What makes this really interesting is how living in an economy where prices are both set by the seller and non-negotiable causes consumers to equate asking price with value.
As a consequence, BOGO feels like a better deal than one item at 50% off MSRP. A 50% discount is a change in the asking price; the value of this item must have depreciated in some way for the seller to want to get rid of it (e.g., this garment is going out of season), and the price I'm paying is a fair deal that I'm happy to accept because I don't need to indulge in extravagances.
But in a BOGO deal, the asking price hasn't moved (or, as the article discusses, may actually be inflated); the fact that I paid full price means that it retains its original value, and the one they throw in is simply an enticement. In other words, I purchased an extravagance at full price, but it was a deal because I walked out with two. The amount paid is double the previous example's, but the perceived value is fourfold.
This isn't even getting into the actual value of perceived value (cf. the sticker price of wine vs. its perceived quality). Really interesting stuff.
> This isn't even getting into the actual value of perceived value (cf. the sticker price of wine vs. its perceived quality). Really interesting stuff.
I fall foul of this trick quite a lot when food shopping. For example if I'm buying a box of cereals and I see one is priced at £1.80 and another is priced at £2.50 but is on sale from £3.50 I'll buy the more expensive one because I'm under the illusion that I'm getting a good saving and a better quality product. In actual fact though I've just spend quite a bit more for a marginally better, if not the same quality item.
When it comes to commodities, the best thing to do is shop by unit, ignore the "sale price" and the msrp, look only at the cost/ounce or cost/unit most US stores list both on their price tags, though you have to watch out for when they use different measurements for directly competing products (ie kellogs sold by the ounce while store brand by the pound).
In semi-blind taste tests I've always preferred the name brand of cereals but not enough to pay extra for them, so when they come out to be the same price as the store brand per ounce I'll buy them otherwise I just go with the cheapest option.
The issue for consumers is that every decision now is about weighing up brand differentiation - DTC is no longer about commodities, but about niches.
Unless you absolutely know the exact type of product you want (i.e. you definitely want some flakes of corn), my take is we're shopping in "ranges". e.g. I need something to eat for breakfast, and I won't be offended at paying more than £X for it.
I find it the same with soap - on a basic level, a 35p bottle of handwash is the same as a more expensive one, but I've now been primed that there's this range of prices I won't be offended at paying, and if something more expensive is reduced into that range, I'll snap it up as a "deal" because it was out of reach and now it's in reach.
I took a fun cooking class in college that was targeted at home cooking.
We did double blind taste tests on nearly every type of food we could think of. It's still amazing to me how infrequently the brand name won in terms of flavor.
Take that as you will, sample size was only about 25 students and my memory might be flawed. But I'll never buy brand name chocolate chips again in my life, I remember that much.
There are slews of items that have laws governing them. Milk is milk. Butter has to follow a formula. Flour is flour, rice is rice.
Butter might feed their cows differently, though, and flours have different gluten contents. Rice can be different varieties. In all of these, however, there isn't much different.
Other things are preferences. For example, my father preferred any-brand-but-Kellogg's corn flakes, but my spouse is in the only-Kellogg's-will-do camp. There isn't much difference between brands after that: Kelloggs flakes tend to be thicker and it changes the taste.
There are slews of store brands that are much better in taste - and ingredients - than their name-brand counterparts. The store brands aren't spending lots of money advertising, after all, and can invest that money into making products that are yummy. Having good-quality store-brand products gets people into your stores.
I’ve heard it’s kinda the opposite. Apparently, lotsa white labeled goods are manufactured in the same plant as the name brand stuff, by that brand, but to differentiate it, the brand will tweak the recipe slightly for the white label run.
I suspect (but never confirmed) that they have some "quality binning" at the factory; the runs closer to set quality get the "main brand" label, the slightly worse get the "value brand" label, etc.
That the cheap store brand is made by the same company that makes the expensive brands is true, one only has to check the manufacturer data on the label.
Fwiw I did strawberry packing at a farm when I was a teen in the UK. This was the exact thing, M&S got the top "quality" selection, then the other supermarkets took the rest.
Only thing though was that the selection was purely visual, M&S wouldn't take any "uglies" (we were told that if we let any in the whole batch would be rejected).
The expensive strawberries were the same ones from the same fields, same picking and packing just put in different boxes with different labels, and they conformed more closely to an idealised strawberry shape.
Quality binning is a thing, but not quite like that.
If they do a factory run for "Brand A", adding the label is a component of that run. There's three main outcomes:
- The product passes Quality Assurance / Quality Control, and sold to mainstream retailers
- The product fails QA/QC, but for cosmetic reasons only such as marring on the packaging or label misalignment. These get sold to discount retailers such as Big Lots[1], but still under the main brand.
- The product fails QA/QC due to a reason that makes it ineligible for public sale. Depending on the margins of the product, it may or may not be worth some level of re-work to make it eligible for sale within one of the two bins above. Otherwise, it's either donated (if the product is safe but ineligible for sale due to some regulatory reason such as consumer protection laws around the word "New" on labels) or scrapped (and might be sellable for some industrial use) or destroyed.
But in all cases, it's still "Brand A" and not sold as a completely different inferior brand.
Private label runs are different. A retailer will come to you with a specific set of requirements around ingredients, price points, profit margins, etc and you'll design a formula that matches their requirements[2]. While the manufacturer is leveraging the same machinery, product formulation expertise, and procurement capabilities, the end result may be completely different than any product you actually sell in your name brand portfolio due to differences in priorities and market goals. For example, Costco, Walmart, and Dollar General may be relying on the same manufacturer for their private label trashbags. But decisions on the thickness of the plastic for the bag, whether to use "break protection" patterns on bag design, whether to incorporate draw strings or just little flaps of plastic, whether to package it in a cardboard box or plastic sleeve, etc are all made in coordination with the retailer requisitioning the private label and will end up as a distinctly different product than both the private label runs for other brands as well as the manufacturers own name brand formulations.
Ice cream is a really big one here. You'll notice that it's always sold by volume (fluid ounces) rather than weight (ounces). Manufacturers control the volume of air that gets incorporated into the ice cream, and can use the same amount of product by weight to produce a pint, quart, or half gallon of ice cream. Both within the name brand portfolio of the company and the private label runs, you'll have wildly different end products based not only on the ingredients chosen for a specific formulation but the density chosen as well.
[1] These discounters also tend to get inventory that is perfectly fine, but that didn't turn fast enough and you're willing to let go at a discount to get it out of your warehouses.
[2] You'll also see this within some name brand portfolios as well. You'll see this in the form of retailer-specific model numbers for something. This happens for lots of reasons, from Amazon having specific Alexa functionality incorporated into the version of a product to Walmart demanding a compromise on warranty period or part quality so that they can get to the retail price point they determine is most optimal.
Even without discount on the more expensive one, it can be used as a marketing trick to make you buy more expensive. For instance offer three versions of a product: $1 branded as cheap/bad, $2 branded as good, $5 branded as luxury. The last one exists mainly to anchor the value of the $2 as also cheap and to make you buy it. If one only had the choice between $1 and $2, most people would choose $1 option.
I agree that there's been a move to split "Store Brand X" into "Store Basics X", "Store Brand X" and "Store Finest X", and that the "basic" product is often perfectly good.
However, for broader product categories, there's also a tendency for the most and least expensive products to be outliers, with the cheapest being barely enough to justify the label and the dearest being aimed at rich suckers. Hence the heuristic of getting the 2nd cheapest (especially if it's a one-off consumable, where savings won't accumulate); or, if splashing out, getting the 2nd most expensive.
In my experience this definitely applies to things like wine and chocolate, where the scale is roughly:
|
Q|
u| x
a| x
l| x x x x
i| xx x
t|
y|
|x
+----------------------------------------------
Price
In some cases, businesses know consumers are following some heuristic like this, and counter-strategize accordingly (or so I've heard). According to this 2013 blog post[0],
> Restaurants realize that many people won’t order
the least expensive wine (no one wants to look
like a cheapskate!) so they often go for the
second cheapest. That’s exactly why it’s often
the most marked-up bottle on the list.
Branding and perceived high quality due to high price works ridiculously well too. My wife will always want to buy the higher price item because “it’s probably better”. I’ve looked at pricing and anchoring extensively and know better but at this point I gave up trying to convince her. Now marketers take our money and I won’t blink an eye, just cry inside.
I know purchase manager at large companies does that quite often. Get quote from three companies. Cancel out highest and lowest bidder and confirm order to middle one.
Surely it depends on your buying habits, and how you buy. Now if you get stuck on the hedonistic treadmill and start buying the more expensive cereal all the time that is bad from a cost point of view, but if it's a one off treat replacing another £3.50 box of cereal, you've saved a pound.
I suppose we should rationally evaluate the benefit that the new cereal independently of the price. And then if the benefit outweighs the cost, then we should buy. But we aren't robots, and we like nice things.
Ps I often buy the wine that's on offer, it does depend on the supermarket though, as some just sell rubbish. It stops me having to look sagely at a half dozen bottles, that I have absolutely no basis to differentiate between, other than label.
What I ended up doing in order to avoid this is that I’ve been buying from the same brands for some time now, i.e. the same soap, the same shampoo, the same butter (truth be told, for butter I fluctuate between two brands), the same chocolate, the same detergent etc. This way I don’t fall for tricks like the one you mentioned because I almost don’t care about any other brands and products than the ones I’m really interested in. I also get to save a lot of time in the supermarket because each time I visit it I know exactly what I want.
You're not exactly beating the system. That's just plain old brand loyalty, which companies love. You've stopped shopping based on quality or value, and they can turn a profit without investing anything into marketing.
paganel is saving time by no thinking about the issue, so 'winning' in some sense.
However... you don't know what the brand is. The brand may be the store brand, which... while it's brand loyalty, is almost always the cheapest, and usually don't have any marketing expense beyond the product in the store in the first place.
I've learned to love most store brands, and... it may be my mind rationalizing it, but I think they've actually become much better quality wise than they were 20 or 30 years ago. But again may be a trick of the brain.
Biggest issue I see is that store brands often don't have the same level of variety. Chips - store brand may have 4 flavors - other vendors may have 10-12 on the shelf above. If I really want a specific flavor, I'll get a name brand, otherwise, just go with store brand (or.. with chips, hopefully skip altogether!)
My localish store brand is also quite good. I buy the store brand for all of the staples.
One place that I can't quite find a non-brand name replacement I like is laundry detergent. I've tried the cheaper brands, store brands, etc..., and always end up back on Tide.
Store brands have certainly gotten much better. I generally try and buy as many store brands as I can. There are a few items where I like the flavor of a brand name better, but not many.
Some grocery chains even have two tiers of store brand. For example, the Loblaws/Zehrs stores in Ontario have yellow "No Name" packaging for the basic level, and "President's Choice" for the premium. Some products are only available in one tier or the other, but for a lot you do have both.
Not really beating the system, more using it to our advantage. The half price offers in the UK big 4 come around often enough that paying full price, or even 3 for 2 is almost never needed on basics. We'd go to Tesco once in a while just for promotions, come out with 6 months worth, then do the regular shop at Aldi.
I remember reading that many of the costs of the in store offers and promotion are actually pushed to the supplier. Leaving Tesco, Asda etc on same margin as before. I suspect this hits smaller suppliers disproportionately.
I don’t want to beat the system because I know it’s a lost battle from the get-go ans I also don’t really feel the need of being “lured” into buying a product. That’s also one of the reasons why I still don’t use an ad-blocker, as I’m almost totally blind to advertising, both online and offline. I do think though that this tactic has made me purchase less stuff over time, I consider that as a win.
I'm very much the opposite. I have in mind what I want to pay for a certain item, butter for example, and I'll buy whatever brand is being promoted that week for my target price. As long as it's not absolute garbage of course.
Maybe it's different in the UK than in other places, but the large supermarket chains are constantly running so many promotions that you can, if very brand disloyal, always shop smart based on bogofs and alike.
> I have in mind what I want to pay for a certain item, butter for example, and I'll buy whatever brand is being promoted that week for my target price.
I do this and it drives my wife nuts. For example, she likes Diet Coke. I see it as diet soda and will buy whatever diet soda is on sale. I only eat fish or steak when it's on sale, otherwise it is chicken all week.
Personally I go with whatever brand taste we like best. Of course I consider the nutritional value when looking at taste. These days we deliver most of our food to our house and the local supermarket that offers the service will have organic options of the same product but only to delivery subscribers. It’s weird but we are in Japan where things are weird. I can get sausage links with food coloring to make them more appealing or without but looking much less desirable. I don’t know if the prices differ since wife does all the ordering.
Yeah, it's really convenient. I often compare the price per weight when choosing between two different but similar items.
I also remember a time when I needed a new dishwasher, and one shop had it from $300 for $200, while another shop just had the same dishwasher simply for $200. I got it from the second shop, of course.
Canada does this, but often products are sold per kg, lb, or 100g. Frequently, different tiers of quality are sold in different units, so comparison shopping is that much more tedious. And the 100g thing is especially pernicious -- all too often, a first glance indicates a 50% discount that careful examination shows to be a 5x markup!
I feel that there is a wealth/background effect here that could be studied somewhat too. I think people who don't have to worry about money are less likely to pay any attention to discounts and deals.
Having come from a council estate, there is a certain mindset behind getting a deal for everything, making your little money go as far as possible, buy one get one free, or discounts on anything, or coupons to get into restaurants or discounted vacations, or companies that "get you deals" on all your electric, gas, TV, internet bills, 8 packs of cheap beer, etc. are all seen as victories and you are crazy for not taking advantage of them. There's an emphasis on getting more quantity for less money. That's easily exploited.
I don't have hard numbers to quote on this, but I'm very convinced that you end up paying more in the end.
From my own experience and pretty much every one I talk about this, people have a tendency to buy things they'll never need. (I constantly try not to do that, but it takes active thinking about it all the time.)
No discount deal is cheaper than the one where you don't buy something you don't need.
Then there's underestimated costs that aren't immediately visible. If you buy more stuff of items that you use over a longer timeframe you'll have to store them. Which of course means you're paying rent for the space in your flat that's taken up by excess stuff.
I consider myself reasonably frugal and thoughtful about money, but I definitely fell into one of these traps buying a suit for the first time. I went in with a specific sale in mind, they told me they had a two-for-one deal going so I might as well try on two colors of suits. But then it turned out the second suit was over double the price of the advertised sale price that I came in for (the first suit would have qualified) and two-for-one would of course be the more expensive of the two prices. But I had already picked it out, etc. and it was after all really just "half" the price since I was getting two suits and you know maybe I did need both colors. I have worn one of them once and the other never in the three or four years since then. Though it is nice to know I won't have to panic if there's a sudden funeral I have to attend, say.
I did the same thing. I had a funeral to go to and needed a suit (of course that is not necessarily true but I did not know it then) and walked in the door at the Men's Warehouse and got hooked on the two-for-one deal. Spent a lot more money than I needed to, for my purposes I could have just gone to the Kohl's department store and picked up something inexpensive and it would have been functionally equivalent.
A long running promotion in Tesco is 3 bottles of any brand beer for £5.25. I can't imagine anyone ever goes into a store with the intention of buying 3 bottles but if you just buy 2 you're misguided into thinking you'll lose out.
In reality, you're spending more and drinking more than you really want to.
Having recently moved to the UK, I have noticed some "offers" of this kind in supermarkets where there wasn't actually any advantage over buying the items by themselves. They really must count on people not checking.
> Having recently moved to the UK, I have noticed some "offers" of this kind in supermarkets where there wasn't actually any advantage over buying the items by themselves. They really must count on people not checking.
I've actually seen a couple cases where the bundle "offer" was a worse deal than buying individually (e.g. get one for $1 or a 2-pack for $3). I almost got suckered by it too, because I needed more than one item, so lazy-thinking said a multipack made more sense.
All that ever counts, regardless of "offer" or "saving" is the price per 100ml or kg. Thankfully the pesky EU interfered with the UK yet again and insisted that must always be displayed.
Haven't used Tesco delivery for years, but their "best offers" always brought back the 10p and 7% savings, the real savings were on different tabs or buried in search. There was a search by cheapest, never by price per unit. Funny that.
What really annoys me though is Tesco displays the price per/unit using different units, so you're constantly having to figure it out in your head - one loaf of bread might display the price per 100g, another the price per 1kg etc.
In the US we take it to the next level by mixing in imperial measurements. I don’t know about most people but I’m using my phone for conversations between ounces, pounds, then some SI measurements, etc.
If you buy 12 there is often a case which is a lot cheaper. I don't drink that much that it makes sense to stockpile; I also have the problem that if I have a fridge full of beer I am going to drink a lot more than I would otherwise.
I may be in a minority, but I prefer to buy a couple of beers just once in a while.
I fall for this every time I go into Tesco. I think the average beer in this deal is £1.89 so you are shaving off 42p by buying 3 which is around 7% per beer. Sounds alright but only if you wanted all three. I tend to buy the 3 and feel obliged to drink them all that evening when I only wanted 1 or 2.
> but I'm very convinced that you end up paying more in the end
This is actually the same tact credit card companies use, even if the balances are paid off every month. That's why we still use budgeted cash from envelopes to pay for most things. The only payments we run through a card are fixed costs where the percentage paid back on the card exceeds the transaction fee if any.
You're still paying for credit card transaction fees indirectly when you use cash. Since retailers are prohibited from charging discounts for cash purchases then to cover the card fees they raise the price for everyone. Cash buyers end up subsidizing card users.
The fees aren't the point. The point is, using something other than cash tends to trick people into spending more in the same way buy one get one free does.
People being unable to control their impulse to buy something they can't afford is hardly a trick. I would maybe say that a casino that utilizes visuals and sounds and other mental techniques might be "tricking" people, but I can't say the same for credit cards.
All the information is there, in plain english, to allow people to use a credit card simply as a way to keep an electronic ledger, get an interest free loan until the auto pay date, earn some cash back, and have some purchase protection via the ability to do a chargeback. You can even set spending limits online.
Similary, I wouldn't say a buy one get one free offer or 75% off sale sign is tricking anyone either. Assuming you've passed 4th grade, you're stupid if you're not calculating unit prices.
I've wondered if CostCo works along this principle. People like the idea of getting bulk rates for items. But even in cases where items really are cheaper per unit, it may not be an advisable purchase for most people if they don't really need or want as much as they are induced to buy.
I love Costco, but it is worth remembering that a good amount of the time even their per-unit prices are higher than the local grocery store. I still shop there, but I go for the stuff they do better than the other stores in the area, not for any kind of bulk price.
FWIW, depending on where you live check to see if there is a Habitat for Humanity ReStore near you. Better than dumping such things into the garbage. And for small projects, you can save a fair chunk of cash by shopping there. I used to get wood stain for a tenth of what HD would charge for the same thing.
I usually don't like language that suggests that consumers are brainwashed by marketing. But, getting people to comprehend that spending money =/= saving money is surprisingly difficult.
Even when they understand money has been spent, it's not spent rationally: money "saved" at the grocery store doesn't actually mean less total money spent, rather the same amount as usual is spent, and more food than usual was able to be purchased.
This is a fine tact if you're going for volume, but it's absolutely not "saving money."
If that additional volume makes your daily spending on food lower, then it's a saving. If it makes you eat more, or throw away more food, then yes, it's not a saving.
That isn’t saving money it’s spending less money as I see it. If you took the surplus amount you would have spent and put that in a long term investment or savings account then I think you could claim a savings. Almost no one does this with day to day spending though so it’s best to view it as spending less. When you spend money you aren’t saving money. You are spending it. You might be spending less in a given situation than you would have if the circumstances were different but it isn’t a savings.
You wouldn't see the following statement as correct usage? "I was going to run to [store x], but I wanted to see the new [store y] instead and it ended up saving me $[amount]."
I'd agree that a "savings" figure on a receipt is bogus though, as it's comparing a price you wouldn't be charged with one you would.
In our everyday speech this is how people talk. So in that sense it is correct usage. I claim it is misleading to think this way. I think our speech has been affected by marketing and it’s caused a change in how we think about money.
Spending money is never a savings. All you can do is spend less than what you were willing to spend. I know our way of speaking isn’t going to change anytime soon but I hope to change the way people think about saving. I hear people who are broke talk about how much they saved in the scenario you presented. But they have no savings at all and it is bad for them to think they saved money when in fact they spent money. Spent money is not a savings.
I'm not sure I get what you mean. If I go to the store with a list of the usual items I purchased and some of those items are on sale, I end up spending less money for the exact same items.
Suppose a grocery bill is usually $100 a week, and (for simplicity's sake) let's say it buys 30 food items. In the example I'm referring to, $100 would still be spent, but 35 food items purchased. This could only be considered "saving money" if the extra food allowed you to spend less than $100 on next week's groceries.
Anyhow, sorry for being confusing. It's possible this example isn't all that common in general. I just bump into it all the time.
We have some Belgian waffles that cost 18 NOK a piece.
They always have an offer that gives you 2 for 20 NOK.
I never eat more than one of these and they end up spoiling as they don't last very long, and even if it seems that I'm "saving" 16 NOK on the purchase I'm actually spending 2 more than I otherwise would.
The other replies have good examples. At it's simplest if you have $100 and go to the shops and leave with $20 you have not saved any money, you have lost $80. Reducing the amount you lose is not saving that money as money is still being lost. Yes you might lose less money than usual but the article and the point most people are making is that these offers short circuit rationality to make us think we are getting a deal but actually in most cases we are not. You have to be very shrewd to do the home economics correctly. I don't bother and most people don't bother and we are being swindled most of the time.
You aren't losing $80 if you are buying something that is of equal or greater value to you. No matter what, I am going to need toilet paper. If I usually spend $20 to get the toilet paper I need, and it is on sale for $15, I actually have saved money. Sure, I spent $15, but I didn't 'lose' $15. I saved $5. Even in the case of a bogo offer. I spend $22 to get 2 packages instead of 1. I don't have to buy toilet paper next month. So I saved $18 assuming that the time value of the additional $2 does not exceed the $18 savings by next month.
> usual items I purchased and some of those items are on sale
Often the "deals" are "buy 3, get one free", where the per unit price might be a bit less than a single unit, but if you only went in for 1, but ended up buy 4, you've paid more than you might have otherwise. Sometimes it's a good deal, and you get more value, sometimes the items expire before you end up using them, etc.
Also with these "deals" you often also have to ask yourself:
Are you buying it because it is cheap or are you buying it because you need it? Often people buy stuff they don't need because it is on sale "right now."
> A coffee mug that usually sells for $10 + $3 S&H will go for $13, with FREE shipping.
I actually prefer this. It's much better than shops that activity try to hide shipping costs until the last moment. Also it makes comparing prices quicker.
Furthermore, if you want to return the item, you're entitled to a full refund, rather than being forced to pay for shipping for an item you didn't want.
Shipping cost can vary a lot, though. Especially in the internet age where it's easy to order things abroad. When I order from a Dutch webshop or from amazon.de, shipping is generally free, but when I order from amazon.com, it's not.
So that means the webship has to know where I live and what kind of shipping I want. Granted, Amazon probably already knows this, but when I use a new webshop, they can't know this, and I don't want to have to tell them before I can see the price of their items.
What use is it to see the price of the item without knowing the shipping cost? It seems to me that what you’re really saying is that they need to know where you live and what kind of shipping you want before they can show you the real price.
> What use is it to see the price of the item without knowing the shipping cost?
It's better than not knowing the price until I tell them where I live.
> It seems to me that what you’re really saying is that they need to know where you live and what kind of shipping you want before they can show you the real price.
If they want to include shipping in the price, then yes, they need to know where I live before they can tell me the price. So either they can't tell me the price, or they will change the price after they learn where I live, or they won't change the price and lose money on it, or they may refuse to ship to me. None of these options are in any way reasonable, except maybe not telling me the price, but that's extremely annoying.
Better to not include shipping, tell me shipping is not included, and add shipping later. That way, shipping cost can be the real shipping cost, rather than shipping cost for 1 item times the number of items, which is likely to be more than the real shipping costs.
My point is that the only “price” that matters in the end is the total amount you pay, with shipping. If shipping is separate then they’re not really showing you “the price,” they’re just showing you a somewhat arbitrary number that sets a floor on the actual price you’ll pay.
> My point is that the only “price” that matters in the end is the total amount you pay, with shipping.
Not at all, how that price is built up is extremely relevant. If an item is cheap but shipping is horrendously expensive, I go look if I can find it at another webshop that has more reasonable shipping. Shipping is part of the total price. Pretending it's not is taking information and choice away from the customer.
But there is no additional information in the general case. The amount charged for shipping is completely arbitrary. All you’re being told is that the price P is actually the sum of A + B, where A and B are just some amounts.
There are exceptions to this. For example, I trust McMaster-Carr to charge me whatever they get charged for shipping, which is good because they won’t tell you in advance what it will cost. But in general it’s just another number. It’s a really common scam to have a cheap item with expensive shipping in order to trick people who aren’t paying close enough attention.
Put it this way: store A is selling widget X for $40 with “free shipping,” store B sells it for $35 plus $5 shipping, and store C is $15 plus $25 shipping. Who do you buy from?
By that argument everything is "just a number". It's still part of the sum.
For example, if C sells something else that I want that's also much cheaper than a the other shops, and it won't increase shipping costs much, then that's the better option. If not, I may continue to shop around until I find a shop that combines low item price with reasonable shipping cost.
The sum is all that matters. The rest is just a weird number game.
As you say, your store preference depends on various factors. If C’s shipping costs are structured one way, you’ll prefer them. Another way, you won’t. You have to know all those details before you can choose. That’s my point: ultimately, functionally, there is no difference between a random store that won’t show you prices until you give them your location, and a ransom store that shows prices immediately but won’t give you shipping costs until you give them your location.
That your generalization does not generally apply, especially in an era of extremely miniaturized popular goods.
Consolidating the S&H into the item cost makes sense for a subset of situations sure, but there's a huge set where it's exploitive.
Amazon orders for example often can amortize S&H costs by shipping a single package containing multiple items sharing a common origin. I'd argue that's true for a huge portion of Amazon orders. It's simply not a good generalization.
I disagree that it's exploitative. It's simply easier. Recalculating shipping costs on a combinatatorial basis has a nonzero cost from a programming and operations POV.
Having a fixed per-item shipping costs lowers overhead drastically, especially for smaller sellers. Large sellers obviously have different customers and I doubt they get away with just multiplying PER_ITEM_SHIPPING_COST X NUMBER_OF_ITEMS (I didn't think that was the focus on the OP though).
I also disagree that it does not generally apply. Given two items, A & B, you might have the following total:
In other words, no matter what, shipping more items does cost more than shipping less items. So it makes sense to charge more for it. How much more is a matter of economics.
The original proposition was that Prime wasn't geting you free shipping -- that pre-dates Prime -- it was getting you upgraded to two-day service rather than the standard wait-a-week ground shipping.
That's true. But every time you buy two mugs you subsidize the shipping for people buying just one. There are better ways to solve the "hidden shipping costs" issue than tack the price to every item.
Me too, as it usually indicates the store also has a generous return policy which is a must shopping online. Stores that "don't charge" for shipping are much more likely to not be stingy in other areas of the consumer experience as well.
Or, you know, it is actually preferable for rational reasons, rather than an indicator that your brain has been hacked. You go to the store and the price you see is the price you pay (well, those of us not stuck in a sales tax state), so it's nice to be able to shop the same way online. I know the shipping is baked in, but I don't have to factor it in separately. I just shop by price.
- If you return the item you will be refunded the total purchase price instead of the price of the item sans shipping.
- You know how much it will actually cost to own the item when its in your cart instead of hiding the cost until the last second when you've already committed.
I recently went to a department store called Kohl's for the first time with my wife, who'd been shopping there for years. For those unfamiliar with this store, think something similar to a JC Penney's. What struck me was that above every item was some digital signage showing a discounted price or promotion (B1G1 Free, 25% off, etc.), along with the MSRP price. So basically, anything I looked at seemed like a great deal. They also have a rewards program whereby you get "Kohl's cash" whenever you reach some threshold for purchases (something like $5.00 Kohl's cash for every $100 spent), which effectively gives you a discount.
Of course, I soon realized that this was all simply a tactic to encourage people to continue to spend their money in the store, an effective one at that. The "sale" price was really no different than the standard price at any other retail store. It was just the perception of getting a good deal and triggering the dopamine receptors in the brain. I told my wife this, but her reaction was one of incredulity. Her thinking was she was saving money by shopping there. It's such a simple, yet brilliant tactic. Make people feel like they're getting a good deal, and they'll spend more money than they otherwise would.
> Most online clothing brands offer ‘free’ shipping, with the catch that you have to meet a minimum purchase amount (often $100) to qualify. Some 58% of consumers will add additional items to their cart — often things they didn’t originally intend to purchase — just to “save” $5 to $10 on handling fees.
You will find people vigorously defending their behaviour when challenged on this. For example: Amazon Prime.
Amazon Prime is a product that costs you money and makes you spend more money on Amazon, and yet people will defend their spending saying that they are "saving" money.
The shipping is "free" but you have to spend £8 a month to qualify. If you don't spend at amazon during that month you are still down £8 (that's about £100 a year). If you spend something at amazon during the month you are still down the £8 in addition to the money spent at something.
Amazon Prime is a shady product designed to get you to spend money at Amazon.
As the article says often you will find the same product for lower in other places. You just need to do the sums. Another common defence we will see when people respond to this is "Oh I know it doesn't save me money, it's the convenience".
Retailers love making their customers comfortable and not thinking about these shady offers. Imagine having millions of customers so happy they will pay more money to you and defending this very process.
Now... there's also the shady dark patterns the company uses to sign you up for it and make it it harder for you to cancel, but that's another thing!
> and yet people will defend their spending saying that they are "saving" money
I've never seen Prime as a purely money-saving scheme. It possibly does save me a bit overall (but not every month, for sure) on the things I genuinely want next day, but I also get the convenience of weekend delivery which either isn't available or is very expensive without Prime (from Amazon or other options), or certain drop-site delivery locations that don't seem to be available & cost-less without Prime. There is also the utility value of not needing to think about delivery as much.
> designed to get you to spend money at Amazon.
That much is certainly true. But it doesn't have to cost you more that way than it would anyway.
> You just need to do the sums.
Shopping around can be time-consuming, especially as every other retailer is pulling similar tricks so you have to make an effort to see through their crack as well. Though I do sometimes double-check and find the Amazon price the same once delivery is accounted for in both cases. Sometimes there is a saving to be made. Sometimes that saving has a convenience cost.
> Another common defence we will see when people respond to this is "Oh I know it doesn't save me money, it's the convenience".
Is paying for convenience inherently wrong in your world view?
IMO, spending time and/or cognitive effort to save money has to be weighed against what-ever else you might be doing with that time/effort (going out for a run, playing with the cat, doing some work, just enjoying doing nothing really, ...) otherwise you are guilty of exactly the same sort of false economy.
> Is paying for convenience inherently wrong in your world view?
I was channelling the spirit of the article.
But for me it's not that something is convenient on it's own, it's 2 things. Firstly, it's that it's shady and manipulative and that people will defend this when challenged by saying "oh it's okay I don't like to think about it, it's convenient".
Secondly because a BOGO offer (or Amazon Prime) lowers the cognitive load it is explicitly a convenient thing for us. our brains think we are both getting a deal and we are having a smooth ride. It's easier to not do the economics and it's easier and smoother for us to think less even if we spend a little bit more.
>There is also the utility value of not needing to think
>Shopping around can be time-consuming
>Spending...cognitive effort to save money
Now, making money isn't wrong, nor is hacking on psychology, but I don't see any comments in HN defending BOGO. We all like to think we are rational and that it's others who are the crazy ones.
Walmart can be convenient too. The prices are about the same as Amazon and depending on where you live you can have your product in hand in however long it takes to pick it up locally (~30 minutes or less let's say). Order it online, pick it up locally.
And if it's not available in the store right now, they ship it to their store for free in usually a day or 2. No membership required.
Given that other retailers charge upwards of £10 for Saturday courier delivery, Amazon is cheap. They also have fairly no-questions-asked customer service policies which is nice.
The refund policy is many times fairer in the UK than with other retailers. I never fell like I'm taking a risk with Amazon. OK, they have a fake products problem but I haven't experienced that yet.
>Amazon Prime is a product that costs you money and makes you spend more money on Amazon, and yet people will defend their spending saying that they are "saving" money... The shipping is "free" but you have to spend £8 a month to qualify. If you don't spend at amazon during that month you are still down £8 (that's about £100 a year). If you spend something at amazon during the month you are still down the £8 in addition to the money spent at something.
OTOH you also get prime video and music.
Prime Video has a lot of HBO stuff (Sopranos, The Wire, Curb) and while prime music's selection is limited, they have a few great electronic or classical stations for studying (commercial free).
I'm more likely to get rid of Netflix than Prime given all that's bundled in.
But it is convenient. I pay a small, fixed amount to Amazon, where I can incidentally buy literally everything, and I never have to worry about shipping costs again, nor worry about dealing with a different interface or multiple accounts for any type of goods I want to buy.
This in itself is an irritation for some: the price went up when that was added and many don't use it at all. I hardly use it (my TV from Amazon connected to a PC with a graphics card from Amazon by an HDMI cable from Amazon won't play Amazon HD streams because of a licensing issue - if I want HD I need to get the content ahem elsewhere) though for me the price is still worth it for other factors.
Your not counting the value you get from prime video I saved on buying all 5 season of arrow on dvd for example or the expanse which has just come out.
I don't always use prime delivery but I still come out ahead.
I'm embarrassed to say Amazon got me with this trap a few times. I'm at the checkout with a $19 mouse but amazon reminds me that I could get free shipping if I get to the $25. So I go back and look for something I need for $6 bucks. Can't find anything I need for $6 bucks so out of frustration I somehow end up with a $70 worth of stuff I don't need just to save a couple of bucks on shipping.
What worked for me is to settle on a generic filler item. Personally I use toothpaste. Costs a decent amount, can be stored for a long time, doesn't need much space and I'll need it eventually. This way I don't go looking around randomly but just always fill the gap with that item.
I try to keep an eye out for small things I could use and keep them in a list for this reason. AmazonBasics has a lot of cords and adapters and things I'd much rather get in lieu of a shipping charge.
Buying the right BOGOF items saves money. For instance, after spending a lot of time trying different options, I now know exactly what face soap I want and I also know the price it sales for. From time to time, it'll be sold as a BOGOF, so providing the price makes sense (i.e. it is the normal price or less than 200% of the normal price) then it is a good buy (it has long shelf life, and will always be used).
I use up about 1.5 loaves of bread per week, so some weeks I buy one loaf, some weeks I buy 2. If it is a week where I only need one, but it is BOGOF I just buy 2 and put on in the freezer (and then take it out the following week). It is a similar story for cheese (although that doesn't need to be frozen, staying in the fridge, sealed, lasts for long enough).
One of the bigger savings we have got from a food perspective is to move towards making a 'menu' of food we are going to eat that week. Then buying the ingredients needed for each dish. This means little or no wastage (good on so many levels), being able to buy at a good price (rather than not getting something required then picking it up at somewhere convenient buy more expensive halfway through the week) and knowing the quantities up front makes it easier to either buy in bulk, or knowing when a deal that involves extra quantity will be suitable.
The above approach has also meant eating much healthier food, not finding ourselves in a position where we order take away because we don't have anything in. Ensuring we have not only meals planned, but healthy snacks (fruit etc) factored in too. It isn't a binary choice of by doing this we get everything 100% perfect, but it has been a hugely noticeable improvement.
I have read several times that some of these approaches and typically favoured by those who have more disposable income, which isn't ideal, as we really want those with less income to be getting all the good savings to try to ease/stop the wealth gap.
> I have read several times that some of these approaches and typically favoured by those who have more disposable income, which isn't ideal, as we really want those with less income to be getting all the good savings to try to ease/stop the wealth gap.
The disposable nature of income is orthogonal to wealth. It is possible and common to be wealthy and still be broke. Consider the pro athletes earning 7-8 figure income that are still forced into bankruptcy. It is also unrealistic to think people who are weak at saving money need a nanny to follow them around and police their spending habits in an effort to close the wealth gap.
The most straight forward means to close the wealth gap is to tax capital gains as regular income and incentive spending from the wealthy with a punishing estate tax.
A punishing estate tax probably does more to incent trust formation, life insurance sales, minority ownership transfer structures, and other such mechanisms to bypass the estate tax than it does incremental spending.
It's largely unprepared idiots that pay any substantial amount of estate tax.
I agree with you. Generally I shop at the same grocery store. When certain BOGO items go on sale I know to buy because I can ball park the usual price. BOGO chicken breast, pork tenderloin, certain tolitries, yogurt, and a few other things. I usually freeze BOGO meat but I can see how it can go bad and you lose money.
My wife and I usually recognize the good deals. We avoid buying stuff we don’t usually eat just because it’s on sale.
Certain things are terrible to buy BOGO especially at gift shops, firework stores, and generally any tourist area. Another commenter mentioned Nashville boots and I can attest it’s a rip off trying to make you spend more. Single items have inflated prices at these places.
And if you don't shop at a store often enough to figure out the real price of goods using one of those historical price sites can help you figure out if you're actually getting a good deal.
The 'true price', if you can say such a thing exists, of an item is almost always what it periodically goes on sale for. If you watch the historical pricing it will dip to a specific price anywhere from 6-24 times a year. As long as your happy with that price then feel no shame for pulling the trigger -- if not then you at least know when it really is on sale.
Example: my personal vice is Diet Coke. The true price in my area is $0.25/can but it often retails at $0.41/can to make it seem like a sale. I will buy in at $0.25 but it's not a real sale until it hits $0.20.
I tend to make a conscious effort to ignore "deals". As far as I know, the one case in which a deal is actually advantageous as a consumer is when that deal encourages consumers to buy more of a certain product at the same time, and the merchant passing part of the scale and predictability savings on to the consumer. For example, if you buy tooth paste every now and then anyway, buying it at the same time as many others might make it cheaper to offer that tooth paste. Or for example having the option between essentially equivalent meal ingredients, more people cooking the same meal at the same time can allow for offering those ingredients more cheaply.
In most cases, however, it feels like they only benefit the merchant, by manipulating the consumer to buy things they don't need, or more expensive things.
I don't think the cost savings I'm missing out on by not making purchases in the first category outweigh the extra costs I avoid by also not making purchases in the second category.
That said, I'd love to hear of more ways of how deals can actually benefit both consumer and merchant.
there's a tactic called a loss leader where the merchant has a discount and sells a product at a loss to get people into the store (and hopefully buy other things that make them a profit). Loss leaders are pretty hard to spot unless you actually know the normal retail price
Right - I thought of mentioning it, but then decided it was part of the category "making me buy more expensive things". Presumably, I wouldn't have gone into that store otherwise, e.g. because it's more expensive. A similar trick is selling a certain product (e.g. an ingredient) at a loss, because it is often bought together with more expensive products (e.g. the rest of the ingredients of the typical meal).
Of course, you could still benefit from this if you were to visit that store anyway, or would have bought those products anyway. However, that's still the case in my "ignore deals" strategy: I don't actively avoid deals, I just try not to use them as a reason to buy something.
Up until 2009 in Norway, it was illegal to advertise products with unrelated additions ("tilgift"). Not strictly related, as here it's the same product. But this made it illegal to do promotions like "buy our car, get a free iPad", "buy this coke, get a chance to win prices". I think consumers wanted the law gone, as it looks like we missed out on deals other countries had. But it makes it harder to compare and tricks our brains.
So even on an electoral level, consumers get fooled by this and want access to shady deals. That's going to make it really hard to get fair consumer protection laws.
(Though maybe it's not surprising that people get fooled in politics.)
I quite enjoy mentally parsing these "offers" in logically equivalent ways. E.g., "buy one get one free" as "only sold in units of two" or even "each purchase of one requires compulsory purchase of a second".
As a child I remember considering the difference between "extra free" and "free" which I used to see on cereal boxes. Sometimes the box claimed "10% free!" but other sneakier boxes would claim "10% extra free!". The latter allows the marketer to quote the same nominal figure for a smaller absolute quantity.
I strongly object to calling something "free" when you can't get it for free. If I'm required to purchase something to get it, it's not free. Things like "10% free" should not be allowed to be called that. It's a 10% discount. Free with the purchase of something else is also not free, as I'm still required to pay money.
Allegedly, when you see the “10% free” message on groceries, that’s a signal that the manufacturer is about to downsize the quantity, with the non-free portion of your purchase being the new normal.
> Sometimes the box claimed "10% free!" but other sneakier boxes would claim "10% extra free!". The latter allows the marketer to quote the same nominal figure for a smaller absolute quantity.
I'm not sure they're trying to be sneaky. The difference is too small for anyone to care about:
- 10% free! (purchase price pays for 90% of the cereal)
- 10% extra free! (purchase price pays for 91% of the cereal)
(Also, it's the first option that indicates a higher unit price, not the second.)
Actually I think we're in agreement here: I didn't make it clear but the nominal figure to which I was referring was the magnitude claimed free. By saying "extra free" they get to write down 10% instead of 9%.
I also agree the difference is small in this case but I'd argue:
* Small wins are still wins.
* The difference is not so small with bigger percentages.
Imagine I decide to tweak my margins for a time and sell 1.5Kg of cereal for the price I previously sold 1Kg. I could say "33% free" (relative to old price) or "50% extra free".
Every time my dad takes something to the till and they say "this is actually on buy-one-get-one-free" he says "can I just have the free one?". Every. Time.
We're staying in Nashville overnight on our way somewhere else and enjoyed walking around on a weekend evening.
We noticed that all of the stores selling cowboy boots (and there are multiple) have a "buy one get two pairs free" offer. All boots in the store we checked out seem to be priced at $300+. So, instead of simply offering discount boots at ~$100, they're leading you to think you're getting $300-quality boots and $600 of "free" value in the extra pairs. Framed like that, who could possibly refuse?
I’m very interested in knowing what proportion of retail revenue comes from these types of dark patterns. Is it even possible to come up with a number? If so, I’d be willing to help fund the research.
The other day a friend and I were discussing the “take X% off your entire order” coupons. These seem to be very common, lately. She mentioned that she recent used one on a cart of $100 in items. She expected a $20 discount. But, to her surprise, she only received $2 off. Apparently all but one of her items were ‘restricted’ items.
It seems like many companies find it easier to trick people than to actually provide great service or products.
"Free shipping" is a funny one. For smaller businesses, it's basically subsidizing far away customers with nearby customer money.
I offer it not because I want to deceive people, but because we sell more that way. People like predictable upfront prices without having to tell anyone their location.
It is, of course, not "free". We just calculate the average shipping cost and pad the price.
Part of it is that "free shipping," at least over a fairly modest purchase dollar amount, has become so prevalent from most large retailers that dealing with a shipping charge that's unknown going in and/or that gives sticker shock checking out turns a lot of people off.
How much does shipping cost actually vary? I always assumed that first//last mile handling of a package dominates over the fuel/depreciation cost share of driving the item farther.
It's much higher for large packages to go long distances vs short. For smaller packages, it matters less, especially because USPS has their flat rate boxes, and UPS/FedEx have to compete with them.
UPS and FedEx charge for large packages by size, not weight. They call it "dimensional weight". And ding heavily for big+far.
At our supermarkets the restricted stuff tends to be stuff like alcohol, cigarettes and scratch cards (and other stuff but that's what I remember). Otherwise people would abuse the discount/coupons/points bonus.
Tangentailly related; i recently needed to buy a new shirt, where in the past, i had shopped at Express for some work shirts - but havent been in their store in several years - i went in as they were having a 40% off store wide.
Their shirts, which i used to have dozens of - are now priced at $69 per shirt... less 40% for this sale.
Ive never paid $69 for one of their shirts in the past. So the 40% off now reflects what i ised to have paid. So i feel they raised the prices of their shirts, then hold frequent 40% off sales to lure in traffic of people thinking they are getting a great sale - only to pay what the full retail of the shirt used to be.
So Express literally found a way to inflate sales of product through this tactic.
JCPenny very famously nearly went out of business because they do this all the time, but then tried to revert to just pricing things normally. People thought they weren't getting deals any more, so they stopped going there.
I like to call this the Kohl's model. I can't imagine anyone ever pays sticker price for anything in a Kohl's store. The prices are ridiculous. Purchase some socks and underwear and the cashier will gladly tell you that you saved hundreds of dollars. Compared to what?!
My local supermarket does this all the time to my great annoyance, I never thought about the mathematics of why they don't just discount the item. At least it's better than the kind of deals that abuses people's misundertandings of mathematics entirely, such as https://www.telegraph.co.uk/finance/personalfinance/money-sa...
Here in the Southeast the grocery chain Publix is pretty much the BOGO chain, as in you buy stuff that is BOGO and take care otherwise. Their prices are standard fare for a chain grocery and the standard price of the item falls in line with other chains. Now for the most part any serious saver would BOGO and then hit up Wal Mart or Aldi to finish out their savings.
One interesting note is that in general you don't have to buy two items as part of a BOGO, you can buy one at half price. Now this is not true as some manufacturers, namely Coca Cola, require the purchase to be made as described. Meaning if its buy two get one you must take all three. They even get silly with Publix in that there will be buy two get two with Coke products that, you guessed it, you have to have four of the product to get it at the price of two.
I'd argue this is legitimate, or at least everyone is footing the bill when you request delivery. But that's no different than everyone footing the bill for having tables and chairs in the shop.
I think the counter argument to this is non-perishable food and other groceries.
There is a certain brand of shelf stable non-dairy milk that my family use a lot of. The usual price is £1.50 a carton. Every few months there is a 3 for £3.00 offer. Now this is obviously a ploy to get you to buy more than you needed and also to appeal to new customers.
But I use these offers to stock up on weeks worth of the stuff. If has a shelf life of over a year so it's a no brainer. I hardly ever pay full price.
I’m curious to know what’s happening with our supermarket ice cream discounts. Every Friday all ice cream is 50% off and as you’d expect a lot of people buy their ice cream on a Friday. The rest of the week it’s full price. Does that mean they are taking a profit hit on Friday just to move inventory or is the ice cream marked up higher than their ideal selling price which would be the standard profit margin they expect on Fridays? Not sure...
They're using it as a loss leader: taking a cut in profit or even a loss to pull people into the store, where they're likely to buy more than enough to make up for it.
You would have to have some insider knowledge to know for sure because both options are possible. But regardless if something is a loss-leader or not I typically shop with the rule that any item that routinely goes on sale for $x has a true price of at most $x.
It's full price the rest of the week so that on Friday it looks like a good deal. How do you know what the actual value is? You only know its value from the price charged during the rest of the week.
I've been living in Thailand for a while now and the market is so unregulated and abused by these sorts of deals.
A big super market near my house runs 2for1 buns every day for the past year.
I've got desensitised to the point where I don't even see the "original price" anymore. The deal price is just the real and only price.
The only real deals are the "almost expiring" price reductions super markets put out before throwing out old food.
I wonder if in the grand scale of things this abuse backfires or I'm just a rare case as a foreigner.
There's plenty of grocery stores in NY that continuously run the same "special" on the same items. I've seen the same hot dogs on sale for the same price for a year.
Yes, there are laws about how long a sale can be, if a product is on sale for a significant amount of time the seller has to make that price the actual price and cannot advertise it as "on sale." Likely those stores run afoul of this law but are too small to be prosecuted by the DA/FTC.
I don’t know if they are legit, but I was shocked by the number of furniture “liquidation” sales when I first moved to Southern California. It seemed every furniture store was closing and selling off inventory. After living in one area for a while it became clear liquidation was just a means of selling crap and reopening under a different name.
Fortunately some of this (bloating the price just before a sale to cover the cost, note: e.g. day before) is illegal where I live. Though it doesn't stop shops from trying. It does give the customer some extra power. If for instance the shop fails to sell all stock and dumps it afterwards you can try to claim the difference as this falls under deceptive practices.
The buy one get two variant is fine as long as there is actual profit to the customer and no shady 'you still pay the same but it looks different' offers.
Same in France. So when sales time arrives, you can see some items prices rising up a week before (which is, de facto, legal as long as you do it in advance)
You are only allowed to discount items already in stock a month before the start date[0]
That's why the back of the shop is fully loaded by boxes a month before the sales period starts.
The rules seem silly because it's an open secret, all companies jack up the price and stock up just before... but you'd be hard pressed to find actual proof:
"I ordered 50k items to the supplier just 30 days before, I meant to buy only 50, fat finger mistake, so we had to discount them".
"Yes, the reference price is based on the highest price we had on record among our 500 stores. Yes, I know it was more than twice the median price, fat finger mistake but hey, who does not make mistakes, 14€99 is too similar to 5€50..."
True in some forms (in the Netherlands) but if you only sell it for a day for the increased price you could argue it is deceptive (Mediamarkt does this usually for a week before the sales which is apparently enough). What they used to do, raise the price on the day of the sale, is fortunately no longer allowed. The other trick being the use of the advised selling price (which is always way more than the actual value of the product) and go from there.
What I usually see these days is that products get offered on sale which have not been sold before so there is no way of knowing if they offered it before for less. Though internet helps if you are in a shop and it sounds dodgy at best.
It also happens in online marketplaces like Amazon but luckily there are tools to track price changes like https://camelcamelcamel.com/ (disclaimer: not affiliated at all, just a happy user). Wish there were more tools like that but for retail.
I love reading the graphs of camelcamelcamel. It's sometimes entirely obvious that two pricing algorithms are fighting for the buy box.
You can also see when an item is reaching its long term date[0]: 180-days(or 365 on some markets now) in inventory point: sudden drop in the price. The margin can get negative because the long term fee is very hefty.
Say you sell SD cards or a similar low volume, low cost item: at a certain point in time, the storage fees will be larger than profit, selling them for 0€01 then makes sense...
I suspect a lot of the BOGO deal structure is to exploit the consumer who intentionally buys only what he can use.
Supermarkets here have gotten big on "buy one get (1, 2, or even 3) free" for large meat packages (racks of ribs, for example), but keeping the price tag high-- say $12 per pound. If you fully exploit the offer, you're effectively paying a bargain $3 per pound, but that requires a lot of fridge space to deal with four big packs of perishable meat. The consumer who says "I only need one or two" is being gouged for NOT wanting to throw rancid leftovers away.
A similar related gimmick are the "buy N, save $M deals." If you buy any ten of a pool of random items, they knock off $10 from the order, but if you only need 9, or 1, you're paying full price.
There's definitely been a swing from "everyday low prices" to "gimmicks and games." Everyday low price became "3-day sale" became "only with club card" became "only if you install our terrible app and explicitly select you want the promotion ADDED to your club card."
I think the ultimate goal is to get where they can advertise aggressive discounts, knowing they don't have to give them to anyone but the people most willing to jump through hoops to get them.
A related and greater rip-off is the discount cards that give you coupons after a purchase. Consumers become addicted to these "deals" that make it seem as if they're paying a very small amount for something. When in fact they paid up-front with the original overpriced purchase. It amounts to an interest-free loan to the retailer that is paid back to you with those coupons.
These cards are the original data tracking example as by using the cards you give the retailer all your data including demographics of your age and location etc. From what I recall retailers cannot use your credit card purchase history for this, you have to use opt in and use the "loyality" cards.
My mother always said "50% off what?" Obviously when the merchant sets the nominal "retail" price to whatever they want, they can set the discount to whatever they want too and maintain their profit margin. This is basic algebra solving for one variable given a desired "discount". It's amazing how effective it is though.
I'm only (vaguely) familiar with the rules in the UK, but they include tests to ensure the 'was' price was actually a genuine usual selling price. This includes tests that the 'full' price must have been in place for longer than the promotional period, that it must have been recent and that significant sales were made at that price. Buy one get one free also has to mean you get two equivalent or similar products. Compliance is also monitored and enforced. I'm not claiming it's perfect, but by and large over here you can have reasonable confidence these promotions are usually valid.
Conversely my wife is Chinese. Over there 'buy one get one free' usually means something like buy one dress, get one flimsy, non colour-matching belt free.
Does anyone know of a book (even better a textbook, if possible) detailing these strategies? This article is about the "BOGO" deal, I'm interested in reading about other kinds of these strategies, and why they work. If anyone has any recommendation, especially for more academic stuff (textbooks or papers), I would greatly appreciate it!
Not a textbook, but Freakonomics is in that ballpark.
It's (un-) surprisingly hard to find academic information about this on Google because all the results are click bait articles about how to improve sales, rather than peer reviewed theory.
Thanks, I'll definitely look into Freakonomics. I agree it's pretty hard to find info on this topic from an academic perspective, and it's really unfortunate, as I believe it is important for the wider public to understand these tactics and why they work.
The book "Predictably Irrational" by behavioral economist Dan Ariely that was mentioned early on in the article is also a good read. It does not directly related to pricing strategy but provide good insight to the irrational decisions that we make, and the BOGO falls into that category.
In a similar vein, I have just finished "Nudge: Improving Decisions About Health, Wealth, and Happiness" by Thaler and Sustein. This might be worth a look as well.
"Thinking, Fast and Slow" by "Daniel Kahneman" is a great book on these topics. There is a lot of info on how the mind can be tricked. I really recommend it.
Everything even vaguely commercial with the word "free" attached is shady. I'm in a minority here (I must be, otherwise it would stop being common because it wouldn't bring in enough marks) but I've grown cynical enough that the word actually puts me on guard and I go searching for the small print, or it just puts me off completely if I don't have time for the small print.
It isn't just BOGO offers, anything free is suspect:
* Just pay postage! (postage is nearly as much as the item costs on Amazon/eBay/others with delivery included, and it'll take up to six weeks for your item to arrive)
* Do the Great North Run for free! (... plus a £320 charity pledge)
* First month free! (if you don't cancel 27 days before the free month ends you'll be paying for the service for at least 6 months afterwards)
The shady economics of a non-functioning close button of an annoying "Subscribe to newsletter" popup. Bottom line: it works but also sends a negative subliminal signal to the visitors that a given business is desperate. Just something for website owners to have in mind.
I increasingly tend to close popups on websites by deleting them from the DOM through dev tools. Not the most user-friendly method, but it's quite thorough.
Doesn't always work though, some web sites also manage to block scrolling of the main content which may not always be easy to figure out (esp. on messy web sites with megatons of JavaScript code, HTML and CSS).
And surely there are browser plugins that help you remove annoying DOM elements in one click?
I usually look at the body element and start removing classes there. That often works. But I suppose a plugin should be able to figure out automatically why something isn't scrolling.
I have a set of Stylus custom CSS styles I use, including a quite effective "Interstitials and Overlays" stylesheet. It's not applied to all sites, but individually to a large number.
Minor comment, but I'm pretty sure in Ariely's experiment he dropped both prices by 1 cent (i.e. the Lindt became 14 cents), hence the drop was identical, but this completely shifted the purchasing decisions.
One way to combat this mentally is to have set prices for things in your head... ie the price you feel each commodity should cost. Don't buy things that deviate to far from that price.
For example I feel a nice non-iron, fitted, button down shirt shouldn't cost more than $20, so I only buy when I see them at, or around that price, BOGO or not (and I need one/two). Same goes for lightning cables, I'm not paying more than $5/(10ft)cable no matter what material it's wrapped in.
I think we need to cite those Study were done in US. And the results are pretty much US specific. From my experience ( Retail is big, so it might not be applicable to every category ) Buy one get one free or anything with the word "Free" works in US, Works in UK, Kind of Works in EU, Doesn't work in Asia. Or At least most of the SEA, China, Japan, Korea etc. The consumer mentality is completely different, and in reality the 50% discount price would work better.
Having it completely "Free" as the spend $12 Beer for Free T-Shirt example doesn't work in Asia as well. Because you would soon realise these market wont pay a $12 product to get a "Free" T-Shirt. It only works in Japan and Korea, and that also depends on the products.
Generally Speaking, Discount is better than Free with Strings attached in Asia Regions. Pricing Strategy, Consumer Expectation and Product Selection is so vastly in every Asian Market are part of the many reason why many large Retailers failed in China.
This article of course totally ignored the scenario where the buyer is aware of the going rate for a given item, and either stocks up when a sale happens or waits until the price point they want to pay. The article basically is suggesting "deals are bad" instead of what it should be saying, which is "don't fall for bad deals".
I agree, in the mane. But I think their point isn’t for people who target a specific good or service but who instead suddenly enter a market (purchase something they wouldn’t otherwise purchase) because of a BOGO deal.
Quote “”Retailers are often as guilty as you can get with manipulating price of an item,” says Cohen. “You’re often charged a price that nobody has ever paid; anything that’s free is just carved off the regular price.””
A friend once pointed out a deal on Coca Cola in one store where 2 bottles were actually cheaper than one single bottle. I reckoned the expensive single bottles were only there to convince you that you were getting a great deal?
Coca Cola is, I think, the classic example of a product where fair cost has become irrelevant.
Funny the title calls economics. But the textbook economics with its utility maximizing rational agents is utterly incapable even accepting the existence of this kind of phenomena, much less analyzing...
Ah, the mythical caricature textbook economics that hasn't integrated bounded rationality or behavioral economics. Funny how I only find that in internet comments and not actual classrooms past 101 (which is too basic to get into this).
I may be too cynical, but I assume most MBA curricula do not contain bounded rationality ot behavioral economics at least as obligatory subject, but are happily restricting themselves to the world view of 101.
Business programs LOVE behavioral econ. You get Nudge and cognitive bias stuff starting in undergrad business classes.
And other than the econ classes, business classes aren't modeling behavior or doing much theory work, so they aren't making assumptions like rationality.
There are papers modeling it in game theory, but you'll spend a lot of time on this in advanced micro, any behavioral or price economics classes, and any applied econ classes. The mythical textbook econ he's talking about is a meme.
I just read the book "Dollars and Sense" and recommend it if you're interested in this topic. It's kind of surface level but it does help explain the ways people spend and think about money.
JC Penny almost went bankrupt when they tried to stop doing sales all the time and just charge fair prices. People want sales, even if the item isn't really cheaper.
This reminds me of that Elon Musk meme where you buy glasses by searching "x".the glasses are free but the transportation is like twice the price to male em
This can be generalized to: Every time someone offers you a "deal of a lifetime" it's a deal that mostly benefits him. If it doesn't screw over a third person it usually screws you, and if it screws over someone else it still might screw you.
That's why the smart man will find deals himself. E.g. instead of waiting for a prospect from a cars dealer that makes him a good offer, he will study what makes a good second hand car, when the prices of second hand cars are lowest and then he will go and make an offer to a caring owner of a car to become its second hand owner.
Payless Shoes is particularly egregious -- they have huge signs that say "BOGO" but then the fine print says... "buy one get one half-off." And their employees are apparently trained to say "buy one get one" until you arrive at the till.
As a consequence, BOGO feels like a better deal than one item at 50% off MSRP. A 50% discount is a change in the asking price; the value of this item must have depreciated in some way for the seller to want to get rid of it (e.g., this garment is going out of season), and the price I'm paying is a fair deal that I'm happy to accept because I don't need to indulge in extravagances.
But in a BOGO deal, the asking price hasn't moved (or, as the article discusses, may actually be inflated); the fact that I paid full price means that it retains its original value, and the one they throw in is simply an enticement. In other words, I purchased an extravagance at full price, but it was a deal because I walked out with two. The amount paid is double the previous example's, but the perceived value is fourfold.
This isn't even getting into the actual value of perceived value (cf. the sticker price of wine vs. its perceived quality). Really interesting stuff.