In theory, consumerism is a basic concept. Whether it’s food, clothing or electronics, you decide what product you need and how much you are willing to pay for the good. Large items, such as houses, automobiles and recreational vehicles, have long been negotiable. Retail store goods, however, come at a fixed price. For years, consumers were tasked with deciding whether or not the good in question was worth that set cost. Retailers began using sales techniques to move products off the shelves for various reasons, ranging from boosting quarterly revenue to clearing space for the next year’s models.
As the retail industry evolved over the years, however, its marketing strategy became more sophisticated. Not only were retailers spending more money on advertising, but they also began capitalizing on their consumers’ cognitive spending biases. As a result, sales have increased to such an extent that it’s impossible to walk into a department store like Kohl’s or Macy’s without seeing sale prices on a large variety of items.
If you consider yourself a rather astute shopper, as I do, then you won’t allow yourself to be swayed by the immediacy of today’s sale on those shoes or long-sleeve tee, knowing full well that such a price will unlikely be limited to a one-time occasion. As it turns out, the illusion of a unique sales event is not as important as the concoction of a random original price. It doesn’t matter if Kohl’s never had any intention of selling that button-down dress shirt for $49. What matters is that the consumer fixates on that price first. Retailers have found that more people are willing to buy a $34 shirt if its marked down 30 percent from $49 than the same exact shirt originally priced $34 with no discount.
Say hello to the anchoring effect.