Halloween decorations have been taken down, costumes have been stowed away and all of the candy corn has been eaten. Americans are now preparing for their next major holiday—Black Friday.
Black Friday is the unofficial official name for the day after Thanksgiving. On this day retailers proclaim the start of the holiday shopping season by offering steep discounts. For example, last year, Black Friday shoppers could buy a Panasonic 50-inch LED HD TV from Best Buy for just $199.99 while supplies lasted. This was a 64 percent discount! This is a classic “door-buster,” a marketing strategy in which retailers offer large discounts on a limited number of desirable items to attract customers. The hope is that once a customer is in the store, they will look around and buy other items.
Consumers take notice of these enticing door-buster deals and take action. According to the National Retail Federation, sales from 2014’s Black Friday weekend totaled $50.9 billion as 133.7 million people shopped either in stores or online. In a survey we conducted, 76 percent of respondents reported having shopped on Black Friday in the past and 41 percent plan to do so again this year.
Black Friday is often regarded as the epitome of an overly crazed capitalistic society. Consumers are willing to stand in line for hours, if not days, in order to snatch good deals. One man in Orlando started to camp out in front of a Best Buy 33 days in advance of Black Friday.
Black Friday can also lead consumers to overspend as they get caught up in the shopping frenzy. In a short survey we conducted, participants were asked to think about a family’s yearly electronics expenditures in a world with Black Friday compared with a world without it. On average, our survey participants believed that a family would increase its yearly expenditures on electronics, despite Black Friday discounts. The participants’ intuition was that Black Friday, even with its large discounts, leads to an increase in spending over the long term.
Why is this happening? One reason could be social proof
One potential reason for such overspending on Black Friday is social proof. This is the principle that states we change our behavior to conform to the social norm. In short, we do what everyone else does. Many social scientists like Robert Cialdini, a psychology and marketing professor at Arizona State University, have shown that social proof impacts our behavior across a number of realms, including our energy consumption, voting patterns and our willingness to reuse towels during a hotel stay.
Social proof may also have an impact on our spending behavior during Black Friday. The more we see images of long lines and crowded malls, the more we are likely to engage in Black Friday shopping ourselves. Black Friday has become the “social norm.” Because so many people are spending, it becomes socially acceptable for one individual to spend. It’s the classic “everyone is doing it” excuse.
But is spending more on Black Friday a recipe for more spending?
In order to answer this broader question, our team created an experiment that asks the Black Friday question, but in a different setting:
Imagine a couple, Dan and Barbara, who eat at the same cheap Chinese restaurant and order the same cheap wine every Tuesday. Their regular Tuesday meal usually costs them $30. Then one Tuesday the couple breaks from tradition and dines at an expensive French restaurant. Their French meal costs them $75. What do you expect will happen to the couple’s regular Tuesday night dinner tradition over the next 10 weeks? Would the couple’s weekly dinner expenditures increase as they start to go to more expensive restaurants and order more expensive wine? Or do they treat the expensive French restaurant as a one-time occurrence and go back to their standard cheaper tradition?
Other participants were asked to consider a case in which the day in question—when Dan and Barbara visited the more expensive French restaurant—was a special day. For some people we said that this special day was Valentine’s Day and for others we said that it was while they were on vacation.
We were interested in what would be the effect of eating at an expensive French restaurant on the choices that people make about their dining choices in the following 10 weeks. We saw that when the expensive dinner took place on a regular Tuesday, participants expected to start attending expensive restaurants more regularly, and in total spend about 47 percent more money on these weekly meals.
When the expensive dinner took place on a special Tuesday (either “vacation” or “Valentine’s Day”), participants expected to spend more as well—but to a lesser degree than for a regular Tuesday. When the special Tuesday was part of a vacation, spending increased 23 percent less than regular; when the special Tuesday was part of Valentine’s Day, spending increased even less—16 percent. When the expensive meal was part of a vacation or Valentine’s Day, people categorized the nice French meal as a “cheat” day dinner. There was a social justification for their increase in spending. It was out of their regular routine, and because of that it was less likely to form a basis for their ongoing spending behavior. When the day was just another Tuesday, however, it was not categorized as a part of a different experience, and there was a larger increase in expenditure in the long term. More generally, people seem to take deviation from their regular spending as a start of a new habit to a larger degree when it is just another day of the week. Meanwhile a deviation from a strategy during a special day compartmentalizes the experience in a way that makes it less likely to spill over to future experiences.
Black Friday might work in a similar way. That day, for many American households, might be serving as a spending cheat day. Over the years it has becomes socially acceptable to spend a substantial amount on this day. But, to the extent that Black Friday is categorized in a special way, it might be the case that spending will revert back to normal levels post–Black Friday.
Cheat days have proved immensely valuable in helping people lose weight. Weight loss programs with cheat days understand that from time to time we are likely to lapse in our diets. These lapses can cause us to give up entirely. With a cheat day, however, we are more likely to understand that this lapse is just temporary and to continue with our long-term plan.
From this perspective, it is true that Americans spend a very large amount of money on Black Friday but it is possible that calling it by this special name and making it a national holiday helps us to separate our Black Friday shopping from all other days. And actually it can help us keep our spending in check, at least to some degree. Without a spending cheat day it is possible that the same type of increased spending would not be categorized as one-off, and would lead to more systematic spending increases.
And what is the practical suggestion from all of this? If you think about buying something and you are worried that it will become a standard expense, do it on Black Friday. You might still regret the purchase but at least you would be less likely to regret a longer stream of related purchases.
What about Gray Thursday, Small Business Saturday, Cyber Monday and Giving Tuesday?
In recent years Black Friday has expanded from a one-day shopping event to a full weekend. In 2005 Ellen Davis coined the term Cyber Monday, the day in which online retailers offer steep discounts. In 2010 American Express created Small Business Saturday, encouraging shoppers to buy from small and local businesses. Starting in 2012 large retailers like Best Buy, Target and Wal-Mart, opened their stores on Thanksgiving Day, creating Gray Thursday. Even charities have joined the trend. In 2012 New York’s 92nd Street Y and the United Nations created Giving Tuesday, a national day of giving.
This proliferation of cheat days should worry us, because with the advent of all of these additional cheat days, overspending might become the norm and not just an occasional release valve. Our recommendation for shoppers: one day a year might be all that we need as a “cheat” day.
History of Thanksgiving and Black Friday - [SIDEBAR]
Retailers have a longstanding history of pegging promotional sales to Thanksgiving.
In 1924 Macy’s launched its famous Thanksgiving Day Parade, largely as a promotional tool to showcase its then-new store on Herald Square in New York City, the largest retail store in the world.
In 1939 Thanksgiving fell on November 30, the fifth Thursday of that month. Under strong pressure from retailers, who feared that a shorter holiday shopping season would lead to a slump in sales, Pres. Franklin D. Roosevelt moved that year’s Thanksgiving to be celebrated on the fourth Thursday of November.
In 1941, after the 1939 debacle, Congress passed a law fixing Thanksgiving as the fourth Thursday of November.
In 1961 the term “Black Friday” was documented for the first time, referring to the Friday after Thanksgiving. Apparently, the term was already in popular use by police officers to describe the heavy shopping traffic.
In 2012 several large retailers opened their stores on Thanksgiving Day.
In 2015, in an interesting trend reversal, REI, the large outdoors retailer, is closing on Black Friday, encouraging employees and shoppers to spend time outdoors, rather than in shopping centers.
Special thanks to Kristen Berman for her insightful comments and to MetLife Foundation for funding this research. The Foundation aspires to help people build a better tomorrow through access to the right financial tools and services.