But what’s behind the frenzy? As those of you who follow our blogs know, we’re keen students of all kinds of behaviour – investment, finance, economic – you name it. Then we came across a fascinating new technical term that describes and explains why shoppers throw punches over bargains. It’s called psychological ownership.

Psychological Ownership Explained

A recent issue of The Conversation, an online platform dedicated to current cultural phenomena, posted a recent article entitled: Why do Black Friday shoppers throw punches over bargains? A marketing expert explains ‘psychological ownership’.

According to shopper marketing gurus, “we often take ownership over a thing or service in our minds before we actually give up the cash that makes it legally ours. And retailers use this psychological technique to get us to buy more of their stuff – or spend more.”

Psychological ownership is a vitally important concept in shopper marketing and there are three factors that foster the pathology:

  • If you can touch or control something or even imagine doing so. A good example is putting something in your shopping cart.
  • If you have customized something or invested your efforts in designing it. When the server brings the food to your table and places your dish in front of someone else, you’re quick to say, ‘That’s mine.’
  • Intimate knowledge. If you grew up with a product, have always used it or have a special or unique way of using it, the odds are good you feel psychological ownership over it.

Psychological Ownership & Investing

Though not widely documented, this phenomenon occurs in investing, too. To avoid it, you need to eliminate emotion from the investment decision making process and rely on evidence.

Nevertheless, you may encounter occasional instances when you simply cannot resist making often compellingly obvious decisions about under-performing stocks – sell your losers and let your winners run – because you’ve built up a psychological attachment to a particular company and the products it makes.

Never the Twain Shall Meet

Though understandable in the context of retailing, psychological ownership is the enemy of the shrewd investor. It’s one thing to feel a sense of psychological ownership over that last chocolate truffle in a display case or to the dream home you found on Zillow, or even intangible things – such as ideas. But when it comes to investing, you need to keep your cool. Back in 2007 when the U.S. dollar hit parity with the Canadian dollar, Canadians swarmed across the border on Black Friday to get in on the great deals. This had a serious negative impact on retailers. Realizing they needed to plan for 2008, the phrase ‘Black Friday’ emerged into Canadian marketing vocabulary.

Ever since then, Black Friday has gained more prominence and interest among retailers and consumers. This year, it falls on November 26th.

Black Friday Sales Growth

In 2011, Canadian Black Friday sales were up 8.5 percent from 2010, while Cyber Monday sales grew at 15.4 percent according to a KPMG research study. It’s continued to gain speed ever since.

Black Friday is the most celebrated shopping day of the year in the U.S. and this frenzied shopping day – which is characterized by tales of fistfights over discounted televisions or even stampedes as consumers rush to get that low-priced sweater they saw in an ad – is clearly gaining ground in Canada.