I was pouring my cereal the other day when I noticed this interesting little promotion – “FREE TIP N’ SIP BOWL!” it announced proudly. “5 TO CHOOSE FROM!” …Ifyoubuythreepacketsandareover16andclaimitbyacertaindatebutno-onereadsthisanywayrighthahaha.
Basically what is being offered is a free, cheap plastic bowl, but only if you buy three packets with special codes inside. Suddenly not so free any more is it?
While there are a few persuasive techniques going on here, for the purpose of this blog we will look at the sunk-costs fallacy.
A sunk cost involves any prior investment of “money, effort or time” (Arkes and Blumer, 1985). Most people don’t want to waste or “lose” things that they have already invested in, and this can often lead to an escalation of commitment.
Arkes and Blumer (1985) conducted a series of experiments to demonstrate the effectiveness of the sunk-cost fallacy. Participants were faced with a set of scenarios, which were different for each experiment. These included such things as being asked whether they would spend their remaining funds on a project they had already invested 90% of their funding on despite a better option being available (experiments 3, 4, 5, 8), or being asked to choose between two items of varying value.
In all of the experiments, participants were more likely to invest in things that either a) they had already spent a lot of money on b) was worth the most money, even if two items were identical in everything except price, or they thought they would enjoy the other item more.
Perhaps the most relevant of their experiments to the cereal example would be experiment 3, in which participants were told to imagine that they were the chief executive of a company who are developing a ‘radar-blank plane’. There were two conditions – in one condition, participants were told that the project was 90% complete when another company started to develop a similar, but superior plane. In the other condition, participants were told that they had had suggested to them that they use their last amount of funding to start building a radar-blank plane, despite another company already doing so. While both scenarios suggest a bad investment, participants were more likely to agree to funding when the project was already 90% complete compared to if they were asked to just start it.
Below is a table adapted from the results of the third experiment. Similar results are seen throughout all experiments involving the aircraft scenario:
Results such as these show that we like to finish what we started, investing our interest and desires in something that we have already contributed towards; no one likes to waste things.
How does this apply to the cereal example you ask? Well think of it in this way; you’ve already bought one box of cereal, which means you are one third of the way to getting the “free bowl”. By the time you buy another box, you are two thirds of the way. With just one more box to go, why not just go for it? Maybe you’ll see a cereal which looks more appealing, or is cheaper, but it doesn’t come with the deal that these promotional packs offer, and therefore you disregard potentially superior options for the cereal you originally started with, similar to the aircraft scenario in the experiment above. What started as “free”, may just end up costing you almost £10…
P.S. There’s also some reciprocation here – “They’re giving me a cheap bowl, so might as well buy their cereal!”, as well as some commitment which fits in with the sunk-costs fallacy – “Well I’ve bought two now, may as well keep going…”
Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational behavior and human decision processes, 35, 124-140.