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Even if you can't remember where you parked your car or what you had for breakfast, new research shows you probably remember low prices when shopping. That's because the prospect of saving money creates an incentive for you to do so.
Previous research has shown people tend not to remember exact prices when shopping but instead lump items into categories such as "too expensive," "a bargain" or "reasonably priced." This new research expands on that and finds people are able to remember lower prices more often than they do higher prices.
"If the price of an item is high, you are less likely to buy it. So why should you go to the bother of remembering the price?" said Northwestern University professor Yuxin Chen, who conducted the research with Ganesh Iyer, a professor at the University of California, and Amit Pazgal, a professor of marketing at Rice University.
The research was based on how people process and remember information. "In computer science, memory is organized in terms of bytes," said Chen, a professor of marketing at Northwestern’s Kellogg School of Management. "If you have one byte of memory in a computer, that means that you can recall either information of zero or one. Applying that to our research, that means you could recall a high price or low price. A person with a better memory can remember more categories of information, but generally human memory is limited and we may only remember a high price or low price."
According to the researchers, shoppers categorize prices either symmetrically or asymmetrically. When prices are categorized symmetrically, shoppers evaluate not only the price of an item, but also details associated with it. In asymmetrical categorization, shoppers compare prices they remember with those offered by other retailers. This creates a price competition that many shoppers are not able to keep up with.
"Let’s say you go to a shopping mall, park your car at one end, and go to the store and check out a price," Chen said. "By the time you get to the other end you don’t remember the price from the first store. You just remember if the price was good or bad, high or low.
"People get overloaded with information. The companies notice and they react rationally to this information — they set their pricing strategies accordingly."
Chen said competition in the marketplace helps compensate for shoppers' imperfect memories.
"So you’re not really going to lose too much, even though you can’t exactly remember prices," Chen said.
Reach BusinessNewsDaily staff writer David Mielach at Dmielach@techmedianetwork.com. Follow him on Twitter @D_M89.