Upselling – Part 3 – My Turn

(Continued from previous post)

My turn.  I place my t-shirts on the counter.  Having heard the dialogue before, I now know what is in store for me.  I begin to think about my answers…”how can I be polite? How do I not show my frustration with this process?  I know that she is required to do this…be nice…”

The salesperson asks, “Did you find everything alright?”  I respond, “Yes.”  My response is abrupt.  I dare not look her in the eyes.  I act disinterested, nonchalant even, hoping she’ll see that I don’t want to engage in conversation and thereby, just maybe, I can dissuade her from engaging me in the round of questions I know are sure to follow.

She starts to scan my items and I notice on the scanner that the t-shirts are coming up at $10 each.

Wait a minute…on the tag it says $16.50.  On the register it says  $10.  What…just…happened?  In my head, I begin to wonder if I should say anything?  Is it a mistake?  Is it wrong to not say anything? I can’t not say something, so I blurt out, “I thought those were $16.50?”  She responds as a matter-of-fact, “Oh, these are on sale, they’re $10 each. There should be a sign next to the shirts. Was it not there?”  “I don’t think so…” I reply, but I don’t remember at all if there was a sign next to the shirts.  I was so distracted by my own thoughts and anxieties that it’s possible an elephant could have walked through the store and I wouldn’t have noticed.  Figuring out all of the colors, doing all of the math, figuring out how many books I could have bought with the same money…what sign? I struggle for a minute, reflecting, was there a sign that I didn’t even notice?  I feel a little bit embarrassed, but then, it dawns on me – Hey! The t-shirts are $10 each!

With this information I begin running some numbers in my head.  A moment ago, I was prepared to pay approximately $115, but now, I’m looking at paying $70.  I have a dilemma.  I ask if we can stop the transaction because I’m mentally calculating, trying to figure out if I should get more shirts or just enjoy the “savings.”  I am having a hard time deciding what I should do.  I feel a cramp in my brain.  I’m no good at this stuff!  I feel so torn about what to do that I stare blankly at the green dots on the register that has my running total at $70. “Do you mind if I run back over and take a look at some more shirts?” I ask.  She replies, “Not a problem.” She smiles politely, knowingly, devilishly and I think for a moment as I move away I hear her laugh – the “we gotcha” sort of laugh.

When I first came into the stores, I picked out the shirts I wanted and then I made a direct line to the counter, head down.  I was a man on a mission.  Now, walking back to the shirt rack, I cautiously lift my head to look around and notice the signs that say “Select Items On Sale.”  Upon seeing the signs, I believe I can actually notice the dopamine showering my brain with yummy feelings, my tummy getting butterflies and on overall sense of excitement.  By the time I get back to the shirt rack, my head is spinning and I have reached a state of giddy-ness.  I notice that there was indeed a sign saying that the t-shirts were on sale for $10 each. How on earth is it possible that I missed the sign – it’s right in the middle of the rack? It’s huge!  I had to pass by it at least 6 times as I looked at the shirts and I never saw the damn sign!  But…there it is, and I say to myself, “Alright daddy-o, I can get some more!”

I convince myself, I came to the store knowing that I was going to spend around $100 so I might as well find 3 more shirts, you know? It’s almost like I’m playing with the house’s money so anything goes, right?  I spend more time reviewing my options, feeling the texture of the shirts, pulling them off the rack and holding them up to my body.  Really deliberating, considering my next move.  I decide on some shirts in colors that I wouldn’t ordinarily purchase, because somehow, this all feels like it’s extra or free or, I don’t know… it just doesn’t feel the same at all.

Heading back to the counter, I begin to tell myself what a good shopper I am! Feeling like a hunter with a prize kill, I swell up with pride.  I lift my head with confidence to view the newly conquered landscape and notice that the “Sale” signs are all over.  I make a mental note to myself that I, Shawn the Super Shopper,  might just have to come back and look at some of these amazing deals!

 

Upselling – Part 2 – The Transaction Before

(Cont’d from previous post)

7 Different shirts at $16.50 – I do the math in my head.  Ten times seven is 70, six times seven is 42, plus three and a half, that almost $115.  For t-shirts!  (but in my head, like my own internal Jedi Mind Trick “you will wear these t-shirts for the next 5 years” – I reply – “yes, I will wear these for 5 years – Dude, it’s okay to by the t-shirts!”) And as the internal dialogue continues, I amble to the counter to make my purchase.

I’m pretty good about not getting distracted between the items I need and where I have to pay.  I don’t look at any other items – straight line to the counter to pay, but there is one other man in front of me.  He is buying two shirts.  As the employee is doing all of the magic stuff she does to make the purchase ready, including taking off hangers, tags, and electronic gizmos, the man turns and looks at me – and I want to say it is a sheepish look, but perhaps I’m just projecting how I’m feeling.  It’s hard to tell at this point.  But I must say that he looks fairly stylish, perhaps even a bit dowdy.

Then, it happens.  I hear the employee, a small, younger woman, begin.   “Are you a member of our rewards program? Do you have our store credit card?  If you sign up today you can save 10% off of this purchase.”  I feel my heart beginning to beat a little bit faster because as I project into the very near future, she is going to be asking me those same questions and I am going to be forced to answer her.  I hate that she is going to ask me those questions, already.  I’m not sure why – I know that I don’t want to be a member of a rewards program and I know that I’m not signing up for a credit card.  But I also know that it is her job to ask – every. single. person.

The man in front of me casually denies her.  She uses a hand-held scanner to scan his two shirts – bleep…bleep…she doesn’t mention how much it will cost him, she just lets it show up on the screen.  The man dutifully takes out his wallet and hands over his credit (or debit) card.  And you would think that from this point it would be a quick and easy transaction… but then she asks him for his email address.  He pauses – I pause – we both think to ourselves about giving out the email address.  We both think, “What are you going to do with my email address?” But, then again, we know what they are going to do with our email address.

After a split second of reflection, or maybe lack thereof, he gives her his email address!  I can’t believe it – he actually gives her his email address!  Then we spend the next eternity as he spells out his email address while the employee scours and pecks at the keyboard. In my head, I’m like, “Dude, they are going to send you emails every six seconds for the rest of your life.  You will never escape them.  You are going to have to change your email account, because when you hit unsubscribe from their email, there will be seven hundred steps to actually unsubscribe and you’ll be so frustrated that you’ll give up!”  He turns his head over his shoulder with a sheepishly sad smile, and without saying a word, sends me this message, “I know.  I know.  I’m not exactly sure why I just did that.  Oh, Lord, what have I done.”  And he turns back to the register.

She proceeds to ask for his phone number and his zip code, which he gives her.  And just as I think I am going to witness the conclusion of this transaction, she asks if he would like to donate a dollar today for the children’s hospital victims of hurricane Xanadu refugee relocation soldiers project homeless food pantry heart disease school lunch backpack fund.

Silence.

I even think the store music has gone silent for this moment.

I think I can hear his heartbeat.

I know what’s going through his head.

He thinks, “No.”  But she stares at him and waits.  He thinks, “A dollar…ah jeez…”  I feel his pain and look at the ceiling so as not to witness the awkward pseudo confrontation playing out in front of me.  And after several seconds, he says, “sure.”  The employee doesn’t even blink, scans a little barcode on her register that adds a dollar to the purchase and finally she enters his payment by rapidly swiping his credit card back and forth.

As they exchange pleasantries, “Receipt with you or in the bag?” and “Have a nice day!” I wish to myself that I could make my purchase without being asked if I want anything else.  I wish for a totally silent transaction, if I were to be perfectly honest.   But I know that’s not what’s going to happen.  What’s going to happen next is a little game retailers like to play with consumers called “Upselling.”  Don’t be fooled for a minute – this is a well-crafted tactic that retailers employ to help liberate shoppers from their cash – and I know that I’m next.

 

Upselling – Part 1 – Before the Counter

Most of the time, when it comes to shopping for clothes, I would much rather buy books – and at many times in my life, I have gone into the mall with the purpose of buying clothes and come out having purchased books. Or, if there is not a bookstore available, I will talk myself out of buying clothes so that I can go buy books some other place.  There appears to be some wiring defect in my head that, when I begin looking at the price of clothing I begin to think about how good an investment books are. In order for me to buy clothes, I almost have to know exactly what I am going to buy, walk in, grab it, go to the counter, pay and leave.  If I don’t do it this way, the voices in my head can become very active.

Well, recently, I finally decided, after a long debate in my head, that it was time to go buy some clothes.  Specifically, I was in the market for some t-shirts.  The majority of mine had served their purpose and had become fairly well worn out.

Not that you could tell by looking at me, but I am pretty picky about my clothing.  I don’t like wearing logos.  Most of the time, when it comes to shirts, I’m actually not a big fan of pockets.  And, yeah, I’m picky about t-shirts, too – high maintenance, right?  And being that I’m picky, once I find a piece of clothing that I like, I am quite apt to stick with that item for a long time – and then when I am forced to shop again, I frequently return to the specific product I have used before.  It’s suppose it’s a little bit like brand loyalty, but maybe not exactly.  Or maybe so…

Now, I knew going into this shopping expedition that I could get exactly what I was looking for online. But instead of taking the tried and true path, I decided to listen to the people in my inner circle about where I should go for my purchase, perhaps to expand my horizons a bit.  So, I go to a specific store because I have been given a good recommendation about the specific t-shirt in which I am interested. Now, based on past experience, I know when I walk into that store, a whole series of weird behaviors are apt to begin.

I walk in. I do a good job of finding the specific product I am interested in buying and go straight to it.  As I am walking, it is almost as if I can feel the dopamine rush, I breathe in deeply, my eyes widen and I begin thinking, “Ah, Jeez! there are SO MANY OPTIONS, $16.50 for a t-shirt, that’s at least one book, maybe two, this is going to be exhausting, ooh, that fabric feels nice – wow, I wonder if I can pull off the yellow or purple shirts — I’m pretty sure those will look awful on me – no, I just need black, gray and blue — but I need to broaden my tastes — I swear they’re pumping in oxygen — the colors are so vivid — the air is crisp — it is really bright in here –I really do need a v-neck and a crew neck –-I know this song they’re playing — is my heart beating faster?”

Now, when I came into the store I was fairly certain of what I wanted to accomplish and had a set amount of money that I was willing to spend on said product.  But I notice that as I am perusing the products, my limit has somehow moved to another location in my mind – and I begin bargaining with myself.  “I’ll grab a bunch of different colors and I can bring some back” and then, “I never go shopping, I haven’t had new clothes in two years, just buy what you want.” And then,  “I know I could get this cheaper, but I want quality for a change. I’m tired of cheap-ing out.” And of course, “I earned this!” or “I deserve this!” – both of those messages growing louder and louder as the primary messages rattlin’ around in my noggin.

I make my way to the counter with 7 different t-shirts in my hand…(to be continued)

A thought on “Saving”

If I had a dollar for every time I’ve heard someone say they’d like to save more money, I’d be a rich man. In all my years of teaching, I have never met anyone who wouldn’t like to have more money tucked away in savings.  So why don’t we save?  My students tell me it’s because they can’t save.  They don’t have enough money to save.  There’s never any money left over to save after they have paid all of their bills.  When encouraged to examine these responses more closely however, nearly everyone recognizes that he or she has saved for something at some point in his or her life, and, no matter what his or her income level, has at least one penny left over at the end each week that he or she could potentially be saving.  So, if it’s not that we can’t or we don’t have enough, then why don’t we save?

One of the barriers that often prevents people from saving has to do with a pervasive belief that saving is only worth doing if the amount being saved is a large number.  All humans, whether they are aware of it or not, have in their heads a dollar amount below which money holds no value for them.   A penny, a nickel, a dime, a quarter, even a dollar, although it could be saved isn’t hardly worth it in most people’s minds.  This is especially true of people who feel they must save a lot of money in a relatively short period of time.  Consider retirement, for example.  People who feel inclined to save for retirement typically believe they need to save a large amount of money in a relatively short period of time.  Even as much as a dollar per week in savings, in this particular example, seems to most people insignificant and hardly worth it.  So instead of saving a dollar per week, what do they do? They save nothing, because they don’t see the value in it.

When you are able to see that saving is more about implementing a behavior than it is about any particular dollar amount saved, you can perhaps begin to see value in doing it.  So pick an amount that you believe you can comfortably save over the next day, week, month, or whatever.  A penny, a dollar, ten dollars, twenty-five dollars, it doesn’t matter.  Pick an amount.  Start small.  Work it into your budget as a line item.  Start saving.  Start now.  And keep going.

 

The Pain of Paying from Dan Ariely

Here’s a short video from Dan Ariely about how we spend differently depending upon the form of payment we use.  If you are not familiar with Mr. Ariely’s work, you should definitely check him out.

Misbelief

Convenience and “The Tyranny of the Moment”

Often times, our hectic and busy lifestyles lead us to make financial decisions just so we don’t have to think or do any additional work.  It’s called convenience and it’s a big part of our cultural value system.  In fact, huge portions of our economy are based on our “need” for convenience.  Then, as we keep adding in more things to do and more places to see, we “need” more conveniences.

“The Tyranny of the Moment” is the idea that when you are so hectic and crazy in the current moment, you are unable to think about and plan for future moments. In these tyrannical moments, everything feels like an emergency and we begin living our life in a series of firefighting episodes.  And I don’t know about you, but when I’m firefighting, I begin to start using those justifications for the decisions I’m making.

So here’s a quick exercise to take a look at these two concepts:

 

1. Identify three of your most common convenience purchases.

2. Identify a time when you have felt so busy that you made a purchase just to keep things simple.

3. Identify a time when you acted out of alignment with your personal values just because you felt too busy or overwhelmed.

 

Being consistently caught up in “The Tyranny of the Moment” can lead to feeling stressed, anxious and tired, which causes poor decision-making and undermines our willpower.  It also typically leads us to rely heavily on convenient solutions – which are typically more expensive and less healthy for us – as opposed to those perfectly rational decisions. All told, this can be an incredible hindrance to people who are trying to develop economically or even those who are trying to live their lives in accordance with their values.

 

Rational Behavior Education and Your Budget

In the world of economics they have the concept of “Homo Econimicus” or “Economic Human.”   This concept indicates that humans are rational beings that act only in their best self-interest.  This is typically used to explain markets and economic theories but in most circles, especially the academic and professional/political circles, it is a quite predominant perception of how humans act in regards to their personal finances and economics.

Well, a lot of education on how people should behave has a very similar approach.  I call it the theory of “Rational Behavior Education.”  My theory on this is that most education is based on the idea that humans are totally rational and if provided with a good rationale as to why a behavior should be changed, the human will naturally see the benefit of such a change and quickly adapt the new behavior.

Let’s take smoking for instance.  We all know smoking is bad for human bodies.  But most education is focused on discussing the fact that it is bad for us, by telling us all of the negative side effects of smoking.  I was a pretty extreme smoker for over ten years and this is what people would tell me over and over, “Your lungs are black, your breath smells, it costs a lot of money, it makes your teeth yellow, it causes cancer, oh, and you could die.“  Now, I know at one point in time, people did need to be convinced that smoking did harm to their body, but that time is long gone.  We know it.  We have heard it for decades.  We know!  But if we were totally rational humans focused solely on our own best interest, we would see quite clearly that smoking is not good for our body, costs a lot of money, makes us smell (which could prevent potential mating possibilities, maybe), and make our teeth yellow, makes our clothes smell and so on.  We would see all of that and we would stop. But do you see the problem?  Yeah, we’re not rational.  Humans can be rational.  We can be unbelievably rational creatures.  We may be, perhaps, the most rational beings on this planet – maybe anywhere in the universe. But we are not ALWAYS rational.  And educational efforts about behaviors aimed solely at our rationality that neglects to touch on how irrationality and emotion plays a significant role in our behaviors will be minimally effective.

In the world of Rational Behavior Education, if we could just teach everyone how to create and manage a budget, a person’ personal financial life would be sunshine and happiness.  But telling people that smoking is bad for them and that they should budget their money is only occasionally, mildly effective.

 

Opportunity Cost

Opportunity Cost is a fancy schmancy term that is usually used in economics classes and it usually is applied to how people use their money.  But I have found that the concept applies equally as well to how we utilize our time, and in fact many people actually grasp the concept better by applying it to time.

The opportunity costs of a particular action are the benefits you could have received by taking an alternative action.  As I mentioned, opportunity cost is usually discussed in terms of money, so here’s what it might look like in an econ book. Imagine that you invest in a stock yielding 3% over the year.  By investing money in the stock, you give up the opportunity to invest in something else like, for instance, a risk-free government bond with a 7% return.  In this example, the opportunity costs are 4% (7% – 3%), the difference in return between the forgone investment and the chosen investment.  Blah, blah, blah – insert lots of additional economics jargon.  What does that mean to you?  Well it means that every time you make a decision to use your time or money one way, you can no longer use it for something else.  The cost is what you spent on the item; the opportunity cost is what you could no longer purchase with those funds. And I know you might be thinking, “Duh! That’s so obvious.” But believe me when I tell you that people often don’t really think about it this way – especially in their day-to-day decision-making.

Now, as I said, opportunity costs are usually discussed in terms of money, but I think the concept can be applied to our time and energy as well.  For example, if I work an 8-hour workday, take 30 minutes for lunch, and commute 30 minutes each way, that adds up to a total time cost of 9.5 hours.  Since that window of time is devoted to and taken up by work, the opportunity cost of working therefore includes everything else I am unable to do during those 9.5 hours.  Spending time with my children, preparing and eating a meal with my family, exercising or recreating with my friends, and watching a favorite television show with a loved one are all examples of the opportunity costs of working.  In order to work, I must give up the time that might otherwise be spent doing and benefitting from something else.  In either case, a choice between two options must be made and the benefits I could have achieved by choosing the alternative option, whether monetary or otherwise, are the opportunity costs.

For some people, this concept has a huge impact on how they see their resources flowing out of their possession. But even if this isn’t a big “Aha” moment, this little concept of opportunity cost, the fact that we have to give up one thing for another can cause us to squirm a little.  Let’s say that I really want that pizza, but I know I’m going to need that $15 for childcare in two days.  But I really want that pizza!  But I know I’m going to need to pay the childcare!  There is conflict, and that conflict leads to some squirming.  And in that squirming we find ourselves dealing with a little problem we discussed earlier.  This is where you might notice that we have Internal Inconsistencies with our time as well as our money.  I might justify what I have to give up by rationalizing my choice, like, “I’m just too tired to cook tonight.” Or maybe some mental bookkeeping, like “I’ll just pay a little less on my credit card bill this month.”

Opportunity Cost is something that is happening every time you make a choice.  It is not something to be eliminated, but rather to be aware  of to help you in your decision-making process.

 

Time Value of Expenses

How much time and energy, in terms of work hours, does it take you to pay for housing, transportation, food, health insurance, car insurance, or entertainment?  Do you know?  If you are like most people, you may have thought about this as it applies to some of your expenses.  Or not. In either case, I have found that when people begin to apply the following exercise to their expenses, they tend to see how or if their expenses are really in alignment with their values in an even deeper way than when they did the receipt exercise.

Here’s an example of how it works.  The other night I took my oldest son out to dinner and to see a movie.  We went to a nice little restaurant.  Not too expensive, but definitely not the “value meal” at the local fast food joint.  The total cost of the meal with tip was around $45.  Movie tickets for the two of us cost $24.  The “Value Package” snack we bought at the theater cost $15.  Total cost for the evening totaled $84.  Now if I’m making $10 per hour and the night out cost $84, then the time cost, in terms of work hours, for the evening out with my son was 8.4 hours.  Well, I know that I work approximately 8 hours each day and so the cost of the evening out was slightly over one of my work days.

In addition to being a good chunk of change, that’s a lot of time and energy. When we pay for rent, mortgage, dinner out, movies, or anything else for that matter, not only does money leave our possession, but so does the time and energy that money represents.  Whenever we spend money, we also spend our time and energy.  And like money, once that time and energy is spent, it cannot be used for anything else.

Of course, using the same example above, we could break out each expense separately as well.  The meal was $45.  If I divide that by $10 per hour I would see that the meal cost me 4.5 hours of work.  The movie was $24, divided by $10 per hour and I would see that the movie cost me 2.4 hours of work.

To calculate the time value of a particular expense, you take the amount of the expense and divide it by the hourly wage you listed above and you can figure out how many hours it takes to earn that expense.

Now, let’s take a different expense.  Say for example your food costs $250 per month and your hourly wage is $10/hour.  Divide $250 by $10 and you will see that it costs 25 hours of work time.  Of course, I’m using simple round numbers to demonstrate and your numbers might not be so simple and round.  No problem.  You can either do the exercise with your exact numbers using decimal points and all, or you can round up or down.  I’m not looking for perfect calculations – this is not a math class!  I just want you to get a better idea of how much of your work time is devoted to your expenses.

How Much Are We Really Spending

People typically think of rent or mortgages as monthly expenses since, after all, we pay those expenses on a monthly basis.  In actuality though, we are paying for every hour, every minute, every second, EVERY MOMENT, of every day. For example, if a typical month has 31 days and there are 24 hours in each day, then the number of hours in a typical month equals 744.  If my rent costs $1,000 per month, I accrue approximately $1.34 in rent per hour and approximately $32.26 per day.

Calculating rent, or mortgage, utilities, credit card bills, grocery bills, etc. down into an hourly or daily amount might not sound like a lot of fun, and my goal here is not to turn you into a human calculator or to persuade you to spend an exorbitant amount of time calculating every single one of your expenses in this way.  I simply want to raise awareness about how much money is really flowing out of your possession, so often without your awareness or knowledge, at any given hour or on any given day.

Time Value of Income

Attaching a monetary value to one’s time and energy, particularly in a work situation, is not uncommon.  Most people know how much money they earn per hour.  On several occasions in my life I have taken jobs that paid around $7.50 per hour.   That’s pretty black and white.  1 hour of my time and energy at work was worth $7.50.  On the other hand, salaried positions are slightly less black and white in terms of time value.  My first salaried position paid $28,000 per year.  The value of an hour of time in a salaried position depends on the number of hours worked during a particular year.  If, for example, in my salaried position, I worked 40 hours per week for 50 weeks, I would accrue 2,000 hours per year, and my hourly rate would be about $14 per hour.  In that case, 1 hour of my time and energy at work would be worth $14.  If however, I worked an extra hour per day for the same number of weeks, I would accrue 2,400 hours per year and my hourly rate would drop to $11.66.  In that case, 1 hour of my time and energy at work would be worth $11.66.

As I said, most people, even those who are salaried, have figured out how much money they earn per hour, but just in case you haven’t, or haven’t done it in a while, we’re going to take some time and go through this together.  But then, we are going to take it one step further.  I’m going to ask you to determine your wage by minute.  Most people have never done this exercise. However, the information that we learn by doing the wage by hour and the wage by minute exercise will be very useful in the exercises that will follow.

Please note, some of these figures that you come up with might not be totally accurate, don’t get hung up on that. The information will still be beneficial and the figures will be close enough for our purposes.  I’ll refer back to this exercise and some of the numbers we figure out here in later posts and exercises.

Okay, so here we go.

Wage by hour:

Begin by figuring out how much money you earn per hour.  For the purposes of this exercise, we will only use our “gross earnings.”

• If you earn an hourly wage, like $10 per hour, then this is easy.  Your time value for this exercise will be $10/hour.
• If you are salaried, then we recommend, for simplicity that you divide your yearly salary by 2 and then drop the zeros.  So it looks like this:

Example:

$24,000 per year divided by 2 = $12,000, then drop the last three numbers and you get $12.

Wage by minute:

This is a computation that very few people undertake.  But when we get ready to look at the time value of our  expenses, knowing our wage by minute can actually be very beneficial.

To figure out your Wage by minute, take your hourly wage and divide it by 60:

$10 per hour divided by 60 (minutes) = approx. 17 cents per minute.

 

So hang on to this information.  We’ll use it in some of the upcoming posts!