Our Brain on Costco

What our brain is doing when we shop at Costco:

Consumers aren't always driven by careful considerations of price and expected utility. We don't look at the electric grill or box of chocolates and perform an explicit cost-benefit analysis. Instead, we outsource much of this calculation to our emotional brain, and rely on relative amounts of pleasure versus pain to tell us what to purchase. (During many of the decisions, the rational prefrontal cortex was largely a spectator, standing silently by while the NAcc pleasure centers and insula secretes aversive feelings argued with each other.) Whichever feeling we feel most intensely tends to dictate our shopping decisions. It's like an emotional tug-of-war.

Retail stores manipulate this cortical setup. They are designed to open our wallets: the frivolous details of the shopping experience are really subtle acts of psychological manipulation. The store is tweaking our brain, trying to soothe the insula and stoke the NAcc. Just look at the interior of a Costco warehouse. It's no accident that the most covetous items are put in the most prominent places. A row of high-definition televisions surrounds the entrance. The fancy jewelry, Rolex watches, iPods and other luxury items are conspicuously placed along the corridors with the heaviest foot traffic. (The fresh food is always located in the back of the store, so that we have to parade past the profitable aisles of temptations.) And then there are the free samples of food, liberally distributed throughout the store. The goal of Costco is to constantly prime the pleasure centers of the brain, to keep us lusting after things we don't need. Even though we probably won't buy the Rolex, just looking at the fancy watch makes us more likely to buy something else, since the coveted item activates the NAcc. We have been conditioned to crave a reward.

But it's not enough to just excite the NAcc: retailers must also inhibit the insula. This is where Costco really excels. When consumers are repeatedly assured that low prices are "guaranteed," or told that a certain item is on sale, the insula stops worrying so much about the price tag. In fact, researchers have found that even when a store puts a promotional sticker next to the price -something like "Bargain Buy!" or "Hot Deal!"-but doesn't actually reduce the price, sales of the item will still dramatically increase. These retail tactics lull our brain into buying more things, since our normal response to price tags is pacified.

Fortunately we don't have a Costco nearby yet, just a Sam's Club and I am betting they haven't figured any of this out yet. I do love the free food samples, though.