Math

Being Hopeless at Math is Costing Us Money

August 6, 2012 Click to Comment “I don’t do math—numbers give me a rash.” That’s a line I’ve used a lot, mostly because it’s true, but also because it gets me a laugh. Truth be told, most of us stink when it comes to doing math on the fly. That’s a problem, because being hopeless with math makes us putty in the hands of retailers. Some rights reserved by MelvinSchlubman Why is it socially acceptable to say that we’re bad at math, but not socially acceptable to say we’re bad at reading? The truth is that it’s not okay to be hopeless with numbers. Here are three ways that our aversion to math costs us money:  The number 9. Amazingly, 65 percent of all retail prices end in the number 9. Unconsciously, we’re charmed into believing the item is a bargain. Both Steve Jobs, who came up with the 99-cent app, and the guy in California who founded the 99-Cent’s Only stores have made millions off this human quirk. Retailers use 9 on purpose to lure us into buying something because they know we’ll assume it’s been discounted. The good news is that simply being aware of the ways that retailers use the number 9 can break their spell over us. Whenever you see a price ending with a 9, stop and think about what’s going on. Intentional confusion. It’s a trick retailers use all the time: A confused customer is more likely to opt for the higher price deal. An item marked 5/$4 prompts us to buy five items for $4, not 1 item for $.80, because it’s too confusing. Which is the better deal: 33 percent off the regular price or 33 percent more product for the same price? Studies show that most people go for the 33-percent more deal because they don’t know how to do the math and they simply guess. And they’re wrong. 33 percent off is the same as a 50-percent increase in the quantity. Let me show you: If the regular price is $1 for 3 pounds, 33-percent off means you get 3 pounds for $.66 or $.22 per pound. If you opt for 33 percent more, you’ll get 4 pounds for $1 or $.25 per pound. The secret is to figure out the per unit price—per ounce, per quart, per pound. Now it’s easy to compare. Price ignorance. In his book Priceless, author William Poundstone tells the story of the retailer Williams-Sonoma and a $279 bread maker. Sales were lagging so they placed a nearly identical machine next to the $279 bread maker with a price tag of $429. Immediately sales doubled on the $279 model because it appeared to be 40 percent cheaper, and therefore a great deal. The same tactic is in play when you see a big display in the supermarket with a sign that reads, “Special!” If you are not up on your prices, you’ll fall for every trick that retailers have up their sleeves to get us to spend more money. Getting good with math, I’m discovering, starts with my attitude. That’s why I am never again going to tell myself or anyone else that I’m bad with math. I’m doing brain calisthenics. And while forcing myself to figure out per unit prices on the fly is a good exercise, I’m learning that a pocket calculator is my friend, too. How are you with math? Let’s discuss in the comments here

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