Kai Ryssdal: Business owners aren’t the only ones who need a strategy to manage those daily deals. So to do consumers. That’d be us.
Tess Vigeland, the host of our personal finance show Marketplace Money, is here. Hey Tess.
Tess Vigeland: Hey Kai.
Ryssdal: So what do ya got?
Vigeland: Well I brought you a deal.
Ryssdal: I love deals!
Vigeland: I know you do. How would you like to go and eat at Cobras and Matadors for $35 off your meal? Give me $35 and it’s yours.
Ryssdal: Yeah, no. I like Cobras and Matadors, but no.
Vigeland: Well, I bought it back in February.
Ryssdal: All right, so February, March, April…
Vigeland: And it’s expiring next week. And I’m not going to get there before then.
Ryssdal: You know what’s funny? That’s why I don’t buy those things. Because life is busy, man.
Vigeland: I know, I know, I know. You never buy anything you regret, you never buy anything that’ll sucker you for a deal.
Ryssdal: I am the perfect consumer.
Vigeland: You are a better man than I am. But you know what — millions of people do buy these things. And I tell you, we are hard-wired to love this stuff.
Ryssdal: So explain.
Vigeland: Well basically this is our brain on bargains. There’s a behavioral economist named Richard Thaler out of the University of Chicago, I’m sure you’re familiar with him. He coined this term “transaction utility” to describe what’s happening here. And basically what it means is we spend to save.
Now I talked about this recently with Suzanne Shu. She teaches marketing down the street at U.C.L.A.
Suzanne Shu: You see something that is just an unbelivable discount to you. And you think, ‘Wow that is so great that I can get this so cheap.’ And you get more excited about the discount than about the actual product itself.
So we just get caught up in the emotions of the deal. It’s kind of how they put the candy right at the grocery register, so you make this impulse buy. ‘It’s cheap. I’ll just add a dollar or two to my bill’ — only here, of course, I added $35.
Ryssdal: And it’s expiring. So I’m going to be not helpful at all and offer this thought: Think before you buy.
Vigeland: Of course, I know! But this is also where they get you. Because these companies are also well aware of something called “the scarcity effect.”
Ryssdal: See, that’s baloney because there ain’t nothing scarce about these daily deal things, right?
Vigeland: Well what this is referring to is the limited time offer that’s put on pretty much all these daily deals. Here’s Prof. Shu again.
Shu: So you sit there asking yourself, ‘Do I want to let it pass me by, and two days later regret the fact that I didn’t go for that great deal when I had the chance? Or do I just want to go ahead and grab it and then figure out how to use it later?’
Plenty of us, if not most of us, do the latter.
Ryssdal: So give me the wise consumer takeaway here?
Vigeland: The wise consumer takeaway is that these companies are just like any other: They exist to separate you from your money. They know all the sweet spots, so you’ve got to think really hard before hitting that accept button. Are you going to buy this anyway? Are you sure you’re going to go? Is it going to be an albatross around your neck to the point where you’re just going to the restaurant to get rid of this stupid coupon? Not that any of that applies to me, all right?
So you want this thing?
Ryssdal: No, I’m not going to take it. But come on back next month and we’ll see what other consumer advice I can give you.
Vigeland: Thank you Kai.
Ryssdal: Tess Vigeland, the host of our personal finance show, Marketplace Money. Tess, thanks a lot.