Ask the behavioural economist, and he would say, “Buried under the sound and fury lies an unshakeable economic-truth. Prices can change your mind without changing themselves.” Yes, read that again. Prices can change your mind without changing themselves.
When the Sale Starts Before the Sale
A few weeks before the sale, online platforms ramp up the original prices. That Rs 42,000 phone is now Rs 46,000. That’s a 10 per cent jump. That Rs 19,999 washing machine is now Rs 22,000. Again, a 10 per cent push. Then, when the actual sale is announced – “Offer Price Rs 18,499 — You Save Rs 3501!” You think that at Rs 18,499 the washing machine is a steal, without realising that it might’ve been the price all along. In the pre-jack-up days of Rs 19,999, if you had pushed for a hard bargain, you might have got yourself a cash discount of Rs 1500 and paid only Rs 18,499!
This is not a scam. It is psychology at work. After all, every man is free to enter into a bad bargain. The higher price acts as an anchor, a reference point that makes the discount look divine. One heavily relies on the first piece of information when making decisions. So when you see, “Was Rs 10,000, Now Rs 2000”, your brain doesn’t ask, “who would buy this at Rs 10,000?” Instead, you celebrate ‘saving’ Rs 8000. But for all that you know, you never needed the product. Which means you didn’t save Rs 8000; you lost Rs 2000!
“50% Off” is Better than “Save Rs 2000”
Percentages look better than number. That’s why when you see 50 per cent off, it reads better than ‘Save Rs 2000.’ The reason is simple. The percentage tells you that you have saved half the cost. That’s why “Up to 80% off” dominates banners. There is yet another trick, adding of a timer. “Deal ends in 15 minutes!” or “Only 2 days left!” Boy, now you’re racing against the clock. Scarcity phrases like “Only a few units left” double the likelihood of a purchase. This is called scarcity bias, when something seems rare, we want it more. It’s the same as the Fear of Missing Out (FOMO).
Algorithm is the new God
Even if you are a smart aleck, the platform probably knows when you will give in. Algorithms track when you hesitate, how often you revisit and what discount finally wins you over. They aren’t manipulating you; they are guiding you! All this is perhaps not unfair because you get the product for the money you give. And you enjoy a bit of consumer surplus. The young Economics graduate will define this as the difference between what you think is the value (the anchor) and what the price is (the one you pay). Slowly people begin to postpone purchases, waiting for sale. When sale becomes permanent, value starts to lose meaning. Alas, this is the new normal.
