as well?” Well, now you know that no, you shouldn’t.
Thanks for reading this article. If you would like to start your own online money-making store, but you don’t know how, then you should be sure to read this e-commerce blue-print.