Economic and Psychological Factors in Purchasing Products
With the gift-giving season behind us, now is a good time to reflect on some of our more unusual purchase behaviors and the products involved. Consider Cabbage Patch Kids, Tickle Me Elmo and Hatchimals. What do these three toys have in common? They were apparently so irresistible that people stood in line for hours waiting for a chance to buy one, occasionally risking injury from other eager shoppers.
A Needing Frenzy
Back in the early ‘80s, my mom stood in line all day to buy a Cabbage Patch Kid for my daughter. Demand – and hysteria – was so high that advertising was pulled and certain shipments were delivered by armored truck. I didn’t find the doll particularly appealing. In truth, I thought the things were pretty ugly. Apparently my daughter felt the same way; she wouldn’t have anything to do with it.
Years later, I went through a lot of trouble to bag a Tickle Me Elmo for a young friend of the family. The cuddly toy’s endearing giggle quickly became a major irritant and little Elmo wound up hidden in the attic. Fortunately, I managed to avoid bodily harm during my hunt, unlike some poor souls who were crushed in media-fueled stampedes. Elmo was cute at least, but worth the effort? Nope.
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Hatchimals must be extra special. Customers aren’t only spending their time in long lines; they are also paying big bucks online. A quick check on Amazon or eBay proves that a lot of people are happy to pay more than $200 for the $50 toy as a result of short supply.
Demand and Supply
The must-have toy madness has been around for decades. In 1934 the Shirley Temple doll was the first toy on record to create a buying frenzy. Demand for the doll skyrocketed just a few days before Christmas with the release of Temple’s movie “Bright Eyes.” A shortage of the dolls is understandable in this case. No one could have predicted the popularity of a song called “On the Good Ship Lollipop.”
Were subsequent shopping frenzies driven by an artificially diminished supply? Beanie Babies were deliberately produced in limited numbers to make the sought-after plush toys even more desirable. Making sure that consumer demand always exceeds the supply leads to the so-called scarcity effect.
Beyond Supply and Demand
How do we explain the Pet Rock craze of 1976? Seriously, a pet rock. The demand couldn’t possibly have had anything to do with lack of supply! Did I mention it’s a rock? While the law of supply and demand exerts its predictable effect, human psychology also plays a significant role in purchase behaviors. In the case of trendy toys, for example, adults want to impress the children in their lives by securing a popular toy that is also scarce. It is a pretty “safe” way to impress a child and become more popular yourself – not considering whether the purchase process itself is necessarily a physically safe experience.
Cognitive biases also come into play, as evidenced not only by children’s toys but also by the pet rock phenomenon: Everyone wants one because everybody else is getting one. This psychological phenomenon is called conformity bias, also known as the bandwagon effect. When an individual observes a group of people they belong to, or wish to belong to, behaving a certain way, they are more likely to follow suit, especially if it’s a low-cost item.
Where Are They Now?
There’s still a big demand for some of these toys from yesteryear. Collectors pay hundreds and sometimes thousands of dollars for Shirley Temple dolls and Beanie Babies. But I suspect there’s an Elmo hiding in attics all across the country. And as far as those pet rocks are concerned, try selling one of those now!
Psychological factors, in addition to supply and demand, play an important role in purchase behaviors – both for trendy and less trendy products. Being aware of these factors can help you sell more products, avoid buying particular products or just understand why you behaved the way you did.