FEATURE
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WHAT KIND OF A SHOPPER ARE YOU? By Swati Raipancholia, Economics (2019)
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ehavioural economics tells us a lot about consumer behaviour and the psychology behind economic decisions that are made every day. Purchasing of goods (i.e. shopping) is largely an economic decision. Given certain assumptions, consumers buy more when prices are lower or when their income is higher, for example. But what are the psychological factors that motivate us to make choices when purchasing products? Have a look below to decipher which shopper you most identify with!
1. Delayed Payment Dan – Dan wants to buy a new phone but can’t currently afford the one that he wants. When he is presented with a deal that allows him to make a series of smaller payments over time, he immediately purchases the phone. The price is the same (if not higher with an interest rate being charged) and Dan’s disposable income is not due to increase, so why is this deal so much better to him than paying it all upfront? The time value of money makes future payments less costly than immediate ones (Psychology Today, 2019). Dan is likely to spend more on his credit card than he is on his debit card for this reason. Dan thrives on immediate gratification as opposed to waiting for a higher reward (in this case, a lower price as a result of higher income or product price lowering in the future). 2. Everyone-else-is-doing-it Ellie – Ellie isn’t particularly interested in shopping, but peer pressure plays on her mind and she buys things she doesn’t necessarily want. This trait is particularly prominent among young people. In 2008, researchers reported in “Child Development” that this pressure to conform increases as teens grow older (Living.Thebump.Com, 2019). Ellie’s decisions to buy certain products stem from what her friends and colleagues are using alongside an inherent desire to ‘fit in’. This behaviour can also be observed in other areas. For instance, organ donation rates in Canada are 2.5% and in Austria they are 99%. This is because there is a process to become a donor in Canada, as opposed to Austria, where it’s ‘a given’ unless one opts out. This social pressure of being automatically included in the donation group encourages individuals
to make certain choices, even if they otherwise wouldn’t (Shopping Direct, 2019). Furthermore, humans are lazy, and if there is a process to opt out of a payment scheme, or in this case, organ donation, they would rather incur the cost of the default option than make the effort to revoke themselves from the scheme. Martin and Randal (2008) provide another example. Their study finds that the propensity to donate to charity increases as a donation box is filled with more money, giving onlookers the impression that many donations have been made. Ellie is incentivised to donate when she sees and/ or believes everyone else is.
3. Framed Finley - Framing refers to the way in which choices are described and presented (Tutor2u, 2019). Finley finds himself drawn in by a sign showing the price of a car to be £4,500, down from £5,000. The discount presented makes the car seems like a much better deal than the original price, but in reality, the ‘discounted’ price Finley will pay is much more attractive to him as it makes it appear as though he is getting a bargain, while the price of the car in the eyes of the retailer would have always been £4,500. 4. Impulsive Irina – Irina buys items impulsively and without much thought or consideration. This could be due to a personality trait known as ‘impulsive buying tendency’, because she enjoys shopping or because Irina forms a connection to the product, be it physical (by being in contact with the product) or social (by seeing others with the product and comparing herself to them) (Psychology Today, 2019). So, we have an Impulsive Irina, what about an Impulsive Ian? This is possibly less likely as consumers’ impulsive buying behaviour shows significant differences between men and women, with females being more likely to purchase impulsively compared to males (Žnideršić et al, 2016). Find Irina making spontaneous purchases and being especially tempted by items near the cash register. You know – the ones that are designed to be futile. 5. Loss Averse Lucy – ‘Losses hurt twice as much as gains make you feel good’ (Psychology Today, 2019). Due to the loss averse nature of humans, phrases such as ‘Last Chance to Buy!’ are used frequently in marketing campaigns. Kahneman & Tversky (1979) found that people evaluate changes in wealth rather than absolute wealth. Choices
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