The Psychology Behind “The Deal”
Why deals attract us?
Business is about making money—so why is it that so many businesses have seemingly constant “great deals,” “bargain bin deals,” and “extreme price-cut deals”? Because, more often than not, these seemingly too-good-to-be-true deals are actually benefiting the business, not the consumer. Every year, countless numbers of businesses take advantage of the psychological effect that “the deal” has on consumers. This “deal” effect can actually influence people into spending more money and into spending money that they otherwise would never have spent were it not for the psychological pull that a good deal has on people’s minds.
In order to understand the psychological behind the deal, it is important to understand what exactly counts as a deal. In the context of business, a deal refers to an item or service which is being advertised at a price which is lower than the advertised retail or regular price. Most deals involve items or services being sold at a certain percentage off the retail or regular price, although a number of deals are also advertised under the concept of “buy one, get one free.” This refers to items which are given to the consumer for free upon their purchase of another item or a certain set number of items.
But why are deals so appealing to consumers? The answer lies in psychology and, in particular, in two psychological business concepts. The first concept is called the scarcity principle. The scarcity principle refers to a principle which means that people are more likely to want something if they believe it is hard to find, rare, or it will soon become scarce. To take advantage of this, many businesses advertise their deals as limited time or exclusive. For example, a business might advertise that a deal will only be available for one night only, or that the deal will only apply to the first 50 customers or first 50 items which are purchased. Because of this type of advertising, people are more likely to want—and to purchase—the goods or services being offered to them. Studies on the scarcity principle have shown that decision making is actually affected by the idea that something is limited or will soon be gone or scarce.Laura Brannon, a professor who teaches psychology at Kansas State University, describes the experience of decision-making during a deal as something which can actually be “somewhat emotional.” People are generally less rational when confronted with a deal because they believe that if they do not purchase something within the limitations imposed by the deal, they may never get it—even if, rationally, there is no reason why they couldn’t purchase the item for a slightly higher price the next day, week or month.
Some businesses further capitalize on this irrational decision making process caused by the scarcity principle creating a higher-stress atmosphere during their deals. This can be accomplished by creating advertising that stresses the limited time nature of the deal, which results in a larger crowd and subsequently a tenser, more fast-paced atmosphere in the place of business during the deal. For example: Black Friday shopping, which is most common in the United States, is intended to create a high-stress, high volume event in which shoppers feel pressured to grab items on sale and purchase them because the business is noisy, cramped and crowded with dozens—if not more—of other shoppers. This atmosphere can also be created by promoting the idea that the items or services being sold during the deal are scarce—even if they are not. For example, a business might ensure that there are only 5 of a certain item which is currently advertised as 25% off on the shelf at one time. Consumers who pass by this item, see the sales price, and see that there are only a few items left might feel compelled to purchase the item in the fear that it may not be there during a return trip. In this way, the business is taking advantage of spur-of-the-moment purchases which are made almost in fear of an item disappearing before they can make a purchase.
The second principle is the social proof principle. The social proof principle, which is closely linked to the scarcity principle, refers to a principle which means that people are more likely to think something is worthwhile when they see that other people are attempting to purchase, use or otherwise provide their patronage to that item or service. The social proof principle is often a way for people to reaffirm and justify their decision to go after a sales deal. For example, someone who lines up outside of a store at 3 in the morning in order to be there to be first in line for a special deal when the store opens at 10 am is more likely to remain standing in line—and therefore go ahead with their intended purchase, and probably more besides—if they see that other people are also standing in line. In a sense, the social proof principle boils down to: “I see other people doing this, which means it’s okay that I’m doing it, too.” In the context of business, this means that consumers are more likely to flock to deals which are generating a lot of social activity. Today, this could mean people lining up outside of a store in order to catch a deal or people constantly refreshing a website in order to catch an online exclusive.
Businesses often take advantage of the social proof principle by encouraging customers to make social displays of their desires for a deal. During special deal events, many businesses even hire security or employees to handle the anticipated crowds, further justifying—in the mind of the consumer—that the deal is really, really worth purchasing. The social proof principle is more often used in planned deals, such as those put together for Black Friday or special anniversary events, because it relies heavily on a consumer visually seeing other consumers lining up or otherwise clamoring for goods or services offered by a business.