Spending More for a Little Solace
As big Labor Day sales roll around, computer stores will tell you about laptops that now come with biometric fingerprint readers. Car companies will talk about "variable air suspension" features that allow you to change the ride of a car, depending on terrain. And video game manufacturers will hawk "ambient intelligence" accessories, including one that blows wind in your face as you make virtual hairpin turns.
For many years, marketers and salespeople have realized that there is money to be made selling people features they do not need and may never use. Many people report being stumped when asked about the intricacies of their DVD players or the complexities of their digital cameras; most sport-utility vehicles with complex off-road traction systems are rarely driven on anything but asphalt.
So if people don't use expensive high-end features, why do they pay more to get them?
Jaebeom Suh, an assistant professor of marketing at Kansas State University, conducted a series of experiments that explored this question. Suh found that people buy unnecessary features because of two cognitive errors -- they overestimate the risk that a product without such features will become obsolete, and they overestimate the likelihood that they will learn to use the new features.
Consumers, especially those buying expensive electronic items, fear that "if I don't buy this feature and a new product launches on the market, I may have to rebuy everything again," Suh explained.
Because features introduced more recently feel as though they are less likely to become obsolete, consumers who buy them experience less anxiety. The money they pay is really not for the feature but for the psychological solace it purchases.
In another experiment, Suh found that consumers tend to think of new features as a kind of investment -- something that costs money but that will pay for itself as they learn to use and love it. Of course, most people never do learn to program their VCRs, meaning the investment is largely a bust. But that does not stop them from repeating the cycle when the next sale rolls around.
Because genuinely innovative products have a much higher risk of commercial failure than existing blockbusters, marketers find it more lucrative to tack on new features to popular items, rather than risk going with truly revolutionary devices. Consumer fears about obsolescence and their misjudgments about the long-term utility of products may indirectly play a role in reducing the amount of overall innovation in the marketplace.
Cognitive errors, of course, are not the only reason people buy things they cannot afford. Sociologist Allison Pugh at the University of Virginia found that parents, especially poor parents, tend to buy products they cannot afford because they are acutely focused on whether their children are fitting into peer groups.
"Children live in an economy of dignity," Pugh said. "This is a system of meanings in which certain things have particular interpersonal power. It can be experiences like going to Marine World or seeing some movie. Those objects and experiences have social power -- they define who belongs and who does not, who can participate in the conversation and who cannot."
Pugh said that detailed interviews she has conducted with 5- to- 9-year-old children and their parents show that low-income parents do not splurge because they fail to understand the importance of delayed gratification or because they are impulsive. Rather it is because they are acutely sensitive to how certain consumer products influence their children's "search for dignity."
"Every 8-year-old boy in my sample had a Game Boy or Nintendo," Pugh said. "This was among parents who were incredibly poor, who were working to stretch their food dollars at the end of the month. They were choosing their child's psychological desires over their own material needs."
There is one last reason people pay more than they should for products: They mistakenly believe a product has more value because it costs more money.
Reader S. Krishnamoorthy Aithal of Falls Church said that he recently tried to give away a small folding table. He put a flier on the bulletin board of his local grocery store in early June. Two weeks later, there were no takers.
In late June, Aithal replaced his flier with a second advertisement, this one offering the same table for $10. The new ad prompted a quick response. A buyer showed up and, after a vigorous bit of bargaining, triumphantly walked away with the table for $5.
Have an interesting anecdote from your own life that says something about human behavior? Send an e-mail firstname.lastname@example.org.