Monthly Mulling💡
The Biases That Empty Your Wallet: The Shopper's 'Mindfield'
Hi👋 Tapan here.
Monthly Mulling is a 2x monthly newsletter with 3 timeless ideas to help you make better decisions in your life and career. Join now👇🏽
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Happy Sunday y’all!
Since the last newsletter, I have travelled to Florence, Chicago, and Amsterdam which gave me little time to read, take notes, and write.
But here's the silver lining: the name 'Monthly Mulling' is my saving grace. Aimed for 2x a month, the name gives me the wiggle room for at least one solid issue per month. A built-in safety net, if you will. Blessing in disguise? You bet! 😮💨
📖 Currently, I am reading: The Mahabharata by Bibek Debroy
This is no ordinary read; it's a 10-volume behemoth that directly translates the Mahabharata's 90,000 shlokas into about 6,000 pages of English text. And here I am, still navigating through volume 1! 😬 I aim to read a new translation of the Mahabharata each year, and Debroy's work is by far the most comprehensive I've tackled. Just a heads-up: It's a direct translation from Sanskrit, so it's not the easiest read!
🛒 The Mind Games of Shopping: Unveiling the Biases That Make Us Buy
I was on a virtual shopping spree on Asos last week, hunting for some T-shirts, and guess what? I stumbled upon the perfect topic for this month's newsletter! 🎯
See the image below? The Asos website, like many others, is exploiting something known as bias in consumer behaviour.
Businesses are able to exploit these cognitive biases to sell more products on their website or stores because humans tend to value perception or beliefs over reality.
The image showcases scarcity bias ("Limited Time Only!"), price anchoring ("Was £26, Now £12.50"), and the isolation effect (a bright neon green banner screaming "50% Off").
Intrigued? Let’s dive in.
🌟 The Eye-Popping Phenomenon: Isolation Effect & Salience
Ever wonder why certain items just seem to "pop" and catch your eye?
We have a tendency to remember an item that stands out in some way from a set of otherwise similar items. This is the Isolation Effect (or Von Restorff Effect).
This is more than just a design trick; it's a psychological phenomenon called ‘Salience’. When something is isolated or visually distinct, it grabs our attention. But salience isn't just about standing out; it's about being memorable or noteworthy.
In 2011, Patagonia ran an unusual advertising campaign which displayed salience.
It caught your attention, didn't it? Despite urging people not to buy, Patagonia's sales soared by 30%! People stopped to read the complete ad which encouraged them to recycle, reuse, and repair clothes.
🤑 The Power of the First Impression: Price Anchoring
Ever read Chris Voss's Never Split the Difference? He talks about "anchoring," where the first piece of information you get becomes your reference point for everything that follows.
Mary is looking at houses. The real estate broker knows that the house he is trying to sell Mary is in poor shape and in a bad area. He starts by showing Mary bad properties in an ugly neighbourhood. Afterwards, he takes her to the house he wanted to sell all along. Suddenly this house and the area seem great in comparison to the other houses she saw.
— Peter Bevelin, Seeking Wisdom: From Darwin to Munger
Websites often display a higher original price next to a discounted price, making the discounted price seem like a steal.
Walk into a designer store, and the priciest items greet you at the entrance. As you proceed, the less expensive options start to look like a deal.
That $65 tie suddenly seems reasonable after you've splurged on a $450 suit. The order in which something is presented matters.
🕒 The Clock is Ticking: Scarcity Bias (FOMO)
Ah, the FOMO is real with this one. Brands like Supreme have turned scarcity into a multi-million-dollar business model. The limited edition "Supreme Clay Brick” is still reselling for £104!
All high-end fashion labels exploit the scarcity bias - “We are only producing 20 items of this product in this country”. Smaller influencers sell “limited time” pdf files or courses with a live countdown.
It creates a sense of urgency by emphasizing limited quantities or limited-time offers, making customers feel the need to buy quickly before the opportunity disappears.
🐑 Follow the Herd: Social Proof and Bandwagon Effect
We're social creatures by nature, and that's why social proof works like a charm.
It's been observed that we're more likely to buy products endorsed by a large number of people. And since we trust our friends and family more than ads, the impact is even stronger.
You must have seen testimonials on websites showing a large number of people trust the product. “Join 5000 other subscribers” is a common quote when marketing newsletters.
From long queues outside restaurants to the "desh ka namak" tagline, we're more likely to jump on the bandwagon if everyone else is doing it.
🥷🏻 Popcorn Economics: The Decoy Effect in Action
You go to a movie theatre and the person at the food counter says, "Why not upgrade to a large popcorn for just 50 cents more?" That's the Decoy Effect at work.
The Decoy Effect is the phenomenon whereby adding a third pricing option makes the consumer change their preference towards an option the seller is trying to promote. The “decoy” is priced to make one of the other options much more attractive.
If consumers are split between two options, adding a “decoy” option can significantly tip the choice people go with.
🤔 Consumer Smarts: What Can You Do?
Be Skeptical: Always question the "great deal" you think you're getting. Is it really a bargain, or is it just price anchoring at play?
Pause and Reflect: Before making an impulse buy due to scarcity or social proof, take a moment to consider if you really need the product.
Educate Yourself: The more you know about these biases, the less likely you are to fall for them.
Remember, not all influencers and businesses are out to get you. Stay informed and make smarter choices.
Thanks for reading 🙏🏽 Do you think any of your friends or family will like Monthly Mulling like you? Please share!😇
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