BEHAVIOURAL ECONOMICS AND SUPERMARKET SHOPPING Millie Colemans

BEHAVIOURAL ECONOMICS AND SUPERMARKET SHOPPING

Behavioural economics is defined by incorporating the study of psychology into the analysis of the decision-making behind an economic outcome. Such as, the factors leading up to a consumer buying one product as an alternative to another.

Richard Thaler created the idea of the nudge theory to suggest that changes can be made to an individual’s “choice environment” to adapt their behaviour. This can be done by drawing attention to certain products to encourage consumers to spend money. In a supermarket this can be done by the placement of goods. Goods with the largest profit margin are placed at eye level and the goods with smaller profit margins are placed at the bottom of the shelves. This encourages people to buy the more expensive goods if they are in a rush and do not have time to compare the goods.

Another way placement can be used is by placing items near the till as consumers don’t necessarily consider the price of the good, they just buy the good off instinct, this is known as irrational behaviour. Supermarkets may also place goods at the end of an aisle because aisle ends are the most profitable place to locate a good. This it why manufactures pay a premium to locate their goods there. Essential items are located at the back of stores to encourage people to be enticed by other goods on their way towards necessities, such as bread and milk, this is known as incidental purchases.

Supermarkets also adapt their layouts to keep customers there longer, as the longer they stay, the more likely they will purchase more items. Some supermarkets do this by playing slower music to relax the customers or upbeat music so that the customer is surrounded by a nice atmosphere which encourages them to buy more goods.

Supermarkets have lots of variety and choice of products, this overwhelms the customer, and they stop making rational decisions and start purchasing on emotion, which leads them to accumulating stuff they don’t need.

Tips to help you not be influenced by behavioural economics in supermarkets include, making a list before you go so that you are more likely to make rational decisions if you’re having to justify why you should be buying the good but didn’t include it on your list. Do not shop on an empty stomach as you will feel hungry and end up buying more than you need. Never shop on payday as supermarkets know when pay days are, even when student loans come in. This is because if you have more money in your pocket, you are more likely to overspend due to the wealth effect. It is also advised to shop alone so that you can’t be persuaded by others to buy unnecessary goods.