Hi y’all —
I wrote a story last week about how 56% of respondents to a recent survey say they think the United States is experiencing a recession — when in reality, the economy is doing just fine. There’s a lot of reasons for the disconnect (politics is a big one), but at the heart of the issue is the fact that everyday Americans are still feeling crushed by the cost of living.
The cost of dining out, for instance, is up 4.1% from a year ago. Mortgage rates are sky-high; in many places, rent increases are outpacing wages. And don’t even get me started on auto and home insurance.
Every dollar counts these days, and that means it’s extra-important to understand the quiet forces shaping my spending habits.
What common marketing tactics should I look out for while shopping?
Tong Guo, a marketing professor at Duke University's Fuqua School of Business, tells me that there are “a lot of psychological biases that get exploited by marketers.”
A classic one is left-digit bias, which is our tendency to focus more on the leftmost number in a price than ones further to the right. Although it’s really only a single-cent difference, consumers perceive $4.99 to be significantly cheaper than $5, which is an underestimation that “hugely increases purchase likelihood,” Guo says.
Because more purchases = more profit for the company, this strategy is super popular. According to a 2022 academic paper that analyzed thousands of grocery products, a whopping 87% of prices end with 9.
In fact, the phenomenon runs so deep that it influences stock prices and the design of price tags.
“They use a smaller font for .99,” Guo adds. “Even from the framing of that price tag, they try to exploit the bias to turn your attention to the left part instead of the right part of the digit.”
Another way marketers nudge shoppers to spend more is by manufacturing scarcity. For instance, a Publix promotion may dictate that you can only buy four of an on-sale item when in reality it’s well-stocked. By telling shoppers there’s a limit, the retailer is making the time seem rare — and pushing you to take advantage ASAP.
“People think, ‘OK it’s going to run out,’ but also ‘[other] people are buying it because it's good, so I have to buy it also,’” says Julio Sevilla, a marketing professor at the University of Georgia.