Managing my money for young adults
Managing my money for young adults

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Managing my money for young adults

4 Your biases do affect your shopping

What pressures lie behind your shopping choices?

People around you exert influences, as you know, and their opinions or their styles can have an effect on your own shopping. But there are also other influences on how you spend your money – ‘short-cuts’ in your thinking, and assumptions in the way you make shopping decisions. These are used by marketing experts all the time, and they’re called ‘heuristics’.

We all use heuristics – ‘shopping beliefs’ – to assess situations where there’s only limited information available to us.

People sometimes pay a higher price for an item or a service they want because they think the higher price equals higher quality. So they’re using price as a mental short-cut to assess quality. But any link between price and quality might or might not exist, or at least the difference in price might not mean a difference in quality, especially when it comes to more expensive branded items.

The next video describes heuristics and how they operate in our lives. Do you recognise any of the heuristics presented here? Which ones influence your behaviour?

Download this video clip.Video player: mmmft_1_video_week3_section_heuristics.mp4
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One reason why people sometimes pay higher prices for certain goods and services is that they think a higher price means a higher quality, so price is used here as a mental shortcut to assess quality. These shortcuts are called heuristics, mental shortcuts that may or may not be accurate, which lead to certain beliefs about the things we buy. They're used to assess situations when there's limited information available.
Marketing companies employ these market beliefs to influence people's spending; of course, a difference in price may not reflect differences in quality, especially when it comes to more expensive branded items. Here's a few examples. Think about what each heuristic is suggesting that you do, and who wants you to believe it.
Generic products are just brands sold under a different label at a lower price. Larger size containers are cheaper per unit than smaller sizes. When in doubt, a national brand is always a safe bet. Items tied to giveaways are not good value.
Stores that have just opened usually charge 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're paying for the label, not quality. More recent products are likely to incorporate newer and better technology.
Some of these heuristics 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 name brands offers some kind of 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 you spend your money on their products rather than their competitors', but remember, it's your money, and you'll be the one using that product or experiencing that service.
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