Stories | March 5, 2013

How the halo effect can make us spend more

If in a discount store, there can be a tendency to buy more and stock up on the assumption prices are lower than elsewhere.

At a local farmers' market, we can be lured by the promise of cheaper prices and fresher produce only to later realise that some items would have actually been cheaper at the supermarket. This is partly because context is king when we shop.  This can mean that sometimes we fall into the trap of overspending simply because we have let our guard down. But there are ways to get back the control.

The trap of letting our guard down
As far back as 1981, academics at Princeton University in the United States were asking why stores have sales. One conclusion was that marking down prices made it look as if an item was cheap – but that shopping around would show whether that was true or if a better deal could be found elsewhere. Our tendency to let our guard down happens in many parts of life and was beautifully illustrated in a study published in the Journal of Consumer Research in 2007 that looked at what people planned to eat in fast-food restaurants.

The researchers were interested in whether the health claims made by restaurants had an impact on how consumers estimated their caloric intake. They found people dining in restaurants that claimed to be healthy tended to underestimate the calories in their meal compared with people dining in restaurants that made no such health claims. Further, because people underestimated the calories in their meal, they tended to overindulge in higher-calorie side dishes and drinks. It appears we fall prey to what’s known as a “health halo”; we are primed to assume that whatever we consume in a ”healthy” restaurant or from a ”healthy” brand is in fact, healthy.

Why we fall for the halo effect
This health halo is a subset of the broader ”halo effect”, in which we tend to rely on one positive attribute about a person or brand to guide our overall expectations. This thinking trap fast tracks decision making and reduces the amount of thinking effort we have to expend. Another element at play when we let our guard down is known as ”priming”. Companies work very hard to establish – or prime – our expectations of their brand because it can influence our behaviour.

When a restaurant makes ‘healthy’ claims they are priming us to assume that the food is actually healthy. Because the context has been established for us, we might lower our guard and make decisions that we perhaps may not have otherwise.

How to protect yourself from overspending
The same halo effects and priming can also impact choices around how to save and spend. When you are in a discount retailer and because your guard is down, you may be less inclined to check the prices and see if they actually are cheaper than elsewhere. Likewise, at the farmer’s market your assumptions about wholesale, direct-from-the-farm prices may mean you accept that as fact without double checking with the grocery store down the road. If you value farm freshness that can be ok but if you’re watching your budget it might come as a shock if you end up spending more than you need to.

If context is king in shopping, think about that and regain the decision making power. For instance, the restaurant study found that being asked to consider whether the opposite of the healthy claims by the restaurant were true was enough to eliminate the health halo. That means that next time you are shopping in a discount retailer, ask yourself if they may actually be overpriced. This will reengage your mind and interrupt your fast-track assumptions, making you a more effective and savvy shopper.