Amazon Is Tricking Us. And We're All Falling For It.

Amazon’s tricking us.

And we’re all falling for it.

Early numbers indicate that sales for Amazon Prime Day 2023 were the highest of all time. U.S. shoppers spent an estimated $12.7 billion over the annual two-day event.

Armed with a laptop, pajamas and caffeinated beverage, millions of shoppers frantically navigate the virtual aisles of Amazon in search of the best deals as soon as the clock strikes midnight.

But wait, hold on a second. There’s a catch.

Allow me to let you in on a little secret.

A discounted price doesn’t always mean you’re getting a good deal.

Wait, what?

Yes, sadly this is often the case.

Retailers frequently use a technique called price anchoring to nudge consumers to buy a certain product.

Here’s how it works.

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Consider this: it’s Prime Day and you’re on Amazon checking out all the great deals. You see a blender originally priced at $200 marked down to $100. You get excited – because well, you’re 30 and those types of things excite you now and I mean c’mon, this has to be the steal of the century!

$100 off? You need this blender now!

But, bear with me here. What if the real value of the blender is only $80 and the price has been temporarily inflated to trick your mind?

Often times, this is what’s really happening.

As it turns out, when you buy something that’s discounted, you’re often just buying it at the normal price.

You see, the price anchoring technique works like this: retailers set the price for an item high (which the customer “anchors” to) and then they lower the price to make it seem like you’re getting a great deal.

Sure enough, Prime Day serves as a great time to lower the price.

Here, your mind saw the $200 original price and used it as an “anchor” to determine what the price should be. So when you saw the price marked down to $100, all you could think about was how good of a deal it was.

It’s quite possible that same blender was selling for $100 (or less) six days, six weeks and/or six months ago before the brief price bump.

In general, shoppers don’t know whether a price is good or not. To decide, the human mind tends to do what’s easiest – it looks at the decision in a relative way and compares it to what’s available.

In other words, we often don’t know what we want unless we see it in context.

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Steve Jobs famously used anchoring when introducing the iPad.

Before revealing the price, Jobs teased on the screen behind him that the iPad was easily worth $999. He then paused and revealed the actual price:

$499!

The crowd went wild.

Why? Compared to the initial price of $999, a $499 iPad seemed like an absolute steal!

Again, people generally don’t know if a price is a good one. To decide, they compare.

Jobs teased the $999 price to set an expectation (“anchor” point) for what an iPad should cost. All of a sudden, $499 seemed much more affordable.

Here’s another one for you. Get this – restaurants find that high-priced menu items boost revenue for the restaurant…even if no one buys them.

Why? Because even though people generally won’t buy the most expensive dish, they’re likely to buy the second most expensive option.

After glancing at the $48 steak option, the $39 chicken doesn’t seem like all that bad of a deal.

I mean, it’s no coincidence that Costco places its most expensive items at the front of the store. Walking past the $2,000 TVs subtly tricks your mind into thinking that anything less than that is a bargain.

Suddenly, that 6-pack of marinara sauce (that is going to take you months to go through) looks like a steal.

A product is never "cheap" or "expensive".

It’s all relative.

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Of course, retailers don’t use price anchoring to nudge you to buy every single product.

But it’s likely much more common than you initially thought.

Start to take notice and wonder – am I really getting a good deal? Or am I getting tricked?

Better yet, ask yourself “do I really need this?”

And if you fall victim to the trap, don’t blame Amazon or anyone else.

Blame your mind.

*Kevin’s tip: use price-tracking websites to confirm whether or not you’re actually getting a good deal