How People Make Money-related Decisions?
“Human beings need variety but too much of variety often leads to inability in money-related decisions. ”
All of us buy. In fact, the truth is that in this complex world we cannot survive without buying. Right from the poorest man to a tycoon, everybody indulges in buying.
Gone are the days when people used to grow grains for themselves, had personal livestock and needed nothing else for survival. Let’s ponder over a bit as regards our inclination towards buying and the factors behind it.
A new filed of study known as Behavioral Economics tries to find out reasons as to why people buy the way they do so. According to this science human beings need variety but too much of variety often leads to inability in money-related decisions.
To take an example if you are told to but a soup from 5 varieties, you would readily do so. But if the varieties are increased to 15 or 20 or even more than that, you would refrain from buying the soup.
You may be surprised at this finding but it is a fact. So, there is a lesson for companies who launch too many options of the same product into the market. Such a tactic often has a negative impact on the sales of a company.
Similarly, the thing that you obtain after spending money has much importance for you than the same thing that you get for free. So we tend to buy a thing for the feeling of ownership associated with it.
Companies that lend out initial products as free samples got to think seriously about it. Often their product is not given due importance because it is available for free. So, never give anything for free, rather reduce its price considerably so that people have to spend at least a small amount of money out of their pockets.
Our conviction and trust also play a major part in our money-spending decisions. A company that is trusted far and wide has no serious problems in launching a new product. Even if their product is priced higher than others of the same nature, people buy it happily.
It’s because their faith on the company persuades them to shell out more money. A new customer on the other hand may altogether shun his idea of buying a costly product even if he is in need of it. He would prefer to alter his need than opt for a company that is not in his trust list.
Author - DeeKay
Tags - Finance, Economy
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