I love to study how people make decisions about the things they buy and sell. It’s always fascinated me. Sometimes I go shopping not to buy, but to learn. I like to observe how people make purchasing (and selling) decisions.
I guess that’s why my two favorite shows on TV are Pawn Stars and the ever entertaining Shark Tank. I’ve seen every episode of both and always look forward to the new ones.
One thing I find interesting about Pawn Stars is how people justify selling their goods for less than they originally expected.
After the pawn shop gives the seller their final buy offer, the seller – almost like clockwork – stares at something for a second, then comes up with a story like… “Well, my wife would kill me if I brought this home without selling it, so…” or “Well, I’m really running low on space in the garage, so…” or “Well, I’ve had this at the top of my closet for 20 years, so…”
The pawn shop makes an offer, but the seller is the one who talks themselves into taking a low number. They justify the low price with the personal consequences of a non-sale. I guess it’s not all that different from justifying a buy, but there’s something fascinating about how people often need to give themselves a comforting non-monetary reason to give up something for less than they think it’s worth. Sometimes it’s “I need the money,” but more often than not it’s about this condition they’ll find themselves in if they don’t sell it.
I don’t have much else to say about it other than I find it interesting that so many different people from so many different walks of life with so many different items for sale almost always fall into the same pattern of thinking. That itself is worth thinking about.
Jared
on 23 Feb 12You should read Dan Ariely’s stuff if you haven’t. He talks about all kinds of these types of mindsets in his irrational books. Love Pawn Stars and Shark Tank as well. I’m Canadian so I watch Dragons Den when waiting for a new shark tank (O’Leary and Robert are on there plus the amazing Jim from Boston Pizza).
COD
on 23 Feb 12I think the real issue on Pawn Stars is that the stuff is rarely worth what the seller thinks when they walk in the door. Also, the sellers on that show really don’t understand the concept of wholesale versus retail. But my favorite part is their explanations of why they are selling. Given the locale, the real reason has to be “need money for gambling” more often than not.
Carlos
on 23 Feb 12I wish we could watch Dragon’s Den here in the US. The latest episode is actually blocked on the broadcaster’s web site!
The mentality I find interesting is how people are so relatively price sensitive. For instance, say someone is shopping for a clipboard in an office supply store. There is a very nice aluminum one for $15, or a plastic one for $8. They think, OMG, I’ll never pay $15 for a clipboard! It’s just not worth it! Yet that evening at dinner, they have no problem spending an additional $7 on one more cocktail that they really didn’t need and only drank half of it.
JF
on 23 Feb 12I think the real issue on Pawn Stars is that the stuff is rarely worth what the seller thinks when they walk in the door.
No question. But what interests me is the stated justification for still selling it. That’s the part of the thought process I find most interesting.
blues4free
on 23 Feb 12@Carlos, yeah and to that point, when 37s Draw went on sale in the iPad app store for $9.99 people had a shit fit. Yet, thats not that much more than a #2 meal at McDonalds. I for one felt that app was worth the price of 2 happy meals.
Lance Jones
on 23 Feb 12So often on Pawn Stars the seller is more motivated that the pawn shop. That’s the key. As soon as the other person knows that you want something more then they do, it’s over.
There is another show on Discovery called “American Guns” which is all about buying and selling firearms. It’s so cool watching how the owner of the Gunsmoke shop (i.e., the ‘star’ of the show) tries to get the best deal on some amazing gun collections. It’s all psychological. He’ll fly onto some ranch in his leased helicopter to make it look like he’s a big shot gun dealer, playing it cool all the way… he always comes at it like, ‘I’ll take these guns off your hands’ for $XXXX.XX, when behind the scenes he’s saying, “Holy Shit, I gotta have this collection!!”. It’s not much different than playing poker.
Seph
on 23 Feb 12Just goes to show how easily the utility of an item to a seller can change from high to low based on circumstances. With each word of justification the seller can feel the value of the item dropping in their mind relative to cash. (This also speaks to how much value is tied up in how we think about our posessions.)
Can you imagine if gas stations treated us this way? Imagine them billing you based on the amount of fuel in your tank and the distance to the next station? They would make a killing on those of us that like to drive just one exit further when the light goes on.
Long live homo economicus?
fredo
on 23 Feb 12So how can we exploit psychological effects like this to to get more money? Here’s some ideas: 1) Offer tiered pricing so that the middle option looks cheap relative to the top option. 2) Charge on a monthly basis so people end up paying many times more over time. 3) Overcharge relative to competitors. If it costs more it must be better right? 4) Market your brand as hip and disruptive so people want to ‘join the cool kids’. 5) A/B test your sign-up page to death. ;)
jim winstead
on 23 Feb 12the new show “comic book men” on AMC has some of this, too.
another side of it is “storage wars” where they add up the supposed value of the storage lockers based on a crude mix of what the buyers say they can sell it for at their stores and what “experts” appraise the odd pieces at, with no distinction between what they would pay to buy the piece vs. selling the piece.
DH
on 24 Feb 12@Jason
You’re actually missing the point actually.
People who walk into a Pawn store, have ALREADY justified to themselves that it’s okay to sell the item for less than retail price (because Pawn store need to buy and then sell the item to make margin)
The easy of sale outweighs the opportunity cost of trying of that person trying to find a retail buyer.
JF
on 24 Feb 12DH, I’m not missing the point. I know the point I’m making.
Patrick B
on 24 Feb 12JF
You’re wrong.
I agree with DH’s (broken English) argument.
Mark
on 24 Feb 12@jim winstead
I’m also stuck on Storage Wars at the moment. The thing that gets me is how they calculate themselves a profit through buying something and then getting an estimated value for it.
They still need to sell it.
Michael
on 24 Feb 12I just watched a couple of Shark Tank episodes. That’s a very interesting show, especially because of Cuban. Where can I go to see all the old episodes? ABC only seems to have the last few.
Devan
on 24 Feb 12I believe a lot of it is to do with the underlying insecurity that the seller feels about setting a price in the first place. Let’s face it – MOST of us HATE selling, be it a product, or ourselves.
When we set a high price on a possession we own, we attach a lot of our own ego and expectations to that. I think most of us will have that little voice in the back of our heads that says “Really?? Is it really worth that much??”. It then becomes a fight between our ego and our ‘self’ to justify the asking price.
Quite often, a lower offer comes as almost a relief – the fact that someone else values the possession (which satisfies the ego), and that you have the opportunity to reduce the asking price (which assuages the guilt of the ‘self’).
Kyla Cromer
on 24 Feb 12I clicked on Comments to recommend Dan Ariely’s book Predictably Irrational, and I see the very first commenter @Jared mentioned him. So I guess I’ll second it! The thing I really found fascinating is that Ariely and his team thought up ways to make this emotional stuff measurable.
Steven
on 24 Feb 12I think both are great examples of people not building a market. They have very little reference of worth or value.
I am blown away at the Pawn Star sellers not having a second buyer to walk away to. They don’t check another pawn shop before walking into that one?
How many Shark Tank founders have no other financing in line? They almost walk in naked looking for someone to clothe them. I have never seen a founder respond about similar comps to their business (cash flow, potential acquirers, etc.) to stand their ground.
Being well prepared must not be good TV.
The sellers need to do their homework.
Chad
on 24 Feb 12The goofy justifications for selling their things for so much lower than they think they are worth are simply to save face. They need the money, but that’s embarassing so they come up with “well my wife will kill me if…”
Jon Baker
on 24 Feb 12There is a programme in the UK where the opposite can be seen. Called four rooms, people bring objects that they believe to be valuable and four dealers / collectors make them offers, people bring all sorts from a wall that street artist Banksy has painted to a celebrities left over half-eaten sandwich.
It seems when people perceive what they are selling has value they are reluctant to accept offers, even if those are higher than the market value.
Tony
on 24 Feb 12Unfortunately, at least some (perhaps all, who knows) of ‘Pawn Stars’ is scripted. A family friend in Vegas went down to the shop and was approached by a producer who said “Hey, wanna be on TV?” He handed him a guitar and told him, “just go in there and say you don’t know much about it.” As ‘luck’ would have it, the guitar expert happened to be on site and etc etc etc…
Not trying to detract from the article as the subject matter is indeed interesting and accurate, but if many of the ‘customers’ on Pawn Stars act similarly in regard to sell prices on ‘their’ items, this may be a likely reason why.
Michael
on 24 Feb 12Answered my own question—they are on Hulu Plus.
Gunnar Tveiten
on 24 Feb 12People don’t even walk in to a pawnshop unless they have already decided to sell the item, and already decided that getting money quickly takes priority over getting a good price.
Everyone knows pawn-shops generally pay less than market-price, afterall they want to turn a profit. Thus they know they could probably get a higher price by selling the item themselves.
But they’ve already decided they need/want money now and are willing to accept getting less of it, in exchange for getting it sooner and with less hassle.
Given that condition, it’s zero surprising that they’re willing to accept a low price.
Anonymous Coward
on 24 Feb 12+1 to Gunner
Jon Pynn
on 24 Feb 12I’ve never watched the show, but do they often show people walking away from deals? It seems to me that the compeling tv is watching the pawn stars dress down fools then get the confessional “I’m just glad I sold it justification” afterwards.
Bill Wagner
on 24 Feb 12+1 on Dan Ariely’s work as well.
Predictably Irrational is a great book, and his blog is always a good read as well (google Dan Ariely).
It’s all about shaping the environment in which people make decisions, and both Shark Tank and Pawn Stars do a great job of creating an environment that makes it a lot easier to accept less for your offering.
Shark Tank does it with the sometimes rapid-fire, high-pressure panel of ‘experts’ that put folks on the defensive the minute they walk in the room.
Pawn Stars has Rick Harrison’s trademark humorous, friendly vibe to butter folks up and build some trust in his appraisal skills.
And in both shows, the actual negotiations are often accompanied by some good cop/bad cop tactics that drive the price down by planting some seeds of doubt in the mind of the seller.
Glenn Meder
on 24 Feb 12Jason,
This has always fascinated me too. People make decisions based on emotion, then back it up by rationalizing. This was a great point made by Capt. Janeway in Star Trek Voyager to Tuvok; logic can be manipulated to suit the situation.
My geek quotes aside, I see this when people do unethical things in business. If someone steals a stapler from work, well they owed me that. Or someone who goes to a competitor in breach of all ethics, well my company screwed me, so I’m justified.
Ike Ahnoklast
on 24 Feb 12Pricing strategies are an incredibly nuanced, subtle art. Here are some relevant links that I’ve saved over the years:
http://www.fastcompany.com/magazine/68/pricing.html http://www.cheapair.com/blog/air-fares-101-why-do-fares-change-all-the-time/?uid=365 http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.htmlIke Ahnoklast
on 24 Feb 12The determination of pricing strategies is a nuanced, subtle art. Here are some relevant links that I’ve saved over the years:
http://www.fastcompany.com/magazine/68/pricing.html http://www.cheapair.com/blog/air-fares-101-why-do-fares-change-all-the-time/?uid=365 http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.htmlGerald
on 27 Feb 12Hi Jason, well spotted! People know they sell on a low offer so they have to find their own justification.
This discussion is closed.