- Hey, everyone, and in this video,
I'm gonna giving you five
scientifically proven
psychological mind tricks
that retail stores both online and offline
use to make you spend more money.
Now, some of these tricks
work by making it more likely
that customers who actually
walk into the store
will purchase something
rather than just walk away.
And other strategies work
by making customers spend more money
by tricking them into
paying higher prices.
And in this video, not
only will I be explaining
how these psychological mind tricks work,
but if you are watching this
and you have your own online store,
I'm also gonna be giving you tips
on how you can implement them as well.
All right, on to the first one.
One, they price one product absurdly high
and expect no one to buy it.
So I live Christchurch, New Zealand,
hence my funny accent, and
here we have a restaurant.
It's a nice restaurant.
It's not fine dining,
but it's pretty nice.
And whenever I go there to eat,
I always like to look at the wine menu
because they have some
absurdly, absurdly priced wines.
Now tell me if this has
ever happened to you.
You'll be browsing the wine
menu and then bizarrely,
you'll see one bottle that costs $3,000,
Which is more than 10 times the cost
of the next most expensive
bottle on the list.
Well, whenever I see this,
I like to show this to my friends for fun
because they pretty much always exclaim,
"Who on Earth is buying that?
"This is not a Michelin star restaurant."
And that's a good question,
and the truth is is that
probably no one is buying it.
It's most likely there for show,
and also to make you pay higher prices
for the other bottles of wine on the menu.
This is a tactic by menu engineers,
and it's actually a twist on something
called price anchoring.
And a fun experiment can
show us this in action.
A team of researchers
lead by Drazen Prelec,
a professor at MIT, decided
to hold a mock auction.
He gathered together a
group of 55 MIT students
and then held up a bottle of wine.
"Look at this lovely 1998 Cotes
du Rhone Jaboulet Parallel,"
he said.
"It's received 86 from Wine Inspector.
"With flavors of red berry,
black chocolate, and mocha,
"this is a medium-intensity,
nicely balanced wine,
"absolutely delightful,
only 8,100 cases made."
After making his pitch for the students,
he then held up another bottle of wine
and gushed about it, and after that,
he held up a cordless keyboard and mouse,
and a pound of Belgian
chocolates, and a designer book,
and pitched their wonders to the students.
When the pitch was over,
he handed a piece of paper to each student
that listed the items for sale.
He said, "I want you to
write the last two digits
"of your social security
number at the top of the page.
"And then, write those same two digits
"next to each item for sale
in the form of a price.
"So if the last two digits of
your social security is 35,
"write $35 next to each item.
"When you've done that, write
yes or no next to each item,
"whether you'd be willing
to pay that price for them?"
When the students were
done with that, he said,
"Okay. Now write down the maximum price
"you would pay for each item next to it."
When finished, the students
were shocked to discover
that their social security numbers
had influenced the maximum bid price.
Students with social security numbers
ending in the upper 20%
placed bids between 216 to 346% higher
than students whose
social security numbers
ended in the lower 20%.
Without even realizing it,
those with high social security numbers
had been subconsciously
using it as an anchor
for being able to figure out
what price they would be willing to pay.
You see, pricing is subjective.
If I show you this bottle of wine,
you probably don't know
how much it's worth
unless you know a lot about the brand.
So for most people, if
you see this on the menu,
the way that you figure out
how much you're actually
willing to pay for it
is you look at the cost of
the other bottles of wine
on there.
And so when you see the
$3,000 bottle of wine,
this $100 bottle of wine
doesn't look so bad.
So how can you implement
this tactic in your store?
Well, one thing you can do
is you can add premium-price products
even if you don't people
to actually buy them.
So let's say you've got
a print-on-demand store,
and you're selling leggings,
or perhaps you've created
some new limited-edition,
limited-print-run space leggings.
Well, because of the fact that they are
limited-edition,
special-print-run leggings,
you can realistically
high-cut the prices of them
so that your other, normal
leggings look cheaper
in comparison, even if no
one will actually buy them.
Two, they give new customers coupons
to trick them into being happy.
These days, it can be harder and harder
for new stores to launch
and get customers in,
and that's because, increasingly,
shoppers are becoming
more and more skeptical
about advertisements.
In 2012, the Nielsen's Global
Trust in Advertising Report
surveyed 28,000 people and asked them,
what forms of advertising do you trust?
92% said they trust friends
and family recommendations.
70% said they trust
online consumer reviews.
But online video ads?
Just 36% trusted them.
It's a chicken or the egg situation.
To get customers in, they need
reviews and recommendations,
but to get reviews and recommendations,
they need to actually have
customers come in first.
But don't worry.
Stores have tactics to
overcome this problem,
and one of them is coupons.
Yes, coupons.
So why coupons?
Well, as science has shown,
coupons can actually
change the chemical balance
of our brains and trick
us into feeling happy
so we can overcome our initial skepticism.
In 2012, a study by Dr. Paul J. Zack
looked at how coupons
impact our happiness,
stress, and health.
He split the test
subjects into two groups.
Group A received a $10-discount
coupon, and Group B did not.
Group A experienced a 38%
rise in oxytocin levels
and rated themselves as being
11% happier than Group B,
who did not get a coupon.
But that's not all.
He also noticed that Group
A's respiration rates
dropped by 32%,
and their heart rates decreased by 5%.
Receiving the coupon made
them feel more relaxed
and less stressed.
Giving new customers a coupon
takes them from a skeptical mindset
into one where they are
more relaxed and happy.
And as science has
shown, this has an impact
on impacting shoppers' buying behavior
and making them spend more.
In 2013, a global survey
of over 10,000 people
by RetailMeNot revealed that
51% of consumers admitted
that they were influenced
when presented with deals,
discounts, and coupons
when shopping online.
And statistics revealed from
vouchercloud backed this up.
57% of new shoppers in a store
become motivated to
complete their purchase
so that they can redeem a coupon.
So how can you implement this
if you own your own online store?
Simple.
Create a one-off discount coupon code
and then add a popup to your store
that offers it to new customers
in exchange for an email address.
One of the most effective Shopify apps
that dropshipping stores use to do this
is the Spin-to-Win app.
This works on another
scientifically proven
conversion method, curiosity.
When shoppers see this popup,
not only are they driven
to enter their email
to get a bargain,
but they're driven to
satisfy their curiosity,
and find out which bargain they'll get.
Three, give away free products
with a buy-one-get-one-free offer.
It's pretty debatable to try to figure out
which is the most iconic
brand in the world.
Maybe it's Disney.
Maybe it's Starbucks.
Maybe it's McDonald's.
Or maybe it's Coca-Cola.
In 1886, Coca-Cola was
an unknown soda company.
When its creator John Pemberton
wanted to boost the
soda's fledgling sales,
his bookkeeper Frank Robertson
came up with a genius idea:
give away thousands of
vouchers to potential customers
that would entitle them to one free drink.
And it worked.
Coca-Cola kept the
promotion going for years.
Between 1894 and 1913, an
estimated one in nine Americans
had received a free Coca-Cola.
This voucher is credited
as being the first ever coupon created,
and it's believed to be a big part
of how Coca-Cola came to
be the giant it is today.
But Coca-Cola's innovative
marketing strategy
didn't just show the power of
coupons and special offers.
It also showed the power of one word,
and that word is free.
In 2012, a team of researchers
at the University of Minnesota's
Carlson School of
Management conducted a study
to see what shoppers prefer more:
getting a discount or
getting something for free.
The researchers offered two offers,
Offer A, a bottle of hand lotion
with a percentage discount;
Option B, a bottle of hand
lotion that came bundled
with a bonus free bottle.
The result?
The research sold 73% more
hand lotion with Offer B.
As I've said before on this
channel, free, free, free.
Everybody loves free.
So why does everybody love the word free?
Well, it turns out that when
we get something for free,
we actually value it more
than if we had paid for it.
As the behavioral scientist
Dan Ariely observed,
"Consumers perceive the benefits
"associated with free products as higher.
"People appear to act as
if zero pricing of a good
"not only decreases its cost,
"but also adds to its benefits."
So how can you implement free offers
in your own online store
to make more money?
Simple. Create your own
buy-one-get-one-free coupons
and test them against
discount coupons to see
if it's more effective
than a straight discount.
The Spin-to-Win Shopify app
is a great way to test this
in a dropshipping store.
Inside the settings, you can set it
so 50% of people win a discount coupon
and 50% of people win
your free item coupon,
and you can see which ends
up being the most effective.
Four, they trick you with volume bonuses
to think that you are
getting a better deal.
Remember that study that
showed that consumers
reacted better to that
buy-one-get-one-free deal?
Well, those researchers
decided to dig a little deeper.
Yes, the word free is extremely powerful,
but could there be another reason
why these offers work so well?
And yes, it did indeed
turn out that there was.
Quite simply, most of
us can be easily tricked
into being really bad at maths.
After their initial test,
the researchers decided to run a new one.
This time, they took a
group of undergraduates
and gave them two offers:
Offer A, a bag of coffee beans
with a 33% price discount;
Offer B, a bag of coffee
beans with 33% extra beans.
The results?
Students as a whole viewed
them as an equally great deal,
even though they were not
an equally great deal.
Let me show you.
Let's take this 100-gram
bag of coffee beans
that normally costs $10.
If we apply a 33% price discount to it,
it now costs $6.70.
That means that each gram of
beans now costs just 6.7 cents.
Now let's take that same
original bag of coffee beans
that costs $10 for 100
grams, but this time,
we'll bump up its volume by 33%.
So now it costs $10
for 133 grams of beans.
If you do the maths,
that works out to be 7.5
cents per gram of beans.
You see, the reason why
these intelligent students,
who are probably way smarter than me,
made this simple mistake
is because of the fact that
they saw the same number, 33.
And their brains go,
"Oh, 33% discount versus
33% increase in volume.
"That's the same thing, right?"
Well, no, it absolutely is not.
It's kind of like an optical illusion.
Check this one out.
It's the Poggendorff illusion.
See that black line?
It looks like it lines up
with the blue one, doesn't it?
Well, actually it doesn't.
It adds up with the red
line, not the blue line.
It's things like this that
show how easy it can be
for marketers like me to trick your brains
into thinking that you're
getting a great deal
even though you're not,
or at least not as great of a
deal as it initially appears.
Five, they use prestige pricing
instead of decimal pricing.
So this is a trick that
has worked its magic on me
and made me spend more money
than I probably should.
So I've got to admit,
I'm quite a big fan of Burberry.
And I'm sure some Brits
would disagree with me here,
but I love the classic checked pattern.
Here is the Burberry website.
Now I've got a question for you.
There's something rather
strange about the store
compared to most other clothing stores.
Can you figure out what's
so unusual about it?
I'll tell you in five,
four, three, two, one.
Okay, so the strange thing
about the Burberry website
is that they don't use
decimals in their pricing.
There is no $489.99 here.
And here's the thing.
Burberry are the rule, not the exception.
If you go to other luxury clothing brands,
you'll see the same pricing strategy.
Man, I love that note there.
Complimentary Shipping and Returns.
Yeah, for $5,700, I should hope so.
Now the reason why they do it
isn't just so that they can be different
for the sake of being different.
They're not being hipster.
The reason why they do it
is because the types of people like me
who are buying their
clothing are doing that
based on feelings.
We aren't doing it as a strategic choice.
The 2014 study, This Number
Just Feels Right, explains why.
When we see a decimal price, such $489.99,
our brains struggle to
process that number quickly,
and so to compensate,
our brains tap into the cognition mode
to try to logically
evaluate it, often poorly.
Because we don't process it very well,
decimal pricing often
leads our brains to think
that things are cheaper than they are.
On the flip side, when we see
a rounded number like $490,
there are no tricks.
Our brains very easily
process it and understand it.
But the flip side is
that because our brains
aren't distracted by trying
to evaluate the price,
not only does it feel
right when we look at it,
but our feelings and
emotions to the forefront
of our decision making.
I can't remember how much
I paid for this t-shirt.
It was probably around $300.
It's a pretty high-quality
t-shirt, I will say.
But considering that you can
get high-quality t-shirts
for a fraction of the price,
this was not a great deal, value-wise.
Burberry know that they're
not gonna win me over
and make me spend money
by using pricing tricks
the hide the fact that this costs $300.
There's no way that you can hide that.
Instead, they go all in
the fact that they know
the real reason why I'm
gonna buy this t-shirt
is based off emotions and feelings.
And it's luxury brands
that benefit the most
from using this pricing strategy,
and that's why it has the
name prestige pricing.
For most of my subscribers
who are watching this video
who are running their own online stores,
you are unlikely to be
targeting the luxury shopper,
so you should avoid this pricing strategy
and stick to decimal pricing.
But it can be confusing
when you launch a store
and you see other types of shops
using different pricing
strategies, and you might think,
"Oh, Burberry used that.
Should I use that as well?"
Well, now you know that no, you shouldn't.
Thanks for watching this video.
And if you would like to start
your own online money-making
store, but you don't know how,
then you should be sure to
download our free ebook,
"The Six Steps that Online Stores follow
"to Make over $10,000 a Month,"
and you'll find a link to
how you can download that
in the video description below.
