You may be seeing clients buy the cheapest hearing aid they can find. They are heading to a bargain basement store, known as Costco, to buy the lowest low-price hearing aids. Despite opinions of poor quality and poor services, Costco still sells hearing aids.

It doesn’t matter what the high-cost item is. Consumers will always want to pay less. You can see this in the airline industry, where those premium seats are not the best sellers.

What can we learn about consumer psychology that can tell us about the business of selling cheap?

I am sharing insights from one of my favourite consumer psychology books, Cheap by Ellen Ruppel Shell.

Cheap Plays on Middle-Class Desires

In this book, Ellen takes us back to the 1950s when discount retail came into existence in American society. What attracted Americans to discount was that they wanted a life of luxury.

Middle-class Americans wanted refrigerators, deep freezers and colour TV sets. At the time, a freezer would cost $400, but the annual family income was $3,319.

Middle-class Americans loved saving money on basic necessities to invest more in other luxury items like the rich, such as family trips abroad, boats, and showy cars.

Discounts were once stigmatized, but now, they are the norm.

Discount retailers intentionally make strategic moves.

Retailers in the discount business are seeking volume. They want to get as many people in the door as possible to make a good profit. These retailers seek low-margin, low-service, high-turnover, and squeeze the cost to buy goods from manufacturers.

“The masses are asses.”

William Levitt

But to get people to come and spend in volumes, everything in the store has to be strategic for it to work.

Items in the stores are done to get us to buy more.

The business model of cheap is done so intentionally. Shopping carts are deliberately placed because they influence people to buy more, and items are purposely stocked for convenience and ease to attract higher-margin items.

Advertising gave customers the confidence to buy without expertise.

Customer pays with their time. They have to do everything on their own, from picking items off the shelf and using self-checkout. Consumers were okay with this because they had confidence in their ability to make purchasing decisions. Advertising gave them that confidence.

Customers can’t understand quality when items aren’t side by side.

“Consumers perceive any discounted good as less desirable unless given a reason to believe otherwise.”

Ellen Ruppel Shell

Retailers playback on what customers don’t know. They intentionally use low cost to shield customers from seeing what a high-quality item is and limit them from making any truly informed buying decisions.

Customers can’t compare quality when, say, a hearing aid costs $1500 up to $2500 in a discount store vs when they go to a higher-end clinic and see shirts ranging from $2,000 to $10,000.

Customers think they are sacrificing time to get good deals.

Retailers play on people who love the hunt and feel like they found a diamond in the rough. They designed outlet malls to help for two reasons.

One was to give customers the perception that they got the lowest price when many goods could be cheaper in their neighbourhood.

Yet, after spending more on gas to drive 100 km away, buying more stuff in the outlet malls than they need, and driving far away, customers get a bargain when they do not. The items in the outlet malls are mostly not the same as in the luxury brand stores. The same brand makes knockoffs.

Secondly, high-end brands and outlet malls have become a marketing tool for selling luxury goods. It helped create exclusivity and the desire of the middle class to feel like they were wealthy. It allows people who can afford to pay a way to justify the high price.

Showing the original and discounted price works to get us to buy more.

In outlet malls, they are very good at using price comparison. They intentionally put the higher original price and show the slashed down price to help us quickly access value. This leads to our perception that we must get something of high value.

Customers choose to pay less for things they don’t know about.

Regarding infrequent purchases, we have little understanding or preference for brands. We jump to buy whichever is cheaper. Businesses play on this by giving us the perception that we are getting a discount but are just buying the original price. The original price is the most inflated. People want to buy a $7000 hearing aid for $2000 but not a $2000 one.

How can small hearing clinics stand out?

You might think people are unwilling to trade low-cost for high-quality. Low prices tell us the design is not good enough to sell or the demand is not there. But that is only when we have some knowledge.

The critical thing to remember is that knowledge is power. When people don’t understand the craftsmanship that goes behind getting hearing aids fitted well and the ability to choose hearing aids that match their lifestyle and needs, they are disempowered. They are giving up their freedom for convenience. And that can be an advantage for hearing clinics who does not want to play the game of discount.