Friday, April 4, 2008

Our Fascination with "Free"

I came across an interesting article today written by Paul J. Lim for Yahoo Finance. The article, called “Why you’re a big sucker,” captures a growing problem in society: Spending more when we planned to spend less.

The question, then, is why do we spend more than we want to? Dan Ariely, a noted behavioral economist says he’s found the answer: Our fascination with “free” offers. Marketing 101 at its finest—appealing to or tricking the senses in order for people to spend more money. Dan Ariely helps to explain part of the problem in the following excerpt:

“Question: How else do we act against our best interests?

A. By comparing prices on similar items.

Question: Wait, I thought that was smart to do?

A. It is, but only if you compare everything with everything. If you just compare items near one another, you open yourself up to being influenced. When you open a menu at a restaurant, you may not realize that the prices you see affect what you're willing to pay. If the most expensive entrée is $45, you might decide $30 is an acceptable price. Should the restaurant add a $60 dish, you may be willing to pay $45. The same issue comes up when shopping for real estate. Letting a broker show you a house above the top of your range can be costly.

Question: So how do we overcome irrationality?

A. There's no cure-all. But when I see the word free, I now ask myself, "What's the seller trying to do here?" Also, it sounds strange, but try not to look at price, not at first. Decide what you want and what you're willing to pay without being influenced by outside factors.”

I’ve noticed major department stores doing this more and more. Raising the sticker price well above what someone may be willing to pay, but advertising the entire store at 50%-75% off. This marketing act tricks the senses into believing we are getting a great deal—but are we?

Although it may be a stretch to suggest completely ignoring the sticker price, knowing what you’re willing to pay and setting your limits will surely save you money in the long run...


Author said...

Hello Brian. I don't know if you have come across this in-depth special from business week, but it would be well worth your time. Here is the link:


Brian Reese said...

Great article...thanks again for the info!

I'll be sure to keep reading your blog--you seem very motivated to do well on the GMAT.

Take care!


Skyler Reep said...

This is true. Marketing is everywhere. The only way NOT to be a victim is to be aware. A friend of mine asked why I was advertising my apartment for $799 instead of $800. "It just makes people feel like you're tricking them," she said. Maybe so, but it's a tried and true marketing method, and it's everywhere. Heck! I'll even throw in FREE running water! Interested?

Brian Reese said...


The oldest trick in the book! The funny thing is that a lot of people (including me at times) will actually round $19.99 (or $799) down to the next whole number to really make a case.

"It was only $19 bucks!!!!) What!!!!

Clark Captions said...

Dear Brian,
First, thanks so much for sharing your "undy" story....sooo funny! Here is my spill regarding "free" and "spending money." Keeping in mind that as a mother trying to stick to a budget, you become pretty careful at what and how you spend your $$$. Since our second largest expenditure in the month is on groceries, I have found that it is best NOT to shop at the wholesale places like Costco or Sam's club. It may look like you are getting a good deal because you are buying in bulk, but in reality, if you do the math, you aren't saving that much. Plus, you always end of spending more because of the marketing and teasers that you find everywhere in the store. My advice, find the grocery store that will match ads, like Wal-mart. Stick to one store, and find every ad that has been placed by your other local stores, and then have Wal-mart do a price-match on each item that you can find from the other ads, that are on your list. (and, keep to the list!) (I hope that makes sense)

As far as department stores can buy name brand clothing from any department store, if you are not too concerned about wearing the latest fashion. Here is what you the seasonal clearance aisles....a lot of times I will go to Old Navy, JC Penney, or the Children's Place at the end of the season, and buy a size bigger for my kids. If you plan well, you can actually get a boat load of product, for a very small price.
($2.99 for shirts, skirts, and sweat pants, and jeans.) You just have to wait until next season to wear it! But, if you plan well, you are always one step ahead of having something great and new to wear. (it just might be last years fashion.) As far as my philosophy on "free".....I really don't think anything is free, so don't get too caught up in that mind game. I hope this helps!


Brian Reese said...


Great comment. I definitely frequent the clearance racks! Hope all is well!


Coach Factory said...

celine handbags, reebok outlet, north face jackets, yoga pants, juicy couture outlet, marc jacobs, ghd, converse shoes, vans, hollister, soccer shoes, montre pas cher, wedding dresses, nike air max, valentino shoes, north face outlet, hermes, chi flat iron, louis vuitton, nike free, michael kors, timberland, p90x, soccer jerseys, beats by dre, louis vuitton, nfl jerseys, birkin bag, abercrombie and fitch, new balance shoes, mont blanc, oakley pas cher, ray ban pas cher, bottega veneta, supra shoes, lululemon, hollister, air max, insanity, ferragamo shoes, asics, lancel, mcm handbags, karen millen, herve leger, ralph lauren, mulberry, rolex watches, hogan, burberry

Coach Factory said...

canada goose, ugg boots, oakley sunglasses outlet, moncler, oakley outlet, cheap sunglasses, oakley sunglasses cheap, jimmy choo, cheap sunglasses, oakley vault, cheap sunglasses, oakley sunglasses outlet, ugg, canada goose, cheap oakley sunglasses, oakley sunglasses cheap, ugg boots, oakley vault, ray-ban, canada goose outlet, ugg boots, ray bans, ray ban sunglasses outlet, cheap oakley sunglasses, canada goose, oakley outlet, gucci, tn pas cher, moncler, oakley, louboutin, ray ban, moncler, canada goose, moncler outlet, discount oakley sunglasses, oakley outlet, cheap oakley, ray ban outlet, ray ban, oakley vault, canada goose outlet, cheap oakley sunglasses, oakley sunglasses cheap, raybans, ray ban outlet, oakley sunglasses outlet, ralph lauren, rayban

Coach Factory said...

prada handbags, kate spade outlet, prada outlet, ray ban sunglasses, ray ban, ralph lauren, jordan shoes, coach purses, louis vuitton handbags, louboutin, michael kors handbags clearance, michael kors outlet online, true religion, nike free, longchamp outlet, michael kors, polo ralph lauren outlet, tory burch outlet, oakley sunglasses, coach factory, oakley sunglasses, oakley sunglasses, nike shoes, gucci outlet, michael kors outlet, air jordan, air max, louboutin, ray ban sunglasses, louis vuitton outlet online, chanel handbags, louis vuitton, burberry outlet online, michael kors, nike free, cheap michael kors, air max, coach outlet store, longchamp, coach outlet, nike air max, polo ralph lauren outlet, true religion jeans, nike air max, tiffany and co, nike roshe run, toms shoes, true religion outlet, michael kors outlet online

maoqiuyun said...

tod's sale
mlb jerseys
louis vuitton outlet stores
polo ralph lauren
jordan shoes
replica watches
asics gel kayano
ray-ban sunglasses
ray ban
adidas outlet
louis vuitton outlet
asics shoes
burberry handbags
ralph lauren
lacoste polo shirts
tods outlet
air jordan 4
hollister pas cher
nba jerseys wholesale
michael kors uk
cheap nba jerseys
coach outlet
michael kors outlet
coach outlet store
louis vuitton outlet uk
hollister clothing
kate spade
abercrombie outlet
air jordan concord
oakley outlet
coach factory outlet
salomon shoes
air max 95
pandora charms
michael kors outlet
kate spade handbags
chanel handbags
iphone 6 cases
links of london
ray ban sunglasses
celine outlet online

Jianxiang Huang said...

jeremy maclin jersey,jamaal charles jersey,joe montana jersey,justin houston jersey,dontari poe jersey,eric berry jersey
mulberry sale
mbt sneakers
stuart weitzman sale
nike roshe,nike roshe run uk,nike roshe uk,roshe run,nike roshe run,roshe run women,rushe run men
soccer jerseys,cheap soccer jerseys,cheap soccer jerseys for sale,soccer jersey,usa soccer jersey,football jerseys
oakley sunglasses outlet
nike air max,air max uk,air max 90,nike air max 90,air max shoes
mont blanc pens
tory burch outlet online
air jordan 13
chanel outlet,chanel handbags,chanel bags,chanel outlet,chanel 2.55
manchester united soccer jersey
blackhawks jersey
miami heat jersey
hermes outlet online
nba jerseys wholesale
oakley sunglasses
north face outlet
nike trainers,nike trainers uk,cheap nike trainers,nike shoes uk,cheap nike shoes uk
jordan 13
stuart weitzman boots
dansko shoes
toms shoes
chicago bulls jersey
bears jerseys
real madrid football shirts
seattle seahawks jerseys
san francisco 49ers jerseys
kate spade handbags
moncler coats
lebron james shoes,lebron 12,lebron 12 shoes,lebron sneakers,lebron iv,lebron 11,lebron 10
the north face outlet
cheap oakley sunglasses
eagles jerseys

Xianjun Ranqin said...

qihang0924,cheap jerseys
hermes uk
ralph lauren polos shirts
uggs on sale
canada goose uk
adidas superstar
nike roshe run
cheap uggs
nike elite socks
timberland uk
jordan pas cher
swarov ski jewelry
kate spade uk
longchamp outlet
toms wedges
p90x workouts
nike huarache
louis vuitton
air max
mcm outlet
uggs boots on sale
ghd hair straighteners
pandora charms
ralph lauren outlet
ed hardy uk
insanity workout
sac longchamp pliage
ed hardy clothing
nike blazer
cheap oakley sunglasses
football shoes
fake oakley sunglasses
cheap versace
coach outlet canada
nike trainers
christian louboutin shoes
polo outlet

mmjiaxin said...

pandora outlet,
timberland shoes,
mac cosmetics,
abercrombie and fitch,
dansko shoes,
mlb jerseys,
adidas outlet,
vans sneakers,
nobis jacket,
kobe bryants shoes,
ed hardy outlet,
los angeles lakers,
giuseppe zanotti,
ray ban uk,
mizuno shoes,
winter coats,
ugg outlet store,
golden state warriors jerseys,
links of london jewellery,
coach outlet store,

Octaviaa Simonyw said...

Oakley Sunglasses
Oakley Vault
Louis Vuitton Handbags
Uggs Outlet
Cheap Jordans
Michael Kors Outlet Online Sale
Wholesale Cheap Jerseys China
fitflop shoes
Michael Kors Purses
cheap oakleys
fitflop sandals
michael kors outlet
ray ban sunglasses
Michael Kors Bags
Michael Kors Purse
Michael Kors Handbags
Cheap Coach Outlet
Cheap Jerseys Online
Ugg Boots Clearance
Coach Outlet Factory
Cheap Jordans For Sale
Ugg Boots
Cheap Jordans
oakley Stores
Cheap Uggs
Michael Kors Outlet
Oakley Store
michael kors outlet
toms outlet
cheap ray ban sunglasses

Minko Chen said...

christian louboutin,louboutin,louboutin outlet,louboutin outlet italia,scarpe louboutin
air max 2014
michael kors outlet online
ugg clearance
ugg boots sale
air max shoes
ray-ban sunglasses
true religion outlet
michael kors uk
coach outlet
new york giants
calvin klein outlet
nike roshe
air max 90
canada goose outelt
kansas city chiefs
tods outlet
michael kors wallet sale
louis vuitton handbags outlet