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NBC Grow: Watch out for 2 mental traps that can make you overspend on Amazon Prime Day, says consumer psychologist

July 16, 2021

Interviewed about 2020 Prime Day.

Relevant portions about price anchors:

‘Price anchoring’ makes you think you’re getting a good deal when you may not be

Amazon listings use several terms that don’t mean what they imply, says Simon Blanchard, a Beyer Family associate professor at the Georgetown University’s McDonough School of Business. Blanchard’s research focuses on consumer psychology and consumer decision-making.

For example, he says, Amazon lists products as “Amazon’s Choice,” but no one really knows what metric the company is using to highlight products and what that phrase means about the quality of the product.

Some of the language Amazon uses on its product listings can cause the cognitive bias known as price anchoring. Anchoring is when a person gives lots of weight to the first piece of information they receive. If a product listing says an item was $100 but is now discounted to $75, the “anchor” is $100.

Price anchors can encourage consumers to purchase products because they feel as if they are getting a good deal. However, on Amazon listings the “anchor” price doesn’t always reflect the market rate of a product, Blanchard says.

The two terms to be wary of are “list price” and “was priced.”

The list price is the price at which Amazon has sold a certain product in the last 90 days. “It’s not market price for the product,” Blanchard says. “It just means the product was sold at that price or higher in the last 90 days.” If a product says “was priced,” that refers to the median price consumers have paid for that product in the last 90 days. “It has nothing to do with the MSRP, or the manufacturer’s suggested retail price,” Blanchard says.

Some third-party vendors take advantage of these unclear terms by raising their prices a couple months before Prime Day, and then dropping prices on Prime Day when traffic to Amazon spikes. This creates the illusion that consumers are getting a good discount, Blanchard says.

“I remember buying an Instant Pot, and if you look at the price, it had been raised a little bit and then around Prime Day they dropped it,” he says. “They raised the price a couple months before. That’s going to increase your median price and average price.”


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