The holiday season is upon us and—based on all the Internet ads, television commercials, and store fliers about—it appears you’ve been granted a golden opportunity to reap huge savings on gifts for everyone on your shopping list.
We are, of course, being facetious—store sales are little more than hype and hyperbole conducted to move merchandise and boost retailers’ bottom lines. And yet even the savviest shoppers among us can be drawn in by the plethora of psychological tricks stores employ to get us to make impulse purchases and overspend.
Do not despair. It is possible to show restraint and become a more rational shopper. Whether you’re planning to head to the mall on Black Friday, traipse down Main Street on Small Business Saturday, or fire up your laptop on Cyber Monday, all you have to do is remember these three basic principles.
Do your homework
The difference between getting a bargain and overpaying for an item is all in the price you pay. Trouble is, the reference price for an item—that is, the amount you expect to pay based on a previously advertised price—is not easy to discern. We live in a discounted shopping culture, where the vast majority of retailers host sales on national holidays. Hallmark holidays, like Valentine’s Day, Mother’s Day, and Father’s Day, are also occasions for sales, as are back-to-school time and graduation season.
With constant markdowns, it’s a challenge to know how much things actually cost. And without that information, you can’t possibly know whether the sale price that’s publicized is truly a deal. Retailers do not help matters by showing you their “discounted price” in comparison with the “suggested retail price,” which is artificially high in order to amplify the price drop.
The antidote to this is to do your homework, plan ahead, and do price checks throughout the year so that you have a better sense of the market. (This is probably only worth the time and energy for big-ticket items.) Be sure to read reviews and research the return policies of the retailers you shop at, too. If that all sounds like too much work, just bear this in mind : Best-selling items seldom go on sale.
Ignore flash sales
“Folks, the countdown is on.” “You must not miss out” on “door buster deals and markdowns” that “will not last long.” Palms sweaty yet? That’s on purpose. Crafty retailers know that when they stage deal-of-the-day promotions or hours-long “flash sales,” you feel immense pressure. “If I don’t buy this air purifier/flat-screen TV/bento lunch box set this very second, I lose my chance,” you think.
But this is misguided. Flash sales are no different from run-of-the-mill sales except that they are designed to create a false sense of urgency. But when you buy an item on impulse, you’re likely gaining little from the purchase if you consider the item’s actual price. You probably didn’t want or need the item all that much in the first place and therefore haven’t done the research to know if that particular brand or model is right for you. This gets compounded when you treat the money you “saved” as a windfall and then transfer it to another sale item that you also don’t really need.
Our advice: Keep a list of what you want to buy and stick to it.
Return items you don’t want
Once you buy something and bring it into your home, you tend to ascribe more value to it because you feel a sense of ownership. And so even if you later realize you don’t need or like the item, or spent too much on it, you fail to return it. The psychological pain of giving it up is too great. You might also feel a tinge of what psychologists refer to as cognitive dissonance—discomfort of doing something inconsistent with your beliefs. Even if you have buyer’s remorse, you persuade yourself that you do, in fact, want to keep what you purchased; otherwise you must admit you made a mistake.
True, there is a sunk cost of shopping—returning the item requires finding time in your schedule to gas up your car and wait in line again (either at the store or the post office). But when it comes to larger ticket items, returning the good you don’t want makes sense.
One final word: Ignore all these tips if you fancy yourself a bargain hunter who really and truly enjoys shopping. Happiness is value added, after all.
Juanjuan Zhang and T. Tony Ke are professors in the marketing department at the MIT Sloan School of Management.