130 // Factors Influencing Your Purchase Decisions

We recently did a podcast on the paradox of choice-the way we have so many choices that it leads to paralysis, so I thought it would be helpful to dive into the reasons why we choose what we choose. If you know what leads to our decisions, you can make better ones.

At some point, you have experienced buyer’s remorse-something you bought did not live up to your expectations. This feeling is actually a healthy thing. Buyer’s remorse is the Yoda of finances. Surrounded by the influx of choices we have today, it’s more common.

This feeling teaches us about what we actually wanted and what we jumped too quickly at. It’s good to let your kids feel it when they’re young, so they learn how to make better decisions as they get older. On the other end of the spectrum, you have also likely felt satisfied and pleased with a purchase, or it turned out to be more valuable to you than the price tag. But how do you know which outcome you will get?

What Influences Your Purchase Decisions?

The first thing to fully understand is what leads to your decisions: behavioral economics, the point where psychology and money meet. What it boils down to is you might tend to make decisions that are against your best interest. You might get excited about something before you’ve given it enough thought, or you buy something because you thought it was what you wanted, but you were just outwitted by the marketing maze set up for you the moment you walked into a store or opened a website. If you understand what goes into these decision-making processes, when you step into a choice, you will have the prescience to see these things coming and fight against that which leads you to decisions that don’t serve you.

I will draw heavily on an article by Dr. Shahram Heshmat.

  1. The tension between the buyer and the planner – He describes it as: β€œbeing of two minds”. One part of you wants delight and instant gratification from purchase decisions, and another part of you thinks long-term and the way the bigger plan has to come together. Those two minds are in constant conflict. The goal of every marketing message is to quiet the planner and give the buyer the wheel. Your ticket to bypass all of that is to recognize your power in this. Before you even walk into a setting where you will be confronted with money decisions, decide what you plan to spend, so you have a frame of reference.
  2. Situational cues – When you are in a situation where you’re about to buy something, you become very easily influenced by your environment. This is why displays are designed to get your attention. Ask yourself what the situational cues might be prompting you to buy based on how your environment is set up.
  3. Social norms – This one is especially influential given the explosion of social media. Marketing strategy plays into the idea of social engagement and how we all want to belong. It leads us to make decisions solely to feel like we fit in or are accepted.
  4. Mental fatigue – The pace we run at, the amount of stimulus thrust in front of us, it gets exhausting. The brain will take the path of least resistance and settle for things that are indulging and comforting. It is important not to make decisions when you feel depleted. Lazy decisions are short-term, comfort-based decisions that tend to be reactionary rather than intentional.
  5. Choice overload – At any point in your day, you probably have too many purchase decisions to make. Many times, a marketing strategy will try to take advantage of that by framing choices in smaller selections to get you to make a decision quickly. They point you to the ones they want you to think were your choice, but they set the mousetrap.

Duped by a Marketing Strategy

  1. Loss aversion – You are designed to try really hard not to lose. Your loss aversion is so strong that you pick whatever promises you that you won’t lose if you have x thing. Even if it’s not an actual loss, that loss aversion got triggered, so you’ll make decisions to stop doing things you enjoy because it was framed as a loss.
  2. Anchoring – That frame of reference that marketers will use to give us a sense of the value of something, and then encourage us to buy something that feels like it’s on sale because that first anchor they gave us set up our perspective. For this, the best thing to do is ask yourself what you’re willing to pay for something so your point of reference comes from you, not the marketing team.
  3. Buy now, pay later – That opportunity will always feel more compelling to you because you get to experience the benefit of whatever you think you need without having to experience the sacrifice of getting it. This is one of the most effective ways consumers get turned upside down. You get sucked into multiple cash flows and payments for things that have already lost value for you by the time you’re paying for it.
  4. Sunk-cost fallacy – While experiencing something, we feel like we need to see it through because we spent money on it. You tend to stay in the thing that you already experienced some level of cost for because you feel a sense of obligation. We have a hard time recognizing sunk costs. It’s hard to understand that this is money that is gone and can not be recovered, and that’s fine. You can still make a good decision about what you do from this point forward instead of putting so much weight on what it cost you to get this far.
  5. Self-justification – When you find reasons to make your decisions seem wise. You explain a purchase away because you don’t want others to see that you acted impulsively or you just wanted something. In marketing, they will tell you this makes all the sense in the world because they know that we do this, so make sure you always check in with the planner, that long-range thinker inside all of us. If the decisions you make line up with that, and it’s something you want and not something you were convinced to want, you don’t owe an explanation to anyone.
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