The Psychology of Spending | Part 1: The Magic Of Advertising
Like a frog in near-boiling hot water, we may not realize the advertising stew that we find ourselves in on a daily basis. It’s all around us, all the time. Corporations spend millions of dollars on advertising, targeting specific markets, employing psychological professionals to help them frame the perfect advertisement to do one thing, get you to spend money.
I humbly submit that corporations don’t spend this money because they somehow find it fun, they do it because it’s effective. The music, the color combinations, the framing of commercials… all of it is specifically designed to make you believe that you need what they are selling. If not at that moment, then later on when you see something that makes your subconscious mind remember what those people were doing in the commercial.
Playing on your psychology is easy for those who know what they are doing..
In 1928, Edward Bernays, considered the ‘Father Of Public Relations’ wrote a book called ‘Propaganda’ (affiliate link) where he laid out not only how advertising works, but who he believes is working behind the curtain in Oz. One of his more conspiratorial proclamations is that:
"The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. ...We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. ...In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons...who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.”
- Edward Bernays | Propaganda, 1928 | Pg. 37
Interestingly, Bernays was not anti-propaganda. He placed a light upon something that most people, if they paid attention to what is happening around them, understand to be true; the entire mechanism of modern culture is designed to frame your thinking and induce you to spend. After all, we are called “consumers.” He later goes on to ask a series of questions that seem to have been lost in our public discourse about what we see on TV, magazines, billboards, social media sites, etc.:
“Who are the men, who, without our realizing it, give us our ideas, tell us whom to admire and whom to despise, what to believe about the ownership of public utilities ... about immigration who tell us how our houses should be designed, what furniture we should put into them, what menus we should serve at our table, what kind of shirts we must wear, what sports we should indulge in, what plays we should see, what charities we should support, what pictures we should admire, what slang we should affect, what jokes we should laugh at?”
- Edward Bernays | Propaganda, 1928 | Pg. 59
Think about it. Why is it that you believe you want the dress of that actress you saw on TV? Why is it that car manufactures use bikini-clad women to promote their sports cars? Why do certain fast food restaurants use certain color combinations in their advertising?
There is a science behind this that has been understood for quite some time.
In opposition to what Bernays posits, I think that we are not helpless victims to these psychological tricks. Imagine a magician walks up to you and tells you they are going to show you a trick. However, during their explanation they tell you that part of this slight of hand is to make you focus on their right hand so they can slip their left into your pocket and take your wallet.
Remember, don’t fall for the distraction
You would probably think two things. This person is a lousy magician and this won’t work now because I know what you are trying to do. In fact, you may even put your hand on your wallet and take a step back from them.
My point is you are now armed with the awareness of their intent. The magic trick is a bust before they even start waving their hands.
What would happen if you were to apply this to your money?
Corporations know one thing for certain. Bad advertising does not drive people to spend money. To frame the best ad, they employ focus groups to see what specific advertising approaches work the best. In all aspects, they appeal to our most base desires. Different for men and women, but the end state is the same… hand over the cash.
A lot of money has been spent on how to defeat the informed spender. But studies about this typically find the same results: someone aware of the scheme is unlikely to be tricked.
One of the ways I like to think of this is to view corporations as my adversary. This is an easy mental frame for me given my military background. I view them as dishonest plotters who desire nothing more than to take my money. I see them as so persistent, that they constantly bombard me with ads about how I need what they are selling. My objective, in my psychological fight, is to prevent them from getting one penny from me until I make the decision to give it to them… and only for something that I really need.
Arm yourself with the awareness that these corporation’s main goal is to trick you to spend your money, and if you don’t have any, they want you to swipe those credit cards. In knowing this, it is possible to inoculate yourself against their efforts.
In your own personal mental battle, maybe you will imagine that your goal is debt free living, reducing your spending, and achieving financial independence. During your journey, your enemy is hell bent on extracting every last dollar from you they can.
Who will win?
In closing, be aware of the magic trick. Understand that you are being manipulated. Put your hand over your wallet/purse/pocketbook/clutch, and take a step back.
In Part 2 we dive into how dopamine plays a significant role in the psychology of spending.
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