The AI Marketers Club is a Digital Training Program and Resource suite Created by John Crestani
Stores are a lot like magicians. They’re always trying to get money to disappear from customers’ bank accounts and wallets, and they often manage that with marketing tricks.
Don't fall for these sneaky marketing tricks designed to separate you from your money.
What they do isn't illegal, and often, it isn’t even unethical. Retailers are simply well versed in consumer psychology, and for those shoppers not paying attention, you may find that you’re often spending a little more than you intended.
To become a savvier shopper, note these ways shoppers are often lured into buying.
1. Buy Now, Pay Later
You may not think of it as a marketing trick. But having it as an option at online check out, and even in some physical stores, is a way to convince customers to spend more.
Even some restaurants and food services offer buy now, pay later plans, usually through an app or a virtual payment card.
2. Subscription Creep
If somebody can get you to agree to pay for their services every month or year, that business is going to be in pretty good shape. They have a new revenue stream: you.
Fortunately, you are in good shape, too, if you like the services or products you’re getting. But if you’re kind of lukewarm or have forgotten that you are paying for a gym membership or a streaming service, then you’re wasting money.
So check your monthly bank statement and ask yourself if you really want all of the subscriptions that you pay for. Speaking of which, the Federal Trade Commission, a couple years ago, created what they called its Negative Option Rule, which would have made it easier for people to cancel their subscriptions, so that customers would always be able to easily click a link and cancel (making it hard to cancel is another way companies trick customers into spending more).
But there were lawsuits from the business community, and a federal appeals court stepped in, and the Negative Option Rule is currently not in place.
Negative option refers to the business practice of assuming a consumer’s silence or failure to cancel a subscription is treated as an agreement to continue to charge them for goods or services.
3. Surveillance Pricing
This is what’s known as when companies collect a lot of data about you – and then they use it against you. (Big companies see it a little differently and probably would say they’re trying to help you find products and services you want.)
We live in an age when more data is being gathered by companies than in any other time, and the more a business knows what makes you tick, the easier they can come up with a price that will entice you to open up your wallet.
4. Dynamic Pricing
This is related to surveillance pricing. If you’ve ever noticed that prices seem to change quickly these days, it may not just be inflation – it might be dynamic pricing at work. Companies will often charge more when demand is high for a product, and less when it’s not (and then the low prices can cause people to say, “Oh, a deal. I’ll get that.” And if enough people do that, then demand is up, and the company may start raising the price).
Dynamic pricing doesn’t always work out in the business’s favor. You may certainly get a good deal and spend less, thanks to dynamic pricing. But if you tend to want to buy certain products and services when everybody else wants them, you may end up spending more than you initially bargained for.
5. Drip Pricing
This is where the final price is much higher than the initial price that you see. It’s happened to all of us. Maybe we see a hotel price that is just fantastic – and we jump on it. But by the time we leave the hotel, we realize that we paid a resort fee, parking fee, and maybe an amenity fee to cover the swimming pool or wi-fi access.
6. The 'Buy All These for Just $X' Sign
This is a popular marketing trick that supermarkets like to use, and it's one that shoppers, especially in these inflationary times, will want to be aware of.
"A retailer will post a sale sign that advertises five items for $5," says Michael Levin, professor of marketing at the University of Louisiana at Lafayette. "A consumer may not know that they can purchase just one item for $1. They'll buy five items because they think that's the only way to get the deal."
7. Marketing Tricks in the Form of Taller, Narrower Packages
You shouldn't judge a book by its cover, but you should judge a package's cover before deciding to buy it.
"Consumers often think that a taller, narrower package holds more product even when it doesn't," says David Hagenbuch, a professor of marketing at Messiah University in Mechanicsburg, Pennsylvania, and founder of Mindfulmarketing.org. "For example, notice how many ice cream containers have shrunk in girth but not in height?"
Marketers and economists have a name for this phenomenon, where the packaging gets smaller but the price stays the same: shrinkflation. You think you’re buying the same product as always – and you are, only you’re purchasing less of it.
8. 'Up to' Sales
This has happened to all of us: "You're walking by a store, and a big, bold sign inside catches your eye: 50% off," Hagenbuch says.
Naturally, you walk inside, hoping to find great deals and oblivious that you’ve stumbled onto one of the more popular marketing tricks. You notice the fine print, and it actually says "up to 50% off," meaning an item can be discounted by any amount between 1% and 50%.
If you had not seen the fine print, "you start shopping, believing that you'll find lots of half-off deals," Hagenbuch says.
9. Advertising Telling You a Product Isn't Expensive
This marketing tactic is called "price framing." The idea behind price framing is that while the retailer can't change the price, it may be able to change the consumer's perception of it. There are many different forms of price framing, too. "Drip pricing," for example, is when you don't see the total price (including shipping fees and taxes) while online shopping until the item is in your cart, and you're all ready to click "buy."
10. Rebates
Whether it’s through the mail or going through a website, manufacturers know you're probably not going to send in a rebate, Levin says, adding that the redemption rate for rebates is "far lower than the redemption rate for coupons."
Making matters worse, he adds, "retailers often incorporate the final price after rebate in very large print on the sale sticker." Consumers "get confused and think they've already received the discount or simply forget to redeem the rebate," Levin says.
11. You Aren't Buying What You Think You Are
Watch out for food products masquerading as something they’re not, Hagenbuch says.
"For instance, some name-brand ice cream makers have reduced the cream content of their products so much that they can no longer be called ice cream. Instead, they must be labeled 'dairy products,'” he says. "This terminology, however, is not readily displayed on the packaging, which mimics what consumers are used to seeing for real ice cream.”
12. The No. 9 Trick
Retailers like prices ending with the number nine – like a $999 TV – because consumers tend to think, "Oh, that's less than $1,000!"
But it's a tactic that works, studies have shown. For instance, in 2003, the journal Quantitative Marketing and Economics conducted field studies testing prices that employed the number and found that when a consumer was offered the choice to buy similar merchandise – like a $49 dress versus a $44 dress – more people would purchase the item that ended in nine.
13. Advertising Focusing on Low Payments, Not the Final Price
This is another form of price framing: Many ads will inform you that for just the price of a cup of coffee per day, you can afford a certain insurance or cellphone plan. Car dealerships often focus on the monthly payment, asking how much you can afford per month – instead of how much you can afford, total.
If you're buying anything requiring monthly payments, look at the annual cost and how much you'll have spent when your purchase is completely paid for. That's often the last thing a retailer or online lender wants you to do.
14. No Dollar Signs and Other Menu Tricks
According to Cornell University research, consumers tend to spend more when dollar signs are left off the menu. Restaurants may also display a few higher-priced items, knowing you probably won't choose them, but other items will look more reasonably priced in comparison.
This is yet another form of price framing, and it isn't only restaurants that will do that. Online and brick and mortar retailers know that it can pay to offer really expensive merchandise that will make most of the other prices seem reasonable.
Some eateries have adopted the advice championed by the late menu engineer Gregg Rapp: Menu prices ending in .95 seem friendlier than those ending in .99, which are associated with value and cheapness.
15. Price Anchoring
Department stores do this all the time, particularly with clothing. You see a $76 shirt on sale for $38 and think you're getting quite a deal. Of course, the store never intended to sell the shirt for $76. The plan all along was to charge consumers $38. The retail industry calls this “price anchoring.”
16. Freemium Offerings
The freemium business model is often used with software, says Danielle Fitzpatrick Clark, CEO and founder of Influence Builder, a marketing firm in Charlotte, North Carolina.
Retailers will offer a free version of software with limited features, or a freemium, as well as a premium version (one you will most definitely pay for).
“Once users are hooked, they're more likely to be willing to pay for additional features or capabilities,” Clark says.
There’s nothing wrong with retailers doing this, of course, but if you are trying to save some of your cash, assuming you like the free version of whatever you’re using, you are on a path for eventually (probably) spending money.
17. Decoy Pricing
Clark says that you’ll see this a lot with software and various membership pricing online.
“This involves setting up your tiers so that one option – usually the middle one – seems like a much better deal. This can encourage customers to choose a more expensive option than they might have otherwise,” Clark says.
If you’re trying to visualize that, imagine a service that offers you two features for $4 a month, nine features for $8 and ten features for $20. The service may hope you pay $20 a month, but they really want you to pay $8 a month instead of $4.
18. Bundling
Insurance companies are well known for doing this, but a lot of companies do this, such as streaming services and cable companies.
“Combine several services into a single package at a slightly discounted rate compared to purchasing each service separately,” Clark says, explaining how it works. She says that companies know that customers or clients might be tempted to spend more upfront to save in the long run.
19. Loyalty Programs
Yes, loyalty programs are good for the customer. Become a customer member of a business, and you’ll get perks and discounts – but only after you spend a lot of money. And, of course, you may find yourself reluctant to go to the competition because of loyalty points.
If you're just several dollars from getting a future discount on a meal at a restaurant, for instance, you may decide to go to the restaurant that has a loyalty program instead of trying something new and possibly cheaper.
And if your loyalty program offers points or badges to collect, so you’ll save more – and spend more – that’s what is known as loyalty app gamification. The retailers are training consumers to think of shopping as a game.
In other words, businesses know what they’re doing. There's no sleight of hand, and no hidden rabbits, but when you whip your credit card, you still may be marveling at what just happened. When it comes to pricing tricks, retailers are very good at their craft.
