Many people have had the experience of making impulsive purchases, buying items they don’t really want or need. Experts say that online retailers and other businesses often employ tactics to induce impulsive shopping in consumers in order to boost their revenue. How can consumers identify and guard against these sales techniques?
According to a report from the Huffington Post, Lennart Baardman, an assistant professor at the University of Michigan’s Ross School of Business, stated that encouraging consumers to make immediate purchases and buy more than they initially planned is a common practice used by online retailers to increase revenue.
Gary Reichmuth, an associate professor at the University of Texas at Austin’s McCombs School of Business, mentioned that creating a sense of urgency or FOMO (fear of missing out) in consumers by using discounts or low stock notifications is a method that retailers use to generate demand and prompt immediate responses to purchases.
If you frequently find yourself buying things you don’t want or need, or overspending, it’s important to understand the common tactics that retailers use to trigger impulsive shopping and how to avoid falling into these traps.
An analysis by researchers at the University of Michigan’s School of Information on 200 online retailers revealed that these retailers employ an average of 19 strategies to prompt consumers to make impulse purchases, with common tactics including discounts, low stock notifications, upselling, and cart notifications.
A study conducted by Wildfire Systems, an e-commerce company based in California, in 2022 found that 80% of consumers are more likely to make a purchase when an item is on sale or they have a discount coupon.
Baardman explained that offering discounts helps increase sales quickly. While discounts may reduce a retailer’s revenue, the increase in sales volume usually offsets the revenue decline from discounts, ultimately leading to profit for the retailer.
Reichmuth highlighted that creating a sense of urgency, like promoting limited availability of a product, can lead consumers to make quick decisions instead of conducting thorough research before purchasing.
He also mentioned that this strategy is often effective for airlines and hotels. When customers are informed that there is only one ticket or room left, they tend to expedite their decision-making process to secure their purchase.
As for retailers claiming an item is the “last one,” it’s hard to verify, but Baardman believes that most reputable retailers are likely telling the truth.
Reichmuth explained that upselling is when businesses persuade consumers to pay more for a better product, such as airlines offering paid upgrades. This is another revenue-boosting strategy employed by retailers.
Other strategies include cross-selling and bundling. Cross-selling involves offering a discount on a related product, while bundling allows consumers to purchase multiple related products at a discounted price.
Baardman noted that besides stimulating consumption, these tactics help retailers sell a large quantity of products quickly. If retailers have excess inventory or want to reduce inventory costs, these strategies come in handy.
Many consumers often add desired items to their online shopping carts while browsing e-commerce websites. Retailers send cart summaries via email or text messages to encourage consumers to return and complete their purchase, a tactic proven to increase sales.
Baardman mentioned that this creates a sense of urgency for consumers and makes them feel valued.
Reichmuth pointed out that these psychological strategies increase consumers’ willingness to make purchases. When emotions are at play, consumers’ brains may temporarily “short-circuit,” leading them to ignore comparison shopping and engage in impulsive shopping.
Baardman added that retailers also use these strategies to collect consumer data, which can be used to further encourage shopping.
To guard against such tactics, Reichmuth advised that consumers should be aware that retailers use these strategies to induce impulsive shopping to maximize profits.
Here are some tips to avoid falling into these traps:
– Unsubscribe from emails or messages from retailers
– Schedule specific times for shopping for particular items
– Set a clear budget to avoid overspending
– Comparison shop to make informed decisions
– Wait 24 hours before completing a transaction to allow impulsive thoughts to subside
In conclusion, before purchasing an item, Baardman suggests asking yourself, “Do I really want or need this?”