The Situationist

Why You Bought That

Posted by The Situationist Staff on September 6, 2007


Christina Binkley had an terrific article last month in the Wall Street Journal on “How Luxury Brands Alter Shoppers’ Price Perceptions.” We have excerpted portions of the article below.

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What is too much to spend on a suit?

The question weighed on Barry Schwartz as he scanned the racks at Boyds men’s store in Philadelphia, which were laden with $3,000 Brioni suits. “Their prices were just out of the world,” recalls Mr. Schwartz, a professor of psychology at Swarthmore College.

We’ve all been there: A window display or a recommendation lures us into a store — and we face unexpectedly astronomical price tags. It seems to happen more often these days as many luxury brands — selling everything from $14,000 Ralph Lauren handbags to $899 Bugaboo baby strollers and $6,900 Beefeater barbecue grills — push their top price points higher than they’ve ever gone before. What’s priced below falls into that ever-expanding category: “affordable luxury.”

Some people cut and run when confronted with prices that seem crazy. But many of us experience a sudden emotional-mathematical transformation. We set a new ceiling for a “reasonable” price. Disinclined to go all the way to buy the trophy, we instead settle for a consolation prize. Mr. Schwartz, a jeans-wearing type, walked out of Boyds with a suit that cost merely $800 — the most he’d ever spent on an item of clothing.

“If you’re in that world long enough, $800 stops even feeling like a lot of money,” Mr. Schwartz says.

This concept is one of the reasons for the proliferation of $300 designer sunglasses these days. The fact that Ralph Lauren is charging $14,000 or so for an alligator “Ricky” handbag makes it easier for a consumer to justify in her mind paying $300 for a rather simple sweater. Many Chanel sunglass owners are actually would-be owners of Chanel suits. Something similar has happened to many owners of Tiffany keychains, Prada legwarmers, Coach wallets, and Frette tea towels.

When shoppers are confronted with prices they can’t afford, a smart retailer will “move you right along to where you can salvage your pride,” says Dan Hill, president of Sensory Logic, a Minneapolis consulting company that helps companies explore their sensory and emotional connections with customers.


Pride, Mr. Hill points out, “is a mixture of anger and happiness.” That pretty much describes the whole shopping experience at those moments when we’re outpriced (anger), then soothe ourselves with a smaller splurge (happiness).

* * *Given that accessories like sunglasses, fragrances, and logoed belts drive the sales of companies like Gucci and Louis Vuitton, such consolation prizes account for a very sizable chunk of the luxury business these days.

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As for Prof. Schwartz, with his $800 suit, “I got sucked in. And I knew what was happening,” he says. . . .

Mr. Schwartz calls the top-priced goods “anchors.” Anchors, he says, set the ceilings on prices of objects that don’t have a clear value.

That is just about everything in luxury goods and fashion. In fact, that’s one reason why some in the luxury fashion industry are irritated with retailers like Target and Zara: They’re seen as setting the ceilings too low.

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To read this article in its entirety, click here. For a previous Situationist post discussing the effect of “irrelevant third options” on people’s political choices, go to Irrelevant Third Options in Presidential Campaigns.” For an earlier post discussing aspects of Barry Schwartz’s research, go to “Just Choose It!

2 Responses to “Why You Bought That”

  1. I did this a couple of months ago when buying a new suit. Most were roughly $600, but I found one at $250. But wait! There was a deal where if I got 2 it would only be $250 for the second one.

    I left spending over $1,100.

    This all points to our tendency to reference when making decisions. It doesn’t just occur in shopping, but in picking relationships, friends and activities as well.

  2. […] other problems, in addition to a heightened chance for regret, posed by to much choice, read “Why You Bought That,” “Just Choose It,” and “Can’t Get No Satisfaction” (Part […]

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