Dr Angel Zhong, Associate Professor of Finance, RMIT
Topics: sales, saving, money, marketing, consumer behaviour
“There are several behavioural biases exploited by business when it comes to sales season: fear of missing out (FOMO), scarcity bias, confirmation bias, anchoring bias and loss aversion bias.
"With the current rising cost of living, uncertainty in the economy and rapidly rising interest rates, consumers may be more likely to fall victim to certain behavioural biases.
“When prices for essential goods and services such as food, housing, and healthcare are increasing, consumers may feel more pressure to find ways to save money.
“This can make them more vulnerable to behaviours driven by FOMO, loss aversion bias and scarcity bias, which may cause them to feel like they need to take advantage of sales and discounts, even if they don't need the item.
“The economic uncertainty and anxiety that can arise during times of rising cost of living can also make consumers more susceptible to other biases, such as confirmation bias and anchoring bias.
“This may cause them to seek out information that confirms their decisions to make a purchase, while ignoring any evidence that suggests they should reconsider, or to be influenced by the original price of an item even if the actual price is still relatively high.
"It’s important to be aware of these biases and take steps to avoid overspending by:
- Setting a budget and sticking to it.
- Comparing the price of items across multiple retailers.
- Checking the original price of the item - some businesses jack up the prices before applying a huge discount.
- Paying attention to terms and conditions such as returns and refunds.
- Being cautious of BNPL products and plan for future repayments.
- Taking time to consider whether a purchase is truly necessary before making it."
Angel Zhong is a finance academic who specialises in empirical asset pricing, digital finance, global financial markets, investor behaviour and the recent trends in retail investing.
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