“When consumers feel like they’re missing out, they buy just to avoid being the loser. That’s loss aversion at its finest: When an individual scrambles to buy an item simply because he or she doesn’t want to be left without.” – Beinghuman.org
What just happened?
At 8:00am I entered a long lineup outside the Vancouver Conference Centre. After standing in the cold for about 45 minutes, a velvet rope was unclipped. The next thing I know, I’ve emerged into absolute madness.
A flurry of arms and shoulders push past me, all vying their way to the colorful racks of what’s assumed to be coveted deals.
I think I must’ve blacked out, because next thing I know I’m standing outside with a paper bag of outdoor wear and a $400 charge on my credit card.
This is my story of my visit to the Arc’teryx sample sale. For those of you non-Vancouverites, Arc’teryx is an outdoor brand of near-religious status among locals and new residents.
The primary service of an Arc’teryx branded item is for people like me who feel they must prove themselves to fellow Vancouverites. “That’s right, I spent $800 on this jacket. I belong here.”
It’s distant secondary purpose is to stay dry in the rain.
Discussions that a $6 umbrella effectively offers the same service aside, I went in with fully rational intentions. “I only want a jacket. Get the jacket, pay, avoid bloodshed.”
I needed one jacket. I bought three. Plus a hat.
How did that happen? How did I, going in with a plan and reasonable intentions, end up spontaneously splurging? Well as it turns out, a few dusty old Psychology 101 terms I learned back in college got the best of me.
Let’s start with the general term: ‘Cognitive Bias.’ Basically we’re irrational beings that do illogical things because we’re biased. You know, cognitively. When we go to make a decision, a hot stew of personal beliefs, emotions, peer groups and core values kick in and influence what we decide.
This includes all sorts of examples like being totally okay believing in a large man in a red coat coming down your chimney every year because adults tell you he exists. Or the placebo effect, feeling better even if you took a sugar pill.
Or being afraid of sharks, despite the drive to the beach being statistically far more dangerous.
And of course we see it on in current world issues like climate change denial, or the dangers of vaccinations. Many hold unwavering beliefs despite being shown considerable evidence on the contrary.
And businesses and marketing use cognitive biases to their advantage. For example many restaurants put a particularly expensive item near the top which makes everything below it seem relatively reasonable.
Loss Aversion and the Sunk Cost Fallacy
Now, under the umbrella (or overpriced Gore-tex) of cognitive biases we have two more specific terms: ‘Loss Aversion’ and ‘the Sunk Cost Fallacy.’
Both loss aversion and the Sunk Cost Fallacy suggest that if we sink time or money in to something that ends up being a bad decision, we don’t want to feel we’ve ‘lost.’ So instead of accepting our defeat and moving on, we keep committing and rolling with that poor decision. We humans hate to lose.
Alright, now that you’re all brushed up on the science, let’s analyze my experience, shall we?
Sunk Cost Fallacy: I waited in line to get in. Therefore I had ‘sunk’ nearly an hour of my precious free time into standing in line. If I left without buying anything, my subconscious would’ve thrown a fit on how I wasted my morning. By buying something, I justified standing in the cold all morning.
Loss Aversion: I got caught up along with 300 or so other people who were snatching up deals before my very eyes. ‘If I don’t grab some myself, I’ll lose out on this great opportunity!’
We experience these every-day situations all the time:
– Costco membership: ‘I paid $100 for a membership so I better get my money’s worth and shop there often’
– Career choices: ‘I went to school for 6 years to be a lawyer. I don’t like my career, but I can’t imagine throwing all that school away to do something else’
– ‘I never wear this sweater, but I just can’t get rid of it, it was $80!’
The list goes on: staying in a relationship well after it’s gone sour, or sticking out a bad movie because you paid $12 for a ticket…..you get it.
Alright, so what do I do about it?
I’m not going to lie, it ain’t easy. These biases formed through countless generations of evolution, and are therefore deeply ingrained in our psyche.
And on top of that, advertisers and retailers know all too well about how to take advantage of this: free samples, 30 day trials, ‘Act now! Only two pairs left!’
But there’s hope! Here’s what you can do:
1. Understand and recognize that we have these inherent biases.
2. Try to notice them when they’re happening. For example, in moments of spontaneous purchases, think to yourself- ‘am I buying this out of need, or fear of missing out on a deal?’
3. Buy only full price items. This guarantees you’ll buy with much more intention.
4. If you do shop sales, go in with a strict plan or budget
5. Learn to love the stuff you already have
So I’ll finish this post with a question to all of you: does anyone need a new jacket?