The Psychology of Christmas Shopping

‘Tis the season to be gifting, and retailers–many whose annual profitability depends on strong holiday sales–are not shy about reminding us of that fact, unleashing advertisements to tug at our heart strings and promotions guaranteeing us the “best” Christmas gifts at the “lowest” prices. Learn about the Psychology of shopping, the tricks that retailers and others take, and how to be more mindful.

Retailers, internet companies, marketers and others are working with our innate cognitive flaws, giving us permission to buy without thinking too deeply about why we’re buying. When you live on a budget, or have a limited income, it is even more important to be mindful of these tricks as well as human psychology. As you set out to do your Christmas shopping, be aware that deeper psychological processes are being triggered by the festive seasonal display.

It’s beginning to look, sound, and smell like Christmas
Atmospherics are everything, and Christmas is an excellent time to pull out all the stops. Christmas trees are draped with tinsel and beautiful ornaments, shops are decked in twinkling lights and garlands, and everywhere seems to be decorated in green and red, a color that’s been shown to galvanize our minds and bodies, encourage action and stimulate our spending. (1)

Stores play classics like “Have Yourself a Merry Little Christmas” in the hope of invoking feelings of nostalgia, happiness, and sharing, emotions which–not coincidentally– encourage consumption, which many low income families can’t afford to do. When this seasonal music is combined with a quintessential Christmas scent–something like gingerbread, pine, or apple spice cinnamon–we are more inclined to like the store and want to spend our money in it. (2)

All that noise, color, and movement isn’t just the shopping center getting into the festive spirit; it’s a tactic designed to make you less likely to think through your decisions completely. At any given moment, you’re handling more stimuli than you can consciously process. Your brain needs to make trade-offs, and they usually involve taking mental shortcuts.

A psychological trick to help prevent unnecessary spending is to try (force yourself!) to leave the store and taking a quick walk around the block. If you are shopping with a friend or partner, tell them beforehand to pull you away. Think about the upcoming rent payment that is due, or the fact you need to pay for essentials like food, utilities, medical and housing. Taking a quick break will give the rational part of your brain time to work. You probably don’t really need that motorized Shiatsu massager.

Touch it, buy it
Our sense of touch is an important part of the multi-sensory campaign to make us buy more. Research led by Joann Peck, from the Wisconsin School of Business, has shown that merely touching an object makes you more likely to buy it. This, her team of researchers deduced after putting a sign up over a display of peaches and nectarines in the fresh produce section of a supermarket inviting customers to “Feel the freshness.” They found that the sign encouraged customers to touch the fruit which, in turn, made them more likely to make an impulse purchase. This same concept applies to Christmas shopping for clothes, toys, or any material goods – if you touch it you are more likely to buy it. (3)

This is not the only way touch influences our buying behavior. Decades of research have shown that we have a tendency to overvalue the things that we own, simply because those things are ours, a finding commonly known as the endowment effect. Peck’s research has revealed that merely touching something can be enough to induce this feeling of psychological ownership.

Over several experiments, she and her team consistently found that subjects who were allowed to touch the objects they were evaluating felt more ownership of those objects and valued them more. (4) (The researchers tried the same trick with objects that were unpleasant to handle and found that the feelings of ownership disappeared. Apparently, touching an object only leads to feelings of ownership when that object is pleasant to handle.)

Companies are well aware that if they can make you feel like an owner, you’re more likely to overvalue something and pay more for it, especially during the Christmas shopping season. So they deliberately make it easy for you to touch and feel the products on display. Some offer a “free trial” of their products and others encourage in-store hoarding knowing that, as shoppers hang onto items for fear that someone else will pick them up, they start to form an attachment to them.

Websites can get in on the Christmas shopping psychology action too: Peck’s research has shown that imagery–“Imagine taking the product home with you. What would you do with it?”–can be nearly as effective in inducing psychological ownership as touch itself. This is part of what drives the one-click shopping experience made famous by Amazon, but now used by countless retailers.

In 2003, the Illinois state attorney general’s office warned holiday shoppers to be cautious of retailers who encourage them to hold objects and imagine the objects as theirs. It might have been one of the odder public service announcements, but buyers would do well to take heed.

Act now!
Evolutionary psychologists will tell you that the impulse to buy is, in part, a survival instinct. There is a free of missing out, that is also pushed by social media and online “influencers”. Back in our hunter and gatherer days, when someone saw something they wanted, they grabbed it, even if they didn’t need it, because they knew they probably wouldn’t come across that item again. This is a “scarcity effect”. Nowadays, when we see that a product is limited in availability (or we think it is around the Christmas season), it immediately becomes more attractive to us.

The most well-known study into the scarcity effect was led by Stephen Worchel in 1975. (5) He and two colleagues divided undergraduate students into two groups, giving each student in one group a jar of ten cookies and each student in the other group a jar with only two cookies in it. The cookies from the emptier jar were consistently rated better than the cookies from the fuller jar, even though they were identical.

In a subsequent experiment, some students were first given a jar of ten cookies, but before they could sample a cookie, the experimenters removed eight of them so that there were again only two. Once again, these cookies were rated more desirable than the cookies in the fuller jar. Crucially, when the students were told that they were losing the cookies because they were in high demand, the cookies were rated higher than when the students were told that a mistake had been made.

Scarcity works because of social proof. The fact is, we are (somewhat irrationally) very open to the opinions of other people–even if we’ve never met them before or even have proof that they actually exist. Just look at social media and all the pictures posted by friends, family, and influencers – most of which are curated to tell a false story of one’s life. Generally, when consumers see that a product is running out of stock, they interpret that to mean that the product must be really good, since everyone else appears to be buying it. But if they find out that the product is scarce because of accidental supply circumstances, they lose interest.

Retailers know this and they enthusiastically capitalize on our fear of missing out both year round and during the Christmas shopping season. The scarcity effect is really pushed by online stores and platform companies. Stores, whether physical or online, try to encourage us to grab a deal before it disappears by using two main tactics:
• Quantity-related scarcity: “Limited edition”; “While stocks last”; “In demand”; “Only X items left” or “Only one more at this price”
• Time-related scarcity: “Limited time only”; “Last chance to buy”; “Seasonal gift set”

Online shops accentuate the effect with a countdown clock. Or a counter showing how many items have sold or how many items are left. As the deadline approaches and as Christmas day gets closer, our perceived gains from the promotional offers turn into perceived losses as we see ourselves losing the opportunity to take advantage of the deal. Counteracting your natural urge to grab requires discipline. Try to remember that many of these deals will likely reappear throughout the year.

Big Christmas sale
Another strategy commonly used to get customers through the door is to have a sale, or to offer discounts on certain items that have been hyped up through TV advertising and targeted emails straight to your inbox or advertisements that “follow” you around the internet. These appeal to the reward system in our brains, which can be a powerful psychological pull when shopping at Christmas.

Whenever this system is activated–like when we see words like “sale” or “deal”–groups of neurons are triggered and the “feel-good” hormone dopamine is released. We feel great, at least for a little while. And that feeling is so strong that our brain tends to forget everything else in that moment; no need to compare prices or to overthink. We can forget about our holidays budgets, the fact the bills or rent is due, or other anxieties or financial challenges.

To compensate, we have regions in our brain that are supposed to rationalize whether our purchases are necessary or not. (6) But when we are confronted with Christmas discounts, this region is barely active. We just grab and buy.

We are also hardwired to feel our losses more than our gains. On average, about twice as much. This means that if we see an item on sale for the Christmas shopping season, we’re more likely to buy it simply because we don’t want to deal with the feeling of not buying it. The fear of missing out on a sale can often outweigh the logic that we’re spending unnecessarily in the first place, albeit at a discount.

However, another thing that triggers loss aversion is paying with cash. When you hand over physical banknotes, you actually feel the loss. When this loss reaches a certain level, you start to feel uneasy and you rein yourself in. If you’re worried about your spending, try using actual money. That Le Creuset Signature cast iron Dutch oven may have cost only $150, but paying for it with hard cash hurt, even if you got $100 off.

Price comparison shopping
The holiday season is a popular time for seasonal catalogs (physical or online) filled with the latest must-have toys, gadgets, and “Things You Cannot Live Without“. This gives retailers the opportunity to mix high-cost, luxury items with regular-priced products which makes the pricing on regular items look much more reasonable by comparison.

A good (granted extreme) example is the Neiman Marcus Christmas Book, which always highlights the Fantasy Gifts. For 2021, they include the Mughal Heart Diamond, a 30.86-carat heart-shaped gem which will set you back a $6.1 million, and a 3-day luxury ski trip for six to Caldera House, in Jackson Hole. The trip costs $235,000 but it also includes a day on the slopes with Olympian Lindsey Vonn. Now the $750 price for those Jimmy Choo glitter pumps seems a little more down to earth. It’ll seem even better when you see that they’re reduced from $900.

These retailers are taking advantage of something known in the business as anchoring. In one well-known study on the anchoring effect, researchers set up adjacent stands on a Californian beach boardwalk. On one stand they advertised a popular CD and, on the other, sweatshirts. Every 30 minutes, they switched the price of a sweatshirt on display between $10 or $80. When the sweatshirt was priced at $10, people were willing to pay $7.29 for the CD, but when the sweatshirt was listed at $80, people were willing to spend around 20 percent more. (7)

The effect is called anchoring because your spending decisions, whether at Christmas or some other time of the year, are being “anchored” by a random number that’s caught your attention. And now any price lower than that number makes you feel like you’re getting a bargain for that Christmas gift although, in reality, you probably aren’t.

Anchors can be anything. Because we have a hard time assigning values to objects, our brains tend to search for a reference point–any reference point. In one well-known study, behavioral psychologist Dan Ariely asked his postgraduate business students to write down the last two digits of their social security number before placing bids in an auction. For example, the auctioneer would hold up a box of chocolates, and the students would write down the two digits before placing their bid. The valuations of the students whose social security numbers were in the top 20 percent were typically greater than those with the lowest numbers by a factor of three: for example, they were willing to pay, on average, $56 for a cordless computer keyboard, compared with the subjects with numbers in the bottom 20 percent, who bid an average of $16. (7)

Unfortunately, anchors work subconsciously, which means that we all tend to fall for the anchoring effect. Hope comes in the form of recent research which has shown that sad people are more likely to use anchoring than people with happy or neutral moods. (9) So keep up the Christmas spirit!

Bottom Line

Human Psychology impacts all of us on a daily basis. The key is to be aware of it. Especially when it comes to shopping for that Christmas gift – be mindful so you do not spend more than you can afford to.

REFERENCES
(1) Bagchi, R., & Cheema, A. (2013). The effect of red background color on willingness-to-pay: The moderating role of selling mechanism. Journal of Consumer Research, 39(5), 947-960.
(2) Spangenberg, E. R., Grohmann, B., & Sprott, D. E. (2005). It’s beginning to smell (and sound) a lot like Christmas: The interactive effects of ambient scent and music in a retail setting. Journal of Business Research, 58(11), 1583-1589.
(3) Peck, J., & Childers, T. L. (2006). If I touch it I have to have it: Individual and environmental influences on impulse purchasing. Journal of Business Research, 59(6), 765-769.
(4) Peck, J., & Shu, S.B. (2009). The effect of mere touch on perceived ownership. Journal of Consumer Research. 36(3), 434-447.
(5) Worchel, S., Lee, J., & Adewole, A. (1975). Effects of supply and demand on ratings of object value. Journal of Personality and Social Psychology, 32(5), 906-914.
(6) Knutson, B., Rick, S., Wimmer, G. E., Prelec, D., & Loewenstein, G. (2007). Neural predictors of purchases. Neuron, 53(1), 147-156.
(7) Nunes, J. C., & Boatwright, P. (2004). Incidental Prices and Their Effect on Willingness to Pay. Journal of Marketing Research, 41(4), 457-466.
(8) Ariely, D., Loewenstein, G., & Prelec, D. (2003). “Coherent arbitrariness”: Stable demand curves without stable preferences. The Quarterly journal of economics, 118(1), 73-106.
(9) Englich, B., & Soder, K. (2009). Moody experts–How mood and expertise influence judgmental anchoring. Judgment and Decision Making, 4(1), 41-50.