Got To Be Good Looking 'Cos He's So Hard to See

Here is another entry from the "save money by not bargain hunting" file. Have you ever decided to feed your bargainista desire by getting together with a bunch of friends and piling in the car for the long drive to the outlet mall? It turns out they put those discount centers in the middle of nowhere for a sound psychological reason. The harder something is to attain, the more we value it. You could grab something out of the bargain bin at the store on the corner, but that is too easy, which makes it easy to avoid. When you go to all the trouble of driving to find bargains, you're much more likely to come back with something.

I learned about this through the blog Sociological Images, which has an article on the psychology of outlet malls:

...as Ellen Ruppel Shell explains in Cheap: The High Cost of Discount Culture. It turns out that being difficult to get to is, in fact, part of the appeal of outlet malls. The fact that they often require a drive of an hour or more signals to consumers that they must have really good deals. That’s the payoff for inconvenience — it’s harder and more time-consuming than going to your local mall, but in return you’re getting a great bargain...

According to Shell, though, that’s pretty typical of outlet malls: they often don’t really provide great bargains. But they provide the illusion of bargains, and a motivation for thinking you’re finding them...

It turns out that the more trouble people go through to get to an outlet, the more they overestimate the amount of savings compared to prices at regular stores. The very fact that it was hard to get to convinces people that it must provide something fantastic; if you aren’t saving a lot of money by going there, why on earth would it be so far out of the way? And the more remote it is, the cheaper the products must be!...

If you’ve driven an hour or more one-way to get great deals at the outlet mall, you are primed to believe you’re getting bargains because otherwise you just wasted a lot of time, effort, and gas for nothing. Once you get there, you’re psychologically motivated to believe your effort was worth it, and you do that by buying stuff and thinking the price is a steal...

We overestimate what the original value of the item must have been and focus on the difference between that hypothetical price and the outlet price, rather than on the objective price itself. And consumers tend to discount the cost of getting to the outlet, not including the cost of gas and their time into the price of the items they buy.

Marketers know us better than we know ourselves.

Handy Money-Saving Tip: Stop Bargain Hunting

"A bargain is something you can't use at a price you can't resist."-Franklin P. Jones*

In the past year or so magazines, newspapers and television programs have been full of features about how you can save money “in these difficult economic times.” (My retirement plan is to copyright the phrase “in these difficult economic times” and collect a royalty anytime a news announcer says it.)

Invariably these features tell you where to shop for the best prices. Rarely do they advise you not to shop. Not shopping, it turns out, is the only thing that is 100% guaranteed to save you money.

So if you want to really save money, here is my advice: stop bargain hunting. Don’t scour the coupon inserts, don’t “friend” your favorite brand to get a special discount feed, don’t rush to the store on double coupon day. All of these activities are simply giving you new ideas of things you could buy by exposing you to constant marketing messages and shiny new products. That’s what they’re designed to do.

You, of course, are too smart to be fooled and will only buy things you’d be buying anyway, right? Just like you never carry a balance on your credit card. Good for you!

But just on the off chance that you are not smarter than the rest of us, you’re probably better off keeping your hunter gatherer instincts in check by not exposing yourself to the hum of a constant shopping mantra. Let’s face it, the credit card companies would not be in business if we all did what we intended to do with their cards when we got them.

A number of studies have shown that we are prone to idealize the future. We are time, energy and money optimists. For some reason we all think we’ll be richer and less busy tomorrow than we are today.

We picture our work and the income from it as if nothing else will come up in our lives. We forget we’ll still have to fix the car, that there will be weddings and funerals and holidays (somehow those manage to surprise us every year, don’t they?) and your spouse or partner will still want attention. All that carefully budgeted time and money goes out the window when confronted with the shocking reality of every day life.

Since I wrote Broke is Beautiful, personal finance reporters have started to ask me for my money-saving tips. "How do you avoid impulse spending?" My flip answer is, “You max out your credit cards.” It’s a sure way to curb impulse spending. Although I say it with my tongue firmly in cheek, it is not entirely a joke.

When you have no access to funds, you simply cannot shop. After a while, you stop listening to commercial messages. They are for someone else-- those strange beings out there with money. It's a similar feeling to turning the radio dial and landing on a Spanish language radio station. “I can hear it, but it's not for me.”

The real trick is to get to this point before you max out your cards. Tell yourself “I don’t need new consumer goods right now, thank you very much. I have a thing right here in my house I can use.” (As all the news features about “decluttering” your home would suggest, most of us have more useable stuff than we know what to do with, yet we go shopping anyway.)

Stop categorizing yourself as a “consumer.” Imagine that there is a nation out there called Consumerica. The residents of this land are called “Consumers” and they communicate through commercials and branding messages. You don’t speak that language. Saving the entire price on an item is a bigger bargain than 50c off any day.



*Thank you to "Ultimate Cheapskate" Jeff Yeager for sharing this quote on Twitter (@JeffYeager)