Retailer Strategy of Charging Less than Advertised
I recently came to the sad realization that I needed a new pair of shorts and maybe a dress shirt too. I would have to (gasp!) go to a clothing store. For some reason these stores group everything by meaningless brand names instead of just having all the shorts or shirts of the same size located together. Even more puzzling is having my purchases ring up at the cash register for less than the marked price.
I’m pretty good at looking around for signs that say something like “25% off marked price.” So, I usually know what price to expect when I get to the cash register. But many stores (Sears and The Bay come to mind) seem to routinely charge me less than I expect.
I remember buying some socks a year or so ago and the lady at the cash actually apologized for the fact that I’d have to pay the marked price; she then suggested that I might want to go back and choose different socks! Fortunately, I declined; they turned out to be good socks.
What advantage does this give the retailer? Superficially, it would seem they are leaving money on the table. Maybe people start to count on these price reductions? But if this were true, then these retailers are making customers unhappy when there is no secret price reduction.
Another possibility is that these retailers are trying to get their customers to focus less on price. After all, what’s the point of looking at the price if you know it’s likely wrong? I’m doubtful about this possible explanation, though. I certainly pay attention to the marked price even if I suspect the real price is lower.
My best guess is that this pricing strategy makes customers feel as though they got a good deal. The most prized customers, compulsive shoppers, have an extra justification for making their purchases and are likely to come back sooner.
I’m pretty good at looking around for signs that say something like “25% off marked price.” So, I usually know what price to expect when I get to the cash register. But many stores (Sears and The Bay come to mind) seem to routinely charge me less than I expect.
I remember buying some socks a year or so ago and the lady at the cash actually apologized for the fact that I’d have to pay the marked price; she then suggested that I might want to go back and choose different socks! Fortunately, I declined; they turned out to be good socks.
What advantage does this give the retailer? Superficially, it would seem they are leaving money on the table. Maybe people start to count on these price reductions? But if this were true, then these retailers are making customers unhappy when there is no secret price reduction.
Another possibility is that these retailers are trying to get their customers to focus less on price. After all, what’s the point of looking at the price if you know it’s likely wrong? I’m doubtful about this possible explanation, though. I certainly pay attention to the marked price even if I suspect the real price is lower.
My best guess is that this pricing strategy makes customers feel as though they got a good deal. The most prized customers, compulsive shoppers, have an extra justification for making their purchases and are likely to come back sooner.
I just had the opposite experience at the Bay this weekend: they had "40% off" signs above many of the racks I was looking at, with "as marked" in tiny print. Turns out only 1-2 items on each rack with the big 40% off sign was actually on sale. Another guy in line with me just walked away in disgust when his shirts rang up at full price.
ReplyDelete@Potato: I wonder if men and women tend to react differently to this type of manipulation. I'm likely to walk away in disgust as well, but I go to clothing stores so infrequently that I don't matter to their sales.
DeleteIt never fails to amaze me how many people consider shopping an entertainment. They buy things they do not need and then brag about the great deal. I knew a woman who dedicated spare bedroom to purchases she never unpacked. That's right: she's got great deals, but never bothered to as much as to open the packaging. Once a year she would drive the stuff to charity, or so she brags.
ReplyDeleteI have noticed that grocery stores use price reductions to gradually introduce higher prices.
@AnatoliN: Clothing stores must be mostly designed to cater to compulsive shoppers. Using price confusion as a way to introduce higher prices is an angle I didn't think of.
DeleteMike, my wife and I have had the same experience at the Bay. We don't shop that often, but it's been a consistent trend at the Bay - choose an item (on sale or not), go to the cash register and have the sales person inform me that she/he can take another 10-15% off. Go figure.
ReplyDeleteIf the Bay is going to fashion the great turnaround that's being talked about, they're going to have to be willing to charge full price ... at least once in a while. In the meantime, we'll take it.
Hey Micheal,
ReplyDeleteDo you happen to live in Canada or USA?
@Anonymous: I'm in Canada. DO you know of US retailers who play the same games with giving random discounts at the cash?
DeleteAlright that's awesome! I was hoping that you could maybe do a book review for a new book called "Managing Alone" (which we will send to you if you're able to do the review) which deals with finances in an event of the death of a spouse.
DeleteAnyways in regards to your question; no I actually do not know of any US retailers who do play the same games of giving random discounts. However; being in New York City and US retailers, everything is so much cheaper; there's no HST 13% tax to worry about. Also most of my experiences in Canadian retailers just like Potato said, use these discounts only on certain products mixed in a batch of regular priced items. These "certain products" are usually not the products we want. On the other hand, I definitely had experiences at Canadian retailers where we got an extra 10-15% off... I often call those my "lucky day"
Anyways, you have an amazing blog :D interesting to read and always updated!
If you're interested in the book review or just commenting with regards to the book please feel free to contact us at:
http://createwealthnow.ca/contact-us/