‘Tis the season, and there are just a few more days for retailers to get their hands on the money in America’s wallets. This year, the gap between rich and poor is widening. As much as 50% of all spending comes from the top 20% of families. With inflation still hovering near 3% and unemployment rising, BBTW asked MichaelAaron Flicker, the author of “Hacking the Human Mind: The Behavioral Science Secrets of 21 of the World’s Most Successful Brands,” how brands keep consumers spending…
You wrote a book called “Hacking the Human Mind” - how do companies do that when it comes to getting you to empty your wallet at Christmas?
MichaelAaron Flicker: We have a lot of subconscious influences on what drives our purchase decisions. The holidays are like the SuperBowl for all retailers. They want to get you to spend, and they want to get you to spend now. It’s empowering for consumers to understand how they do it, because then they can be aware when they’re making more of an emotional decision than they otherwise might have realized. Daniel Kahneman said, ‘Thinking is to humans like swimming is to cats. They can do it, they just prefer not to.’
There’s an inherent conflict when it comes to holiday shopping: Consumers, especially now with rising inflation, unemployment, and an uncertain economic outlook, don’t want to spend much. But retailers — and the overall economy— need us to spend more.
MAF: We want to get people to make responsible choices, but brands must get people to make decisions to buy. So, there’s lots of psychological insights that they’re using to get that done. The top 20% of consumers are exerting incredible buying power right now. Brands and retailers are focused on them, trying to capture as much of the pie as possible. For consumers to be aware of what’s going on, I think it’s helpful to understand some of the psychological tactics that brands use.
The number one thing you see a lot of retailers using right now is scarcity: There’s only so much time left in this offer, or there’s only so many pieces left. The study that explains the emotional side of this comes from 2010 bySuzanne Shuat UCLA’s Anderson School of Management. Researchers offered participants a gift voucher worth $6 for a free coffee and cake at a local cafe, and randomly gave participants one of two vouchers, one expiring in three weeks and the other expiring in two months. The research showed that when the expiry date was two months away, only 6% of the vouchers were redeemed, but at just three weeks, 33% of the vouchers were redeemed. A lot of these lightning sales on Amazon$AMZN ( ▲ 2.48% ) are playing with, you’re so worried that you’re going to miss out. That fear of missing out on the deal really drives a lot of consumer behavior.
What other tactics do they use to get you to spend?
There are two broad ways people get what they want in life, through other people, what we could call social connectedness, or through money. By focusing the buyer on the nostalgia, it boosts the sense of social connectedness, and the importance of money wavers. It explains why Pumpkin Spice Latte is such a moneymaker for Starbucks$SBUX ( ▲ 4.94% ) . It creates this nostalgic moment for them, 21 years and running, where it just prints money for Starbucks.
What’s changed this year?
Social targeting allows marketers to create the feeling of a “movement” that is happening everywhere, even when it’s not. Through social platforms, brands can target consumers with multiple messages that “everyone’s buying this” with things like influencers, content creators and ads that have lots of likes and comments — even when it’s targeted to a relatively small group of people. Behaviorally, that’s enough. Humans don’t need statistical proof of popularity; we rely on perceived consensus. When a shopper sees repeated signals that “people like me are doing this,” the brain treats it as social proof and it has a very strong effect on a person’s action.
So social proof gets turbocharged by targeting. Showing early signals of participation, excitement, and discovery to the exact consumers most likely to be receptive to that behavior drives results. And marketers hope to compress the adoption curve: so that it feels like something is “taking off” almost instantly.
And then, once social proof is established, all the other holiday biases we discussed become dramatically more powerful through what we call “bias stacking.” Scarcity doesn’t just mean “limited supply” — it becomes “limited supply and everyone’s already grabbing it.” Urgency isn’t just about door-buster, 12 hour left deadlines — it’s about the rush to participate and not be left out. Time pressure, loss aversion, and FOMO stop operating independently and start reinforcing one another.
How do consumers counter this?
If we as consumers realize that being shown emotion in commercials is appealing to our subconscious, our sensibilities of wanting to connect with the story happening in the commercial…brands are doing that to lessen the evaluation of the cost and to increase the social connectedness with the brand.
What about the famous new Year’s resolutions?
There is this idea of fresh start effects. At New Year’s, where there’s a fresh start to the year, and people reset, it also happens on your birthday. If you move to a new home, the fresh start effect is in place. The ability to reset your habits has a surprising effect on your openness to try new brands or your openness to try new things. In 2018. in the United Kingdom, the West Midlands police wrote to 2,000 repeat offenders that now would be an ideal opportunity to make a fresh start and abandon your life of crime. When the police try the fresh start letter after the birthday of the criminal, the response rate jumps 56% in their willingness to call a hotline, largely because it’s their birthday.
So how do we “hack” back?
The number one thing we would recommend is taking a beat, taking a breath and say, “what’s really driving my urgency in this moment? Is the urgency coming from a deal I’m worried I’ll never get again?” Or is my desire that my spouse really wants this, and that I was going to buy it anyway? Pick apart what’s being emotionally driven and what’s being rationally driven. By just taking a step back, imagine explaining the purchase to your spouse, and right away, you have to be more logical. And if you can’t explain it, maybe you ought not do it.
(This interview was edited for length and clarity)
—Peter S. Green
Big Businesses mentioned this week:
$WBD ( ▼ 2.13% ) $PSKY ( ▼ 0.31% ) $NFLX ( ▼ 0.83% ) $ORCL ( ▲ 0.88% ) $PEP ( ▼ 0.47% ) $WMT ( ▼ 0.72% ) $DIS ( ▲ 1.12% ) $GOOG ( ▲ 1.91% ) $F ( ▲ 0.08% )
The usual suspects
- No dice: Warner Bros Discovery $WBD ( ▼ 2.13% ) ’s board of directors just put their finger firmly in the shotgun barrel of the Ellison family, Jared Kushner and their Saudi Arabian backers, advising shareholders to turn down the hostile bid from the Ellisons’ Paramount $PSKY ( ▼ 0.31% ) for the storied Warner Brothers Studio, HBO, CNN, and a raft of other media and entertainment properties, and calling the Ellison offer “illusory.” The Board said it unanimously endorsed Netflix’s $NFLX ( ▼ 0.83% ) $72 billion offer over Paramount’s $108 billion bid. Paramount’s offer was to include $40.65 billion in equity, but the Ellisons balked at putting up their share of the cash, said the WBD board. “PSKY has consistently misled WBD shareholders that its proposed transaction has a ‘full backstop’ from the Ellison family. It does not, and never has,” the Board wrote in a letter to shareholders released on Wednesday. “There is no Ellison family commitment of any kind… they propose that you rely on an unknown and opaque revocable trust.” Netflix’s offer is fully funded, and it’s got a market cap of over $400 billion, compared to paramount’s $15 billion market cap, the Board added. Just hours before WBD rejected the Ellison bid, First Son-in-law Jared Kushner’s Affinity partners dropped out. Affinity was part of the Ellison offer, and its patron, Saudi Arabia’s Public Investment Fund, promised to invest $24 billion in the Ellison bid.(On Monday, Kushner’s firm also pulled out of a planned Trump luxury hotel deal in Belgrade after Serbian prosecutors charged four government officials with corruption linked to the hotel site). A deal with Netflix still needs the Federal government’s approval, and President Trump has said he wants to have a say in who gets WBD and its assets. Ellison’s takeover of Paramount has shifted Paramount property CBS News to the right, and influence over WBD’s CNN, a longtime thorn in Trump’s side, would be a victory for Trump. But under the Netflix option, WBD would spin off its cable and linear TV offerings (apart from HBO), potentially stymying a bid to control CNN. A final decision by shareholders won’t come for months, and a WBD sale would likely come late next year. Stay tuned for the next exciting episode!
- One big loser in the WBD drama is a company you’ve likely never heard of: Called Hackman Capital Partners, it owns and operates about 60 soundstages from Hollywood to Ireland. Shows like Seinfeld and Gilligan’s Island were shot on hackman’s stages, but the entertainment industry’s consolidation means fewer new shows are being shot, and whoever wins the WBD battle will get a vast catalogue of old shows and films, meaning less demand for new productions. Sound stage construction boomed during the streaming boom a decade ago, and the pandemic, with private equity firms including Blackstone and Bain Capital pouring cash into new stages. New shoots of big-budget U.S. film and TV projects dropped 30% from 2022 to 2024, according to data firm ProdProp, and now payments are coming due on all the money that fueled the soundstage expansion, the Wall Street Journal reports.
- What about Oracle? The Paramount-WBD dispute has been shining some unwanted light on Larry Ellison’s company, Oracle $ORCL ( ▲ 0.88% ) . Investors and analysts are concerned about Oracle’s big push into AI, upgrading its data centers to run AI bots. That’s why Oracle’s stock took off in September when OpenAI committed to buy $300 billion in computing power from Oracle over 5 years. Oracle’s stock shot so high that Ellison’s stake briefly made him richer than Elon Musk. But OpenAI doesn’t have enough cash to meet all its commitments—it’s basing them on imagined future revenue. And when Wall Street figured that one out, Oracle’s stock took a 10% dive. It dove another 5% today on more news of that ilk: That contracts that have yet to be signed and booked as sales might not actually come through. The contracts are called “remaining performance obligations” or RPOs, and for Oracle, RPOs now account for nine times Oracle’s revenue for the past four quarters. That’s helped send the stock down more than 40% from its all time high in September.
- Pepsi’s challenge: It pays for Pepsi’s $PEP ( ▼ 0.47% ) retailers to have friends in high places. Like at Pepsi, for instance. According to a class action suit filed this week, Walmart’s $WMT ( ▼ 0.72% ) friends at Pepsi went out of their way to protect the market share of America’s largest retailer. Pepsi would monitor retail prices charged by Walmart competitors for Pepsi sodas and snacks, and make sure Walmart got a better price. Walmart’s volumes were so great, Pepsi had to stay on the chain’s good side: Pepsi sales through Walmart and its affiliated Sam’s Club accounted for 14% of revenue last year. The suit follows a Federal Trade Commission suit filed in the last days of the Biden Administration. Trump appointees withdrew the suit, but now a private suit makes the same claims. It argues that anti-trust law blocks wholesalers from conspiring with merchants and selling the same goods at different prices.
- he envelope, please:And the winner for broadcaster of the 2029 Academy Awards is….. YouTube?$GOOGL ( ▲ 1.93% ) That’s right. The Hollywood awards show with its famous red carpet and celebrity dustups is changing places, ending what will be a 56-year run on Disney’s$DIS ( ▲ 1.12% ) ABC network. YouTube is the biggest TV network in the U.S. now, with 13% of all TV viewing time. What’s behind the move? Younger viewers now stream most of their programming over the web.
What do you think of Big Business This Week? Tell us how you really feel in this survey!
Car Talk
- Tesla’s self-driving troubles: Can Teslas really drive themselves? A California court said “no,” and ordered Tesla $TSLA ( ▲ 3.45% ) to fix its technology or stop advertising its Autopilot and self-driving capabilities which it says make the false claim that a driver can just get in a Tesla and let the car take them away. The court stayed its order to give the company time to make its self-driving tools work, but Tesla has faced a steady stream of lawsuits from drivers and victims of self-driving cars. Tesla still hasn’t introduced fully self-driving taxis in Austin, Texas. It promised 500 cabs by the end of the year, now it says it may remove passenger seat monitors in about 60 cabs by the end of the year, but there’s no sign of the 1,000 Tesla robotaxis promised for San Francisco. Tesla’s robotaxis rely solely on cameras and machine-learning technology rather than also using lidar or radar sensors as Google’s Waymo does.
- Ford’s $19.5 Billion EV hit: The spark is gone from Ford’s $F ( ▲ 0.08% ) EV business. After racking up losses of $13 billion since 2023, Ford said rolling back its investment in rechargeable cars and trucks, and writing down investments of $19.5 billion. The end of federal EV subsidies, and a peak in demand for large EVs, like the F-150 pickup made it clear to Ford leadership that EVs aren’t a money-spinner. Still, Ford says it’s on track for a $30,000 small EV pickup for sale by 2027while it expands hybrids. Ford shares dropped about 3% on the news, but shares are still up 38% this year.
Get Big Business This Week in your inbox every week—and read it before everybody else! Sign up today.
Trumplandia
- Inflation gets personal: A new study by the Bank of America Institute says lower-income families are facing inflation that’s higher than that of people in the upper-income brackets. Looking at Fed data in August, the Bank found lower-income households’ annual inflation was 3%, compared with 2.9% for middle and higher-income households, who spend a smaller share of their income on food, energy, and shelter. That’s largely because lower-income households spend more of their money on necessities such as food, rent, and transportation costs, “they are hit more, relative to higher-income groups who spend more on services,” Francesco D’Acunto, a professor of finance at Georgetown McDonough’s Psaros Center for Financial Markets and Policy, told CNBC. “The data is very clear about that.”
- Just how much inflation is there anyway?Bureau of Labor Statistics numbers for inflation, just out, show prices rose 2.7% in the October-November period from a year earlier. That suggests inflation is falling closer to the Fed’s 2-ish% target, and would let the Fed keep cutting interest rates. But some data watchers say the numbers may be rigged, and in fact, inflation is much higher. Meanwhile, thejobs reportis also showing bad news, with job growth collapsing and unemployment rising. The economy lost 105,000 jobs in October, before gaining 64,000 in November. That’s a 6-month average of 17,000 new jobs a month, the lowest in 15 years (apart from the Covid period). Meanwhile, unemployment, measured in new benefit claims, is up to 4.6%, the highest since the end of Covid, and average hourly wages are rising by only 3.5%, which, if inflation is really at 3% means real wages are growing at only 0.5%, the lowest since 2023.
- Apprentice Fed Chair Edition: Is it Kevin? Or Kevin? Or Chris? A couple of weeks ago, President Trump said he knew who he was going to pick to succeed Jerome Powell as Fed Chair in May. The front runner: One of the two guys named Kevin, this time Kevin Hassett, director of the National Economic Council. But now it seems Kevin Warsh, a former Fed governor, and Chris Waller, a current Fed governor, are also in the mix. The choice matters because Trump says he wants a Fed chair who will follow his lead and lower interest rates further. But the Fed is divided over whether to lower rates again. “If the next chair comes in with a specific agenda that is not consistent with the economic backdrop, I think that person will lose the room right away,” Tom Porcelli, the chief economist at Wells Fargo, told the New York Times. Whatever cuts the Fed may make next year, it’s not clear they will translate to lower mortgage rates or credit card rates for consumers. Last week’s Fed cut by a quarter-percentage point to 3.5%-3.75% saw mortgage rates climb to 6.38% from 6.33%.
Want more Cheddar?
You’re clearly into smart people talking about even smarter things. Lucky for you, that’s literally our whole deal atCheddar. We interview the brightest minds in business, finance, and tech. If you’d like more in-depth analysis from interesting people, lcheck out ourwhere to watchpage and turn us on 24/7! Your wallet will thank you and so, more importantly, will your mind. But also your wallet. Remember that.
Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.
