How To Control Spending by Understanding Marketing Strategy

Have you ever found yourself standing outside the store window, thinking something like; “this is probably the last chance to get this thing with such a great deal.”, “if I don’t buy it, some one will grab it real soon”, “I will just get it first, I can use the extra some day”, “I can get greater discount if I buy more”. These are exactly how sophisticated marketer wants you to think. They create such an emotional situation where you will find yourself irresistible to something they call it a great deal. In controlling spending and studying of human spending behaviors, it is important to understand the strategies used by the marketer.

Average dollar per customer - Average dollar per customer is the average amount of money one customer spends in a transaction of purchase. For a store to be more profitable, one of the sales variables they need to improve is the average dollar per customer. There are many strategies to increase this figure. Below are some of the examples:

1. Buy two get one free.
2. Buy one get another with 30% discount.
3. Arrange a series of related products together that are interrelated and make them seems like interdependent.
4. Placement of product in the right place.
5. Use of wording 1: Clearance sales.
6. Use of wording 2. Early bird package, first come first served, first 100 customers discount, etc.

 Giving out great discount – For the first two strategies, it seems the seller is giving out great deal by giving great discount but actually they entice you to buy a few similar products that you probably don’t need. Let say buy one and get the second with 30% discount, if they get 40% profit margin when you buy an item, then they get you to buy 2. The combine margin becomes 50% with 25% margin per item (25% = 40% – 30% discount divided by 2). Even though their margin per item is lowered, but their combined profit margin increased by 20% (from 40 to 50%) which also increase the average dollar spent per customer. A very good example is McDonald, the price of a burger is very low, but in the process of ordering, a well trained staff will usually get you to buy the combo meal, have an upgrade to the size, get a sundae for dessert and spend a little bit more to get the super cute toy. That explains when you only want a $3 burger for lunch instead you came out from the restaurant spending $20. That’s a whopping 600% increase in average dollar spent per customer. By attracting 100 customers to do the same, how much profit you as consumer help them to make?

Strategic placement of products - For the third and forth strategy, it is usually employed in retail store or shopping complexes, for example in branded clothing boutique and grocery store. Have you ever wondered why all the stuff you need are all conveniently arrange near to each other? For example, when you buy a pair of jeans, there are racks displaying belts that go well with the jeans. When you buy a working shirt, there are cufflink, tie, and slack being placed adjacent to each other. This is because shopper who buys a pair of jeans usually needs a new belt to go together and buyer who buys a working shirt will likely to get a tie or a new cufflink. By putting near each other, it is very convenient for the shopper to grab it and it is also reminder for the shopper to buy more, thus increasing average dollar per customer.

Have you ever noticed some shop that is on sale usually don’t display the items on sales at store front, instead they place those items at the end/back of the shop. This is no coincidence or by random, in fact this is cleverly designed by marketing expert. First of all, a store that is on sale will attract lots of attention; it lures customers into the store that is the first step. Many people will go into the store even they never planned to until they see the sales banner. Usually the non sales items will be placed at the store front. The common behavior of shopper is that they spontaneously have a look at those non-sales items before they walk to the sales section. By the time they are there, they probably have a lot more to pay for.

Emotion trigger – Human spends when reacted to certain emotions; excitement, fear and greed. The clever use of wording can trigger the emotion in human. How do you feel when you see the word “clearance sales” or “stock clearance”? If the store on sale is your favorite clothing brand, you are likely to feel excited and deep down, emotion of greed. How many stores do you think that put on this banner are really selling the stock in cost price? The answer is, not a single one of them. Do you think cost in operating a store is free? Of course not. Or have you noticed is there any difference between clearance sales and normal sales? You might be surprise that some claimed clearance sales are selling at the same or higher price than normal sales. That’s why, even though it is a ”clearance sales”, they can still make a good margin of profit from you, and because of clever use of word, more customers will flock into the store, thus more potential buyers.

Emotional Urgency – Another clever strategy employed is to create a sense of emotional urgency in consumers, the emotion that combines greed and fear. I’m sure you come across advertisement with words like; early bird package or first 100 customers discount. The advertisement might tell you it is a great deal and there is only little stock left before it lasts. Well, some are true but many of them are not. The aims of designing such words are to set an emotional urgency in human mind. People who hear or see this will usually commit to buying mode in rush for fear the deal will end, even though they might not need it (greed). The worse thing is; it might not be that great of a deal as it claims after reconsider.

In my early article I wrote about emotional resiliency in spending control.  In order to further boosting emotional resiliency it is also very important to understand the sales and marketing strategies being used on you, so you can use it to protect against it. There is a Chinese proverb sounds like this:

In order to understand yourself you need to understand what you are up  against.