It's been around for decades, and yet many people still don’t know exactly how it works. This foundational system is easier...
4 Minute ReadTopic: budget
Everyone loves a deal. And the retail world knows it.
Check out these four pricing techniques used to convince us we’re getting a good deal. Then learn how to tell if the item is actually on sale or not with our pro shopping tips below:
1. Price Anchoring
Infomercials are a classic example of price anchoring.
Imagine an over-accessorized shopping channel hostess demonstrating the latest kitchen gadget. Her pitch is almost always the same: “Normally, this would cost you $150. But if you call in the next hour, we’ll give it to you for the low, low price of $39.99! We’ll even throw in free shipping!”
If a higher price is established in our minds first, we’re often more likely to buy an item for the price that is set next. It seems like a steal by comparison! That’s why you can find the “suggested retail price” on everything from cars to children’s books. It might be a deal—or it might not be.
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Pro Shopping Tip: Don’t assume the price you see is the best one. Read reliable reviews online and do some comparison shopping of your own before you buy. You might find a better deal in about five minutes. Or less.
Related: Dave’s Most Popular Money-Saving Tip
2. Bonus Packs
If given the choice between getting a bonus pack or a discount, which would you pick?
In a study published in the Journal of Marketing, researchers offered consumers hand lotion for either 35% off the regular price or in a bonus pack of 50% more. Not surprisingly, most shoppers chose the bonus pack.
But here’s the kicker: The discount was the better deal! That’s because 50% more product equals a discount of 33%. Shoppers would have been better off getting the regular pack for less money! Tricky.
Pro Shopping Tip: Make sure you’re comparing apples to apples. Or in this case, hand lotion to hand lotion. Look at the price per unit instead of comparing two totally different measurements.
3. Three’s a Crowd
We don’t like high prices, but we don’t like cheap junk either.
That’s why you might see a distracting price cushion on either side of a product that’s being promoted. The Atlantic retells a perfect example of this, first published in William Poundstone’s book Priceless: The Myth of Fair Value (and How to Take Advantage of It).
In an experiment, customers were offered two drinks: one priced at $2.50 and the other at $1.80. Most bought the more expensive drink because of the perceived higher quality. Then, another drink entered the mix at $1.60.
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Suddenly, the mid-priced drink soared in popularity! It was the perfect combination of quality and price. Keep in mind: Products are positioned to make them look like a bargain.
Pro Shopping Tip: Don’t judge a product’s quality based on the prices around it. Figure out what you like, and budget for that item—and that item only.
4. The Color Orange
When we see a sale sign, a deal alarm goes off in our heads.
Behavioral economist Dan Ariely shows us just how susceptible we are to sale stickers with a few photos from Whole Foods Market. The bright orange sales sticker had a price of $3.99. Above the sale sticker, was the regular price.
Guess how much? $3.99!
Pro Shopping Tip: Look at the regular price when you’re shopping, not just the brightly colored sales sticker. Bright colors don’t necessarily mean a better deal.
Don’t Be Fooled!
When you are out shopping, stop and do the math before you buy. Is it really a good deal, or are you just getting duped? Keep more money in your budget by being aware.
Not sure what you can and can’t spend on deals? A budget is the plan you create for your money so you can tell every dollar where to go. Check out EveryDollar, our free budget tool, to create your plan today!