Hey there! It's Talk About Money Tuesday, my favorite day of the week.๐ค
I wasn't planning to write about anything shopping related, but then I got five Black Friday sale emails in my inbox in less than an hour last week.๐ฉ
They made me think about all the tactics retailers use to get people to buy what they're selling โ including encouraging us to pick up things, try them on, or test them out.
Maybe you've touched a super soft sweater while shopping or played around on an iPhone at the Apple Store. The next thing you know, you're the owner of a new sweater or new iPhone.๐ซ (Or a new floor-to-ceiling bookshelf. Trust me, it can happen.)
But why does that happen? Part of the explanation has to do with a concept behavioral economists call the endowment effect.
Basically, the endowment effect describes our tendency to place a higher value on things we own. And sometimes, simply touching or trying things can start to create that sense of attachment.
This is an interesting money lesson for young people because it proves that we don't always buy things because we need them. Sometimes we just want them because we've interacted with them or started imagining that they belong to us.
Teaching young people to recognize these psychological tendencies can help them become more mindful shoppers and make better financial decisions.
Money Stat
86%
If they can't touch it, they're not buying it. According to a report from The Harris Poll/Quad, 86% of Gen Z and Millennial consumers say that touching and feeling products are essential to their purchasing decisions. When it comes to high-end products, 80% of all consumers said they won't buy expensive items without being able to physically verify their quality.
Get in the Zone
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Money skill: How to become a conscious consumer
Why it matters: Young people are constantly exposed to marketing that shapes what they want and how much they're willing to spend. Learning to evaluate products on their own allows them to see past the hype and recognize real value. It will also help them put their own needs and priorities first when they make spending decisions.
Try this: Retailers are experts at making products appealing, but here are some ways parents and mentors can help young people notice when their wants are being influenced by what they see and touch:
โก๏ธ Become a marketing detective. When shopping together, ask your child what makes them want a product. Is it the packaging? The way it's displayed? Or something about the product itself? Talk about how retailers use these features to influence buying decisions.
โก๏ธ Separate the product from the experience. After your child touches or tries something in a store, ask them to describe what they actually like about the item. Would they still want it if it came in plain packaging or couldn't be tested first? This helps them focus on the product's actual value rather than letting the shopping experience influence their decision.
Understanding how marketing and attractive packaging can tempt them into unplanned purchases, helps young people think critically about what they're buying and make smarter purchases.
Smart Money Quiz
โ
A clothing store prompts shoppers to feel different fabrics and handle clothes before buying. What marketing strategy is the store using to influence customers?
A. Price anchoring
B. Sensory marketing
C. Social proof
D. Loss aversion
(The answer is at the end of this newsletter.)
The Language of Money
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Talking to your kids about consumer psychology doesn't have to be complicated. Here's some youth-friendly terms to start the conversation:
Consumer psychology: The study of why people buy things. It looks at how your feelings, thoughts, habits, and experiences affect what you spend money on.
Emotional spending: Buying something because of how it makes you feel.
Endowment effect: When you own something, or feel like you do, you tend to think it's more valuable than it actually is.
Perceived value: How much you think something is worth.
Sensory marketing: When companies use sight, touch, sound, smell, or taste to make products more appealing. Think free food samples or displays that invite you to touch and try.
Looking for more youth-friendly personal finance terms to share with kids and teens? โโโโDownload your Language of Money freebie!โ
Loose Change
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๐๏ธ If you struggle with impulse buying, get your shopping fix on a fake shopping site. No returns, no regrets.
๐ฑ At one point, a media outlet predicted that Apple Stores โ masters of the endowment effect โ would fail.
๐ A three-day test drive makes it really easy to get attached to the car you might want to buy.
Thanks for reading! If you want to read some of my past newsletters, click here. And if this newsletter was forwarded to you, please subscribe โhereโ.
'Til next time,
Audrey
โFounder &
Certified Financial Education Instructorโ
The FinLit Zone
ANSWERโ
โB. Sensory marketing. Sensory marketing uses our senses to shape how we experience products and brands. By encouraging shoppers to touch, see, hear, taste, or smell products, retailers can make shopping more engaging and influence what we buy.
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