Remember last Christmas? Aunt Sally gave you a gift card to one of those stores that you never shop at since it’s just too expensive. For the sake of this article, let’s say it was a gourmet kitchen store with all of the really cool kitchen gadgets; a good example since that is what my gift card was for.
Follow my experience for a moment and see if you can relate.
I walked into the store and stared in wonderment; all of those neat pots and pans with French names (yes, I like to cook). I had heard the names before, but never had the opportunity to try out one of the products. I just knew that if I could own a French omelet pan that cost $50 my omelets would be the fluffiest and tastiest omelets around. How did I survive into my fifties without such a pan?
But look at that price. Is it really worth it? Should I spend $50 for a special pan just to cook my eggs?
Not to worry, I have a gift card! The decision was easy.
I walked out of the store with my new French omelet pan, already planning tomorrow’s breakfast. My family was in for a treat. The following morning, the omelet was good, just like they always are. I looked at my new pan and was disappointed that it did nothing special for my omelet; even with the French name. I started having buyers remorse for spending $50 for a pan until I remembered that I used a gift card and not real money that I had worked hard for.
Before I create family tensions, let me thank Aunt Sally again for the card. Her intentions were good and I appreciate the gift. The problem was within me for making a poor decision since I was using a gift card.
At this point in the article, you will identify with the thought process used to make my buying decision since you have been there also. Secondly, you probably know where this article is heading. Let me continue for those that do not see the analogy yet.
I call it the ‘Gift Card Mentality’ and define it like this: the lack of proper decision making analysis because it’s not my money.
Now, where can we apply this syndrome in our regular lives?
Here are a few examples to consider:
- Let’s buy that new solar system for our house because the taxpayers will be putting up most of the money in the form of rebates.
- I want the newest drug on the market and not that old generic that has been working for me. Why not? The co-pay is the same.
- Sign me up for that class on basket-weaving in the 18th Century. I know I will never use the information I learn and yes, it costs $1,500 for the units, but I have a grant.
- The new Federal program will only cost the taxpayers Two Billion Dollars a year to start and we are sure it is worth the cost.
You get the picture, buying decisions based upon the fact that someone else is paying the bill. Would you make the same decisions if the money spent was money you earned? That should always be the test.
I understand the attraction of getting the solar system for such a low cost, but we need to take this discussion to the next step to understand the long term outcome of these decisions.
Since your decision is made easy due to spending the other guys money, you will pay a higher cost for the product. Since you will pay a higher cost, the person selling the product will charge more. The entire free market system spins out of control because the incentive to make products competitive is negated by the availability of free money to be spent on those products.
We are all guilty of applying the Gift Card Mentality to our buying decisions from the President all the way down to a blogger shopping for an omelet pan.
The next time you hear someone ask the question ‘why is this product or service so expensive’, look to see if the product gets purchased with the other guy’s money; more than likely, you will have the answer to their question.
by Jack Woodward 7/6/12