In Discussions, Discussions, Money, Shopping, Style

All shoppers want, is just to feel like they’re getting a deal

Read a post from the NY Times: Sometimes, We Want Prices to Fool Us, where it details out something I’ve read about a couple of times in books that talk about the psychology of shopping.

Devoted coupon users like Ms. Fobes may be more frugal than the typical consumer.

But most shoppers, coupon collectors or not, want the thrill of getting a great deal, even if it’s an illusion.

In recent months, Penney recognized that human trait and backtracked on its pricing policy, offering coupons and running weekly sales again.

And it started marking up items to immediately mark them down for the appearance of a discount.

“But for someone like me, who’s always looking for a sale or a coupon — seeing that something is marked down 20 percent off, then being able to hand over the coupon to save, it just entices me,” she said. “It’s a rush.

Basically, we WANT to feel like we’re getting a deal, even if we aren’t.

RETAILERS MARK UP PRICES TO MARK THEM DOWN

This is a very common practice, and done at J. C. Penney, but also at The Bay. I’ve noticed that most of their prices are overpriced (in shopping comparisons), but then they offer a “25% off” deal that makes you think that you’re getting it for cheaper.

Even before big sales (Black Friday, Boxing Day, etc), they mark up prices and then do a fake mark down to make us feel like we’re getting a deal.

Photograph-Shopping-Clothes-Closet-Wardrobe-2


RETAILERS KNOW WE WANT A DEAL BUT CAN’T DO MATH

It’s commonly known that we get tricked when math comes into play.

BUY ONE GET THE SECOND FOR HALF THE PRICE

…is easy to understand, but something more complicated where some math is involved like:

BUY ONE & GET THE SECOND ONE FOR 35% OFF, AND THE THIRD FOR 37% OFF

..makes it harder for us to understand which one is really the better deal because we suck at knowing how to multiply for percentages.

That’s probably a crappy example, but you know what I mean. When there are tiered percentages (much like tiered tax rates), we get confused as to when the discount is applied, to what amount and when.

Photograph-Shopping-Home-Serving-Tableware-Things-Home-House

For the record, this is how I do the calculation for sales:

If something is 37% off, I multiply the item by 63% to get the “real” price right away.

E.g. $10 item at 37% off

$10 x 0.63 = $6.30

Otherwise you are stuck doing the calculation the LONG way, which is to multiply $10 by 0.37 and then to subtract that discount from the original $10 price.

If I am doing a calculation for two or more items, I always get the final price for both, then divide it by 2 to see if it’s really a deal or not.

E.g. $10 item with the second one half off

$10 + $10 – $5 = $15

$15 / 2 = $7.50 each

So if I see a deal for the item at let’s say 30% off, or at $7 each, it’s clearly a better deal to buy them at 30% off than it is to buy one with the second half off.

THE REAL DEALS APPEAR AT AROUND THE 40% MARK

The Frugal Guru Guide says the following for clothes (although I reckon it works for everything):

If it says regular price, it’s really 40% more expensive than it should be.

If it says 30% off, it’s really regular price.

If it says 40% off, it’s really 14% off.

If it says 50% off, it’s really  37% off.

If it says 60% off, it’s really 43% off.

If it says 70% off, it’s really 57% off.

If it says 80% off, it’s really 71% off.

So you can see that when discounts start at 40%, then it’s a REAL deal, as in you’re finally getting something for the actual price.

Photograph-Travel-Toronto-Ontario-Canada-Honest-Eds-Shopping

I haven’t tested out this theory but it sounds correct based on what I have observed at retailers. It isn’t until something hits the final sale rack that it is really a good deal.

Otherwise, retailers are always giving “deals” at 20% off, 30%, or 40% off to make you think that you should get in and buy the items NOW before the deal disappears.

DO YOUR RESEARCH BEFOREHAND

Before I buy anything, I tend to do my research, especially for big ticket items.

I know what the price is at retail, then I figure out a discount that is acceptable to me, consider any sales taxes, and whatever other accessories or bonuses I get with the deal.

I also keep a price chart for things I buy often such as certain vitamins or creams.

I don’t bother keeping track of things I don’t plan on buying again, but without a price chart, I’ll never remember what things cost.

 

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Sherry of Save. Spend. Splurge.

Millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. Since then, I have paid my $600K home in cash (my half was $300K), my $180K casr in cash, worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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12 Comments

  1. MakintheBacon

    Excellent post. Whenever i see a sign that says 10-20 percent off, i just pass it by because i know it’s not a deal. I also tend to do a lot of research before i go shopping and price compare. Too bad price matching for shoes and clothes is not an option. 😉

    Reply
    1. saverspender @ save. spend. splurge.

      @MakintheBacon: Tell me about it!

      When I see something that fits and is perfect, I am hesitant to put it back in fear of never finding it again.

      Reply
  2. Maya Symone

    Retailers think people are stupid, but hey some people are. I think a 10% discount is so dumb, I just don’t know why people get excited about it.
    I’ve been telling people for years that stores make an item more expensive and then mark it down.
    Everyone loves a good deal and we can get caught up thinking something is better than it actually is.

    Reply
    1. saverspender @ save. spend. splurge.

      10% – 15% for me is a given. I can even get that just by asking nicely at the counter in some stores, so it doesn’t get me excited.

      Reply
  3. CorianneM

    Yes, there can be such steep discounts in clothes shops – it can’t be right! Also don’t usually use the buy one, get one free/discounted… especially in the supermarket. I live alone, so what use are two of everything! I eat, but not that much, and I like variety in what I eat.

    You made me think of a funny thing that happened in a Chinese supermarket in Beijing. I was buying a broccoli. The lady was shouting the whole time “buy one, get one free” (in Chinese). I only needed one, but I was having a discussion with my friend about what exactly we were going to cook, and suddenly the shop lady was standing next to me, pointing at the broccoli and saying “buy one, get one free”. Then she grabbed the broccoli from my hands, got another broccoli (both broccolis wrapped in plastic by the way) from the crate and then taped them together. Then she gave them back. This all happened in like two seconds! I tried then to explain I didn’t want the second one, but she wouldn’t budge!

    She probably thought she was doing me, the foreigner, a service, but instead I ended up with two broccolis – and two eggplants, because I wasn’t paying attention again and she taped an extra eggplant to the one I was holding…

    Reply
    1. saverspender @ save. spend. splurge.

      I think they just think that you SHOULDN’T pass up free food if it’s offered to you. I mean, buy one get one FREE? Why would you turn out the free one!?

      Most people think like that.

      Reply
  4. StackingCash

    The best deal is just not buying anything but the bare necessities. 🙂

    Reply
    1. saverspender @ save. spend. splurge.

      You know what? BF says that a lot 🙂

      “The best deal is not buying anything. I save 100%!”

      Reply
  5. PK

    Any time you’ve got a “get the xth item for y% off” you open it up to purchase arbitrage. My dad instilled this in me at a young age… usually they order purchases from most expensive to least expensive. Take 2nd item 50% off… so if you split up a $60, $60, $30, $25 purchase into $60, $60 and $30, $25 purchases you’ll save money. ($27.50 saved vs. $42.50).

    Oh, and you’ll confuse the checkout person. Worth it.

    Reply
  6. cj

    I don’t think we shop enough to look for deals and do the math, but this is really fascinating. We tend to find buy the best priced items over and over until we find something better. But your method can help us understand when we are being cheated or not. Thanks for some groovy info!!

    Reply
  7. Jane Savers @ Solving The Money Puzzle

    Retailers think we are stupid. I guess some of us are stupid if we fall for these sales tactics.

    I watch for true bargains like meat on its last day of sale at the grocery store or the 50% off rack of breads. Just freeze the bread or bagels and toast to eat and you would never know that it was possible a bit stale.

    Reply

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