Consumer Math

Here are a few articles I’ve found that give us a glimpse into the (sad) state of consumer math in America, and what we can do about it.

funnysaleThis article on NBC News sums up a situation I’m sure we’ve all found ourselves in:

“Think about the last time you had lunch with four or more friends. What happened when the bill came?  Everyone pulled out calculators, there was a lot of murmuring and head scratching and still some of your friends just ended up throwing down a $20 bill and hoping for the best.  Now, imagine that crowd in a car dealership or with a mortgage broker. They wouldn’t stand a chance.”

Why are these situations always so difficult? This article from the Atlantic sums up some typical issues consumers have with math. The intro gives a great example:

“This is your brain on shopping: and it’s not very smart…

You walk into a Starbucks and see two deals for a cup of coffee. The first deal offers 33% extra coffee. The second takes 33% off the regular price. What’s the better deal?

“They’re about equal!” you’d say, if you’re like the students who participated in a new study published in the Journal of Marketing. And you’d be wrong. The deals appear to be equivalent, but in fact, a 33% discount is the same as a 50 percent increase in quantity. Math time: Let’s say the standard coffee is $1 for 3 quarts ($0.33 per quart). The first deal gets you 4 quarts for $1 ($0.25 per quart) and the second gets you 3 quarts for 66 cents ($.22 per quart).

The upshot: Getting something extra “for free” feels better than getting the same for less.”

It’s not just that we’re all “bad at math”. This interesting article from ConversionXL explains some of the pricing tricks used to confuse consumers into spending more.  My favorite is the magic of 9 :

“In one of the experiments done by University of Chicago and MIT, a mail order catalog was printed in 3 different versions. One women’s clothing items tested was sold for $39. In experimental versions of the catalog, the company offered the same item for $34 and $44. Each catalog was sent to an identically sized sample.

There were more sales at the charm price of $39 than at either of the other prices, including the cheaper $34. $39 had both greater sales volume and greater profit per sale…

People used to download music for free, then Steve Jobs convinced them to pay. How? By charging 99 cents.”

A better grasp pf the math, along with awareness of these tricks of the trade can help students make better choices in the future.


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