The Psychology of Black Friday
Hello All,
Many of us (often in spite of ourselves) are at least somewhat interested (and often excited) about Black Friday and Cyber Monday without, perhaps, even knowing why. I thought it would be interesting to (superficially) explore the psychology behind this phenomenon.
According to this article , there are 3 main “mental blindspots” namely loss aversion, restraint bias and the bandwagon effect that make BF/CM sales deeply compelling. To expound - we feel the pain of loss far more severely than the pleasure of gain, we are more impulsive than we think we are and we are inclined to rally to the majority opinion or “jump on the bandwagon” or engage in mob mentality.
Then there is FOMO (as the kids like to refer to the fear of missing out). This is tied into the regret of either buying something impulsively or not buying it and watching the price go up later. Of course, the very act of making a desirable purchase increases dopamine which is our pleasure activating hormone. It is akin to eating a delicious meal or having a great conversation. The desire to increase our dopamine levels is very useful to, among others, gambling establishments and drug peddlers.
Marketing has become significantly more sophisticated in recent years as they mine psychological research and come up with techniques that seduce consumers into buying their products and services. For example, FOMO is activated by creating a “limited time offer” (how often have you seen this?) so that if you don’t act fast you might be feel the regret of not buying the thing much more keenly. However, if you are able to grab a deal, you might feel a sense of empowerment and success.
Interestingly, the colour red is used overwhelmingly in sale marketing due to its association with passion, love and energy. It accesses our feelings rather than our intellect which is useful when making impulsive purchases.
Marketers harness the bandwagon effect which is tied in to wanting to belong by indicating that other people like you are making the same decision.
Anchor pricing is a simple, yet highly effective pricing strategy. A shop might have many items which are expensive with a small selection that are reasonably priced. To customers, these cheaper items are a bargain which triggers their “getting a deal” instinct and are more likely to make a purchase.
It can be unsettling to realize that we are not as rational as we sometimes want to believe and that there are a host of psychological techniques that can be used to disarm our critical thinking. Often our decision to buy is driven by an emotional and/or hormonal impulse, helped along by crafty sales techniques that are often very subtle yet deeply powerful at the same time.
Blog Post
I have compiled a list of best practices when starting a corporation.
What You Should Know After You Have Incorporated
Deciding whether to incorporate can be challenging for many small business owners. There is a lot of conflicting information and it can be hard to determine, in the absence of experience, what facts
Small Business Articles/Tips
Black Friday Ideas for Service Based Businesses: It can be more challenging for services based businesses to put on a sale. This article has some good ideas
Looking for a Side Hustle? When thinking about starting a business on the side, it is useful to examine not only what you want to do but how to get there. This article has some interesting insights.
Tax Stuff:
CRA Indexation Adjustment: Every year CRA adjusts the amounts of credits, benefits and thresholds partially informed by the consumer price index (CPI) furnished by Statistics Canada. For details, see here
Compliance with Personal Services Business Rules: An article from CPA Canada about PSBs (already discussed in my newsletter a few weeks ago) that might shed more light on a somewhat grey area.
QuickBooks Tip:Starting Your New Corporation
When starting a new business or corporation, make sure that you set up your QBO file to avoid issues and errors down the road. This includes reflecting the year end of the corporation, setting up products and/or services, linking your bank accounts, customizing invoices and setting up your chart of accounts. My checklist breaks this down a bit more.
Books and Resources
Small Business Tax Facts(Sole Proprietorships/Registered Businesses/Self Employed Workers)
This book helps you have a better understanding of tax (brackets, tax rates, deductions etc), how it applies to your unincorporated small businesses and how to do your own tax return (or at least understand what your accountant does). It also includes a comprehensive breakdown of deductible expenses, by category with special sections on more complex deductions such as home office, vehicle and capital cost allowance.
FastStart Your Corporation(Corporations)
A step by step guide to starting your small business corporation, including what you need to know about incorporation, setting up your accounting and tax considerations.
QuickStart your QuickBooks(Sole Proprietorships and Corporations)
A comprehensive guide that takes you through the many features of QBO and gives you step by step instructions on how to setup and work with QBO day to day. It is ideal for beginners who have never used QBO before and also for those who are currently using it, but have questions or need guidance.
FastStart Your Business (Sole Proprietorships)
A step by step guide for anyone who is planning to start a Canadian business or become self employed (and does not want to incorporate) and wants to know what they need to do or simply has questions.
Small Business and Your Dividends (Corporations)
For incorporated small business owners who want to know more about small business dividends, the differences between salary vs dividends and which is better and step by step instructions on how to file your own dividend declarations (T5s).
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Start Your Business Checklist
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Hope everyone has a snuggly weekend!
Ronika
