Unmasking the Mysteries: The Psychology of Retail Pricing

Ever wondered why you keep falling for the $19.99 trick, or why a $400 pair of jeans seem like a steal next to its $200 counterpart? Hold on to your wallets, because we're about to reveal the secrets of the retail world and their cunning pricing strategies. From the art of anchoring to the mesmerizing left-digit effect, we dissect the tactics that get us to part ways with our hard-earned cash. We'll also venture into the dreamlike (and wallet-emptying) world of high-end fashion, tech toys, and the South Florida real estate market, where owning a beachfront property feels more like a fantasy. 

But that's not all! This episode's not just about understanding these mind games, it's about fighting back. We'll equip you with savvy shopping tips for resisting these strategies, especially during the financially challenging holiday season. We'll also help you cut back on those sneaky, unused subscriptions draining your paycheck every month. So, buckle up for an enlightening ride at the Observation Station! Let's unravel the mysteries of retail pricing, become wiser consumers, and even share a few laughs along the way.

Transcript

Speaker 1: 0:02

Do you ever lift your head up from your phone, look around and think to yourself my God, everything is weird. Well, we do A lot. This is the Observation Station, a unique, entertaining and hilarious podcast. If we observe it, we talk about it. Anything and everything, anything and everything. Let's get weird and let's have some fun. This is the Observation Station and now your host, tommy Heights.

Speaker 2: 0:49

Hey folks, welcome back to the Observation Station. The podcast. That's like a Swiss Army knife for your brain, always handy and full of surprises. I'm your host, tommy Heights, coming to you from the heart of South Florida where the weather's hot but the deals are hotter. So today we're diving into the wacky and often bewildering world of psychology of pricing strategies. So hang tight, because this episode could save you a penny or two, or at least make you a question why you saved them in the first place.

Speaker 2: 1:25

So first thing we're going to be talking about is the anchoring effect, or why you would think $200 jeans are a steal. So you walk into a store and you see a pair of jeans for $400 and suddenly the $200 pair next to them looks like a bargain. Congratulations, you've been anchored. Retailers set a high priced anchor product to make everything else look cheap by comparison. But seriously, I mean $400 for jeans. You better be able to fly in those. I've been seeing some of these people with the torn jeans and all this other stuff. You almost have to be looking like a homeless, and that's actually the new style. So I don't understand it. These shoes that are already like they have worn out skid marks on the side, they're going for $500, $600 and up. It's like what the hell is going on here?

Speaker 2: 2:19

And the 99 cent magic trick. You'd think nowadays that there'd be a lot of 99 cent stuff still around, but not with inflation. So the classic 99 cent trick $9.99 to the $10, the one cent change that magically transforms a double digit price into a single digit wonder. And do we really fall for it? Yeah, you bet we do. That's the left digit effect in action. So where our brains get stuck on that first digit. So just remember, you're not saving much, you're just spending less on your way to being broke. So nowadays it's almost like, okay, are we going to try and to like spend all the way to the limit? Or what's the deal now? Because things are so, so, so expensive nowadays. You're thinking yourself eh probably should have it.

Speaker 2: 3:20

Where you should watch kind of what you're doing because the prices of things are going way, way, way high and the best thing to do is kind of watch where you're putting all your eggs in a basket. It's not that I'm saying do this, do that, but it's all about figuring why am I spending on stuff that's overpriced? Just because maybe it's the new trend is the main thing. Price elasticity is the next topic here. So when luxuries aren't enough, in industries like high-end fashion or tech gadgets, price elasticity is like that mysterious party guest who either makes or breaks the party. A high price can actually make these items more desirable because they're seen as valuable or exclusive. So next time you see an exorbitantly priced handbag or phone, just remember it's not expensive, it's exclusively priced for discerning buyers. Wank-wank, I guess. So this is an example. So in South Florida, say, if you're in Miami's real estate market, you're not selling just houses, you're selling dreams, very, very expensive dreams. You can't slap a 999,999 tag on an oceanfront beach property and expected to just fly off the market, right, I mean depending, I guess. But yeah, I mean you should try and see then what happens. I mean it's just amazing that you think something that is a million dollars is so much, it's probably a rundown place. If it's a million dollars, beachfront property, if it's like you know, a large one, maybe it's like from the 80s and needs a lot of renovation, who knows? So this is the kind of stuff that I'll give you an example we'll go into. Say, when you go into the mall there's a lot of things like oh my God, blowout sale. The biggest thing that I've been noticing in the mall are those places that have like the art that you can put out on your lawn and they're thinking, oh, it used to be priced 20,000, now it's priced like a thousand. Those are always having blowout sales.

Speaker 2: 5:53

Whoever has the ownership of any of those stores, I would really want to see what their house looks like. I mean, think about how much crap these people have in their house. It's like, why would I need a Transformers made out of forks or whatever it is in these stores? So now it's coming up to be the holidays, everyone's looking to say, okay, well, things are getting really expensive just for bills around the house. How am I going to afford to get presents and stuff for the family? Look at it like this you got to take care of yourself. Don't have it where you can't eat just because you're thinking I don't want to show up without presents, whatever it is, everybody has to be living on their own terms.

Speaker 2: 6:41

Right now it's a war out there, literally, because not only the craziness that's happening overseas which is another different thing altogether but figuring out what it is that the money's going towards certain subscriptions Like. I have to cut out certain subscriptions and stuff here and there a lot of times because it's like okay, am I using this product? No, then I need to be getting another kind of understanding of saying, well, if I'm not going to be using these products all the time, then I shouldn't be having to pay the subscriptions. Netflix is kind of like a thing that I've kept for a while and said, okay, well, I see it keeps giving me alerts, it's going to raise the price, raise the price, raise the price. But I mean there's always a movie or two Like think about it like this when you spent on one movie ticket back in the day, it was literally has cost a whole month of what Netflix is. So we just take things as they come.

Speaker 2: 7:48

A lot of times the food that I'm going out to spend on lunch. It's like how are things becoming like $30 for sandwich and a drink? And then they're like, okay, and they want a tip too. What? I don't even know how half of these places that you go out it could be the most simple thing. It's like you ask for a peanut butter and jelly sandwich and they want like a 25% tip. Whoa, whoa, whoa, whoa, whoa. How about we get people to start paying living wages to these, even if it's low skills? They need to get AI to be doing a lot of these low skilled jobs. You go into McDonald's. Now this is a big thing.

Speaker 2: 8:32

If you're going to like McDonald's or any of these fast food places, definitely get the application. The prices in the store and on the app are completely different. That's why you see a lot of times it's like oh, online, exclusive prices. So the app is much, much cheaper. If you have it where it's like a bunch of free deals, you're getting rewards points.

Speaker 2: 8:54

I'm not really advocating to say, hey, go to fast food places. That's probably not the best healthy choice. I'm just saying, if you're going to be going out, try to have it where it's like you're getting rewarded for going Sometimes the gas stations. They do reward points. If you're buying stuff in the gas station, if you go in and get snacks a lot, make sure that you're getting your rewards points, just like credit card points. But you're just like doubling up getting credit card points and rewards points If you're doing it like that, getting a double whammy. Just try to figure out how to game the system a little bit here and there and that's how I get free stuff along the way. You're like oh okay, free this, free, that free. You know, maybe sometimes it's like McDonald's buy here. Oh, free Big Mac, okay, whatever. It's like, didn't expect that, just throw it in there, it's free. I mean, all this stuff adds up over a while. That's why I'm just saying like, just think about trying to get rewarded for stuff you're already buying.

Speaker 2: 9:53

Plus, if right now maybe you know you got laid off, take a look at say, okay, I need to get income as soon as possible, but what expenses do I need to cut out? Because there's a lot of things that these people are buying that I talk to them. It's like why do you have it where you're spending this much and this much? Luckily, my car's paid off, so I don't have any car payments because you're hearing about how much people are paying a month for their vehicles. It's like you know, car payments can be $500 to $700. Insurance can be, you know, 250 to 500 or whatever, depending on if they have the family plan individual. It's just astronomical here in South Florida for car insurance.

Speaker 2: 10:43

So I mean, look, in conclusion, pricing is like a magic show. It's all about the illusion and perception, sprinkled with a dash of what that just happened to my wallet. So, whether you're just setting prices for your business or you're falling prey to these strategies as a consumer, just know that the game is as mental as it is financial. So don't forget to tune in next Tuesday for an episode that's gonna make your head spin the intrigue of the gut feeling, so intuition or coincidence. So ever had a hunch that turned out to be spot on. We're diving into the belly of the beast, or should I say the gut of the matter. And that wraps up this episode of Observation Station. I'm getting tongue twisted over here. If you left to learn something, or even if you're just questioning your last shopping spree, hit that subscribe button and share this podcast with your friends and family. I'm Tommy Heights, and remember, when it comes to pricing mind over matter doesn't always make sense. Take it easy, everybody.

Speaker 1: 11:55

Bye-bye. You've been listening to the Observation Station. We find everyday life and everyday situations hilarious. We hope you've enjoyed the show. We know we had a blast. Make sure to like, rate and review, and be sure to tell a friend about the show. That would help too. See you next time on the Observation Station.