Harvard Psychologist, Dan Gilbert explains why we’re all terrible at buying things.
Do you know that,
- We don’t always act in our own best interest.
- We’re easily manipulated.
The Harvard psychologist who is also the author of “Stumbling On Happiness” explains some of the research he did with his colleagues, mainly around how comparing things affects our behavior, while peaking at this month’s World Business Forum in New York.
He said the comparisons we draw shape the purchases we make — for better or worse.
He used neighborhood wine store as an example. Say you’re going over to your friend’s housewarming and you want to pick up a gift. There’s an $8 bottle of wine, a $27 bottle, and a $33 bottle. Which do you buy?
Most people don’t want the most expensive, and they don’t want the least expensive because, Gilbert says, “you don’t want to feel cheap.” So most people will opt for the middle price.
Read also: 15 Ways To Beat Procrastination.
A smart retailer will put this information to use by placing a super expensive bottle, like $100 or so, on the same shelf, Gilbert says. It’s not a problem if it doesn’t sell — the purpose of the $100 bottle is to make that $33 bottle look reasonable.
Our comparison shopping gets us tangled up in other ways, too.
Below is more about his research as earlier presented by businessinsider.
According to Gilbert, economists maintain that before buying anything you should ask yourself, “What else could I do with this money?” But there’s a problem. “You can’t possibly compare the thing you might buy with everything else,” he says.
“Rather than comparing with the possible,” he continues, “people compare with the past.” This can get us into trouble.
In another set of experiments, Gilbert presented his subjects with two different purchasing decisions.
• In one, there was a $2,000 Hawaiian vacation package that got marked down to $1,600. In another, that $2,000 vacation package went on sale for $700, but you decide to mull it over for a week. And by the time you get to the ticket agency, that deal is gone — you’re left with a $1,500 offer.
Which would you buy? In Gilbert’s experiments, most people took the first offer but rejected the second. That’s because we’re constantly comparing today’s prices with the past, which means we can lose out on our best deals.
It also explains why we’re so drawn to sales. If a product is cheaper today than it was yesterday, we want it.
“That’s why ‘Price Cut’ are the most magical words in marketing,” Gilbert said.