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How we decide what something is worth

July 3, 2018

[Image credit: Max Pixel]

 

The other day I came across a really interesting experiment held at New York University.

Think of it like this, you see a pillow (or any "spoil yourself" item) at one shop for $200 but it's on special at half price. That's $100 off! Winning!!

You buy the pillow, and the next day walk into a clearance outlet only to see it selling for $40....

Ummm so hold on... did you still get a bargain?

It's that exact thought that the experiment was designed to look into. 

They took a batch of participants and showed them a set of products. Even though the branding was removed, the products were common that most people would be familiar with.

In the first batch, the researchers informed the participants of the prices for each item. This batch was told they were selling nice and cheap.

They took a different batch of participants, showed them the same products but the prices they were told was substantially higher.

The researchers switched the experiment around a bit to take the participants' minds off the real study, but they soon came back to it. They asked the participants about the products and how much they would be willing to pay for them. Their absolute maximum, imagining that there was some sort of shortage on the items.

Participant after participant gave the same result: that they would pay less if they were given the lower price in the first place, and more if they were given the higher price in the first place.

I find this not only fascinating, but really powerful... afterall understanding is half way to the solution.

Instead of deciding what you will pay based on the price listed on a product (or the RRP it's being compared to), simply look at the final price. Do you think it's reasonable?

Are you still happy with the $100 you paid for the pillow? If so, good news -- there's no need for buyer's remorse! If not, next time take the time to decide on what you believe is reasonable, don't look at the RRP and decide from there. The item's worth is up to you. 

If you know and can harness your thoughts (and impulses), you have a fantastic chance at 'winning' every time you shop!

 

Speak soon,

Erika Gilbert

My Income Organiser

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