Pricing tricks

CHOICE tells you how to spot the everyday pricing tricks you face as a consumer.
 
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01 .Top tactics

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As consumers we compare the price of a product with other prices, rather than with similar products, which may ultimately make us bad judges of value. This behaviour affects the way prices are structured by retailers, marketers and merchandisers and how people shop.

Anchor price

Australian and US research has shown that the first price we see becomes the “anchor” price and acts as the reference point for subsequent prices.

For example, an expensive bottle of wine may be included on a menu along with a very cheap bottle. This combination directs people to the middle-priced wines and acts as the anchor prices to create an artificial mid-point, which diners assume is the best value.In reality these wines may have a higher markup and actually represent poor value – yet you can’t see this clearly because you’re comparing the price of the cheapest bottle of wine with the most expensive.

Pricing tricks that create an artificial anchor price can hide high prices as well as poor value, and make it very difficult for consumers to make fair choices about what they buy. So it’s very important that consumers are armed with some tools before marching into the shops.

Product layout

Because most Australian consumers read from left to right, the lowest price on a supermarket shelf is often shown on the left.

It acts as an anchor point that directs us to the mid-point, which we assume is the best value. In every supermarket aisle, the brands with a higher markup will be positioned at eye level so that less effort is required for shoppers to choose these products.

Research has shown that consumers tend to circulate around the edges of the store and dip into the aisles rather than systematically travelling up and down. Supermarkets typically position the most popular items with the highest markup at the front of the aisles to encourage shoppers to put them into their trolleys.

Bracketing

“Bracketing” is when expensive items, such as steak or seafood, are offered in two sizes.

The smaller, less expensive dish is the item the restaurant expects to sell in larger quantities; the larger, more expensive option is included on the menu to make the smaller size appear better value and encourage diners to order that item.

The cheaper item may not represent better value but it’s virtually impossible for diners to judge value for money in the absence of weight or unit price details.

Loss leader

Retailers will often position discounted products that are sold at a loss at the front of the store to entice customers inside. CHOICE has found that some liquor stores sell cheap cartons of beer as the “loss leader” to get you inside.

This simple ploy works because the discounted items are the anchor point, suggesting to consumers that other items inside will be discounted.

This may not be the case, but that doesn’t matter because once you’ve invested time and effort getting into a store, you’re more likely to spend.

Rebates

These act as a trick to lower the price, but you must pay full price upfront and then work to claim back the refund.

Caps

Mobile phone “cap” plans create a false anchor price because you’re charged more if you go over your limit.

Discount ads

Adverts offering discount products use a cheap anchor price to suggest all prices are discounted for that particular shop or website.

Cash vs card

Pay with cash rather than a credit card because it makes the purchase more real. Research shows that pain receptors in the brain are activated during a cash purchase. This phenomenon helps limit overspending when using cash.

 
 

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