The Psychology Of Black Friday
The biggest spending time of the year is here. TV commercials, promotional emails, and Social Media ads overwhelm us with irresistible offers. Our brain is smart, but not always smart enough to resist immediate gratification. What exactly happens in our brain during sales? And why is Black Friday a perfect storm for spending?
A newsletter drops into your inbox saying, “24-hour flash sale!” You don't need a new shirt, but it's so cheap and only temporary, and before you know it, you've clicked the "buy" button. Your intention was not to buy, but somehow, you ended up doing it anyway.
Data from Intrum’s new European Consumer Report (ECPR, 2023) shows that due to high-interest rates and inflation, 70% of consumers will spend less on day-to-day expenses, and 65% will consume less during holidays during the next 12 months. The numbers are compelling, yet we know from behavioural science that people often don’t do what they say. Black Friday can make us spend more than we intended, and leave us with a financial hangover afterwards.
Intentions are not the same as actions. In every decision, we are affected by our thoughts, feelings, and what’s around us. All of these can influence us to make decisions that make us feel great in the present but that are less beneficial in the long run. Let’s go through some of them.
The dopamine rush
Sales have clear effects on our brains. When we get our hands on that last big flat-screen TV in the store, our dopamine (a pleasure hormone) levels go through the roof. The reward centre of the brain lights up and makes us feel amazing! This chemical response is commonly called "shopper's high” but wears off sooner than you think. New things are exciting at first, but we adapt to them fast.
Fear of missing out
Lucrative and time-limited deals can trigger a "fear of missing out" (FoMo), which can make us purchase things we otherwise wouldn't.[1] When we see a great deal, a part of the brain called the limbic system, also known as the “hot system”, is activated and triggers a “Go! response”. This system is responsible for our impulsive, unplanned behaviours and is driven by immediate rewards (like too-good-to-be-true deals).
The brain’s “cool system”, on the other hand, is strategic and reflective, but consequently slower in making decisions. During sales, the time-limited offers trigger a sense of urgency which makes us act under stress to get a bargain. To avoid overspending, we must step out of the “hot system” and get into the “cool system”. You can do this by asking yourself if you really need to buy it and give yourself a couple of hours to think about it before making the decision. Also, it is always good to remind yourself about your long-term financial goals in these situations.
Present bias
For some, Black Friday is a way to seek happiness at a time when we are feeling anxious or stressed from other things in life. This is referred to as present bias. It describes our tendency to choose a smaller payoff now instead of a larger potential payoff in the future. We all suffer from present bias from time to time. When seeing an attractive offer on Black Friday, we should remind ourselves that it’s often our brain just seeking immediate rewards and that we also want to have money in the future to shop for.
Our brain is very emotional. This is why it does not always follow our sound intentions and long-term plans, but instead, look for rewards that will make us feel good here and now.Elin Helander, Cognitive Scientist and founder, Whateverland
Keeping up with pals
Seeing ads everywhere with Black Friday deals, as well as hearing how your friends will consume, can make it feel like it’s normal. But our finances look different, some can afford to buy more, some less. Yet, for everyone, Black Friday should be a time to buy what we need when it’s on sale instead of buying what we don’t need just because it’s on sale.
Social comparison is a double-edged sword. It can serve as a strong motivator, but it can also make us vulnerable to overspending to maintain our status in a group.Elin Helander, Cognitive Scientist and founder at Whateverland
3 takeaways:
- Be aware of your emotions. Consider if you just buy things to relieve stress or to “reward yourself”.
- Cognitive biases like FoMo can cause us to buy stuff just because we don’t want to miss out on a good deal.
- The social effect is strong. Don’t buy things just because people around you do it.
[1] Swain, S.D., Hanna, R., Abendroth, L.J. (2006). How Time Restrictions Work: the Roles of Urgency, Anticipated Regret, and Deal Evaluations. Association for Consumer Research, 33, 523-525
