I have talked about how I like to play the lottery. I think of myself as a moderate player as I don’t like to blow too much money for my entertainment and that includes gambling. As an example, I’ve shared about how I manage my gambling on cruise ships by setting a set daily amount that I plan to lose. When it’s gone, it’s gone. In the rare instances where I win, I give my wife the money to spend in the spa. It’s a win-win for both of us. It’s actually a double win for me as she’s in a good mood for the rest of the day when she gets back from a hot stone massage.
I don’t just limit my gambling to the high seas. I also play on land via my state lottery. I use the same philosophy. I only play what I expect to lose. Gambling of course is never an investment. For the lottery this looks like buying one scratch ticket on Monday and one on Friday. My philosophy is that if I win something substantial, I either start or end my week on a really good note. I like this method as it definitely reigns in spending on a losing proposition. I use the lottery app often to double check my tickets and enter points. When I log in, I see whatever news the lottery wants to promote. Recently I saw something I didn’t like, it was a new type of game called “Digital Instants” and it simply felt wrong. But that wasn’t the only thing. It got me thinking about how systems that are designed to pull money out of consumers continually grow and get better and better at it. It also made me reflect on what that means for how we have to look at the world.
The North Carolina Lottery has been pushing online play as much as possible. This makes complete sense as they get to keep an extra 7% commission they usually pay to retailers and managing the app costs much less than 7% of transactions. It first started with online draw games like Mega Millions and Powerball among others. Then, as I said, one day Digital Instants showed up in the app. The games are fundamentally online slot machines. Technologically this makes perfect sense too. Slots today aren’t mechanical, they are software that runs on a fancy looking PC. In my opinion slot machines are much more dangerous than draw games as they are designed to hook someone into a playing loop that never ends. It’s immediate and continuous. If you aren’t careful and have the wrong type of personality, you can keep feeding the machines your money until you don’t have any more. The entire Las Vegas metropolis, not to mention every cruise ship and resort casino, is built on this model.
So why introduce something so addictive and immediate? It wasn’t too difficult to understand the lottery’s motivation. There are many reputable international online casinos. This means slots are no longer a destination activity. You can play the slots from your couch, and the lottery was losing money to this new internet connected competition. If they didn’t offer an alternative, they would be leaving money on the table. It’s always easy to justify this as the money the lottery earns goes to the state coffers.
What was so upsetting to me is that every time I logged in to scan tickets, something you should always do in case you missed a number and the card was actually a winner, I’d be subjected to the digital version of walking into a physical casino. I say I, but it’s actually millions of daily players.
I realized this activity isn’t any different than what’s going on with other countless marketers who have become overly aggressive in applying the science and art of extracting ever more cash out of their customer base. As an example, car manufacturers carefully structure their offerings to bump consumers to the next model. This one hit me personally as I wanted to buy a Ford Maverick in the first year it was available. The base model had everything I needed, except cruise control. I found out that was by design to push everyone to the next level up in price. Of course, if your at that level, you may want to move to a Ford Ranger, which leads to the venerable F150. Now all of a sudden your twenty something thousand dollar pickup is a forty something thousand dollar pickup. You see this strategy with apple products. There is always a small but high demand feature in the next model up their product stack.
This isn’t anything new. I recall how the cable TV companies were masters of the low cost package that seemed great but had a couple of key stations missing that all but guaranteed the vast majority of customers would jump up to the next tier adding 20-40% to their bill. We see it today in cell phones. There is always a cool new device offered by the telecom companies which only comes with a slight bump in monthly bills. Disney’s genie plus fast pass system is another example of taking an expensive thing – the theme park passes – and getting the customers who’ve already purchased to bump up a substantial amount.
Why not keep it simple? Offer a good product at a good price and not play games. Mostly because the companies involved are like machines designed to make money. In the current world the purpose of the company is not to take care of customers or employees. It’s to make money for shareholders. To that end, like a race car engine, the machines are constantly tweaked to try and drive more performance. There are armies of financial and marketing professionals whose sole job is to make the company better at extracting more and more money out of consumers as it’s an easier way to drive corporate growth, especially in mature markets where organic growth has slowed. If a company can’t easily get more customers, the natural evolution of all companies is to squeeze ever more money out of existing ones.
The net effect of this for the consumers, i.e. us, is that we need to do more and more to try and play financial defense. It’s so easy to get stuck in the loop of going for the next thing, or adding one more little thing that adds up. As I’ve said, that’s by design. There are definitely some techniques which can help. Dave Ramsey pushes for using cash instead of credit because cash is still very emotional and credit is just numbers on a digital screen. Since I buy my cars with cash, I get this. Going back to the vehicle example, my next vehicle is going to be the aforementioned Ford Maverick. The F-150 is a nice vehicle so naturally I’d want one. The F-150 has an average sale price of about sixty thousand dollars and an average monthly payment of just under $900. No question it’s out of my league. This doesn’t even take into account long term maintenance costs. The Maverick is less than half that. I wonder how many people go into a dealership looking for that advertised $30,000 dollar truck and walk out with the $700 lease on a completely different model. Great for the company and the banks, but horrible for the consumer.
As a side note, If I wanted a 5th wheel, something my wife and I have discussed, I’d need a F-350 and that’s an astronomical $83,445 dollars or about the price of a house in a country town. And people are paying these astonishing prices, in many cases because they get bumped up from where they get started at the dealer.
Some things you can’t buy with cash and be done with it. The latest trends in pulling money out of pockets are the ubiquitous online subscriptions. This is because every marketer wants to turn every product line into a service with regular monthly billing. If there is an effort required to cancel, companies win because they know that human nature tends to keep the status quo, i.e. people will just pay another month rather than put in the effort to cancel. I used to try and avoid this by buying gift cards for set subscription times, like annual subscriptions for the few services I want. Now that option is going away as marketers figured out it’s a bad idea to sell a subscription product with a finite end to the service billing. The only thing you can do is sign up for monthly billing and just like the cable TV days of old the subscription tiers are getting more complicated and designed to push consumers into the more expensive plans.
There are other strategies to play financial defense. One way is to try and be emotionally aware enough to avoid spending triggers. You can create lists, budgets, and try to avoid the temptation brought upon by avoiding advertising and activities that are advertising heavy wherever possible. I think the most powerful way to avoid falling into spending traps is by educating yourself on the tactics used by marketers. If you can see the strategy used for the upsell, it’s easier to avoid it.
The big argument I want to make is that as marketers up their game, we have to continually up our defense. I like to gamble, it’s fun. I like slots, they are fun, in very very moderate predetermined amounts and only when I’m at a destination. I don’t like slots on my tablet every time I want to check my scratch tickets. And god knows the lottery won’t allow me to remove that from their homepage to avoid temptation from their marketing messages. So I have to be disciplined over the immediate emotional triggers the lottery is trying to incite in me. It’s a never-ending battle that’s very hard to win.
So how do I deal with one more highly tempting marketing offer in a never ending barrage of them everywhere I turn? Like a bad human relationship, I have to figure out what boundaries I need to erect and what I need to do to make sure I enforce them. I’ll make some mistakes, I’m sure, but knowing it’s a never-ending battle will keep me safe from willingly giving in to bandits, both the human marketers and the digital one armed kind.
Like what you read?
I spend hundreds of hours working on these articles every year with no compensation other than support I get through donations. You can support with a tip and by subscribing to the podcast (and writing a review on iTunes would be really appreciated as well!)
One time tips:
https://venmo.com/pelusopresents
On Going
https://www.patreon.com/PelusoPresents
In addition to subscribing here on Medium.com, you can also find more writings by Mike Peluso at:
The Blog:
With hundreds of archived articles, Peluso Presents is your source for commentary, ideas and insight in navigating the collision points between work and life.
The Podcast:
http://pelusopresents.libsyn.com/
For those who are on the go, every episode of the Peluso Presents podcast includes a reading of a highlighted post as well as other great entertaining information. Available wherever you get your podcast fix from! Subscribe on iTunes!
ITUNES: https://itunes.apple.com/us/podcast/the-peluso-presents-podcast/id1143822193?mt=2&ls=1
GOOGLE PLAY: https://play.google.com/music/podcasts/portal/
RSS FEED: http://pelusopresents.libsyn.com/rss
Twitter: https://twitter.com/PelusoPresents
Get reminders of articles, Tweet AT me, and occasionally see some other great tweets by Mike!
Email: Peluso AT Outlook.com
Your feedback and suggestions / requests are super valuable! Email is for those who still like to communicate old school!
Home of Peluso Presents 