How to pay less for gifts

PORTLAND, Ore. - Richard Birke, a Law and Negotiation Professor at Willamette University, joined KATU's "AM Northwest" show Nov. 25 to pass along negotiation tips that could help anyone save money on gifts this holiday season.

Here are Richard's tips:

Holiday gift shopping can be challenging.  We feel the need to get exactly the right things for everyone, while still watching our budget and not taking too much time.  And yet, every year, we spend too much, take too long and we still manage to buy some gifts that are not quite as well-liked as we had hoped.

In an effort to help people think about how to do better, here are seven hints that come from negotiation psychology – each of which can make you a better shopper.


1.  PLAY DEFENSE AGAINST YOUR OWN EXPECTATIONS

People what to believe that they are buying gifts for other people, when they are really buying gifts for themselves.  Once you accept that you are buying a gift to satisfy a need of yours – to show someone how much you love them, to not look cheap at the office gift swap, to help someone along in a hobby, to encourage someone to read more, or the like – you realize how many different ways there are to satisfy your need than paying top dollar for a “must-have” item.

The exception to this is when you know exactly what someone wants and it’s important to you to get them the exact right thing.  In that instance, the only problem comes if that thing is sold out or unavailable.  In which case, you may want to give them a physical raincheck – a picture of the item or something like that – so they know that you got their desires exactly right.  There’s nothing worse than wanting a particular golf club or blender and getting something useful but not the one you wanted.  I’d rather be told “it was sold out but your gift is the first one that comes in stock” than to get one that is …sigh…fine.  (But not perfect.)


2.  THINK ABOUT GIVING MONEY OR A GIFT CARD

Two Reasons why gift cards make good gifts:

  1. You are a victim of projection – you think “they’ll like the thing I buy to the same degree I like it” and they rarely do.  A gift card means that you don’t have to have hurt feelings when you give them a sweater you love and they only sort of like it.
  2. You gift them choice & control – the ability to choose is separately valued.  No one likes having their choices limited, so conversely, a gift card that brings dreams of what to do with it adds some fantasy to the cash value.

Three reasons why they aren't so great:

  1. Lots of people don’t use them, or don’t use all of them.  Stores like this – they sell a $50 card and don’t have to provide $50 worth of merchandise. 
  2. The ones that use all of them end up buying something that costs a lot more than the value of the card.
  3. It’s not very personal.
     

3.   VALUE ABSOLUTE DISCOUNTS MORE THAN PERCENTAGES

Most people value absolute discounts less than percentage discounts – we’ll drive across town to save $10 on a $50 pair of jeans, but we won’t drive across town to save $50 on a car.  In the first deal, you may spend more on gas than the discount, but it seems wasteful not to save 20%.  In the second example, the $50 doesn’t seem to matter much when spending thousands on a car.
 

4.   PAY MORE ATTENTION TO THE FEATURES YOU NEED THAN TO THE COMPARITIVE ADVANTAGES OF OTHER PRODUCTS

While it’s useful to look at a few different products at your price level when deciding which one to buy, retailers are very good at making a medium-to-high priced product appear cheaper by comparing it to a very high priced product. 

If a store sold $100 cameras and $500 cameras and half of the customers bought the lower priced camera and half bought the higher priced one, the store could bring in a $3000 camera, and while few people would buy it, a lot of the people who would have bought $100 cameras will now buy the $500 camera – it seems so much more reasonably priced when there’s a $3000 camera next to it.


5.   IF YOU WANT TO BARGAIN OVER PRICES FOR HOLIDAY GIFTS, YOU HAVE TO BE TALKING TO THE RIGHT PERSON, IN THE RIGHT PLACE, AT THE RIGHT TIME 

Here are examples: 

  • Right person – owner or long term employee;
  • Right place – boutique or small shop;
  • Right time – either right at the start of shopping (when the owner is nervous about making money and she values the first dollars a lot) or toward the end (when it costs more to keep the item than to sell it a discount). 
  • Wrong person – temporary clerk/seasonal hire;
  • Wrong place – at a huge chain where they couldn’t override the barcode even if they wanted to;
  • Wrong time – when lots of other customers are around waiting for the clerk’s attention.
     

 6.    RESIST SCARCITY BIAS

We are all more attracted to things that seem hard to get.  Limited time offers – limited editions – limited anything makes us want something more.  Don’t be fooled and don’t be rushed.
 

7.    QUESTION THE ILLUSION OF SOCIAL PROOF

If it looks like everyone is buying a particular thing – a video game, a book or other media – we think “it must be good.”  So advertisers will do anything to make a product seem like it’s No. 1. Go deeper. Is the No. 1 rating by an objective rater, with the same interests as you, or is it by a “hired gun” who has an incentive to get you to buy  something you may not want?

There’s lots more, but these seven ought to help you have a better buying season.  Happy negotiating!

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