MSE’s Academy of Money
MSE’s Academy of Money

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MSE’s Academy of Money

5 Understanding the marketing forces that can affect our spending

The figure is a photo of a young male and female back-to-back in a supermarket contemplating possible purchases.
Figure 4 What influences your choice of products?

One reason why people sometimes pay higher prices for certain goods and services is that they think a higher price equates to higher quality. The price of a product is often used as a mental shortcut to assess quality. Such shortcuts (sometimes called heuristics) are used to help assess situations when there’s limited information available. Marketing departments employ these market beliefs to influence people’s spending.

Of course, a link between price and quality may or may not be accurate; or at least the differences in price may not reflect differences in quality, especially when it comes to more expensive branded items.

Here’s a list of some common decision-making shortcuts people use when shopping. Think about what each shortcut is suggesting to you to do, and who wants you to believe it.

  • Supermarkets’ ‘own’ brand products are just national brands sold under a different label at a lower price.
  • Larger-sized containers are cheaper per unit than smaller sizes.
  • When in doubt, a big brand is always a safe bet.
  • Items tied to ‘give-aways’ are not good value.
  • Stores that have just opened usually offer attractive prices.
  • Larger stores offer lower prices than smaller stores.
  • Small shops give you better service than large stores.
  • Higher prices indicate higher quality.
  • When buying heavily advertised goods, you are paying for the label not the quality.
  • More recent products are likely to incorporate newer and better technology.
  • It’s best to buy well-established products which have been tested by the market for some time.
  • If companies advertise heavily they must believe that their products will sell well.
  • Don’t buy ‘fresh’ fish on Mondays.

Some of these shortcuts are suggesting that you should buy from large stores; some from small stores. Some are telling you that you should search out bargains; others that it’s not worth it. Some suggest that buying named brands is a protection; others that they’re a waste of money.

In each case, there are some particular groups, producers or retailers, who would like you to believe in what is being said so that you spend your money on their products rather than their competitors.

Activity 7 Mental shortcuts: which do you believe and use?

Timing: Allow approximately 5 minutes for this activity

How many of the above ‘shortcuts’ do you believe and use when you are shopping? Have you got any other ones you use?

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Answer

The answer will obviously vary from person to person but most of us deploy at least one of these shortcuts, whether consciously or unconsciously.

Some are usually reliable – for example the cost per unit of goods in large containers is usually lower than in smaller containers. But not always. Check this out when you are next at a supermarket. Other shortcuts are, at best, a figment of the imagination.

Some shortcuts, while you might even believe both of them, are contradictory – see the first and third shortcuts about ‘brands’.

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