Have list prices lost their luster? Why the retail price isn’t all it’s cracked up to be

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“Save 70%! Save 80%! Save 90% on retail!”

Big percentage sales — though they sound great — often lose their luster after a buyer does a little comparison shopping.

Now more than ever, especially with the popularity of online shopping, people love — and expect — to get a great deal.

But is that deal really a great deal or just the perception of a great deal? A new study finds that consumers often choose a more expensive option — just because the discount sounds better.

RELATED: 9 simple things you can do every day to stretch a buck

Higher discounts may be higher prices in disguise

According to Larry Compeau, a professor at Clarkson University who is an expert on pricing strategies, “Everyone expects a deal on the web. Nobody wants to pay retail. Some sellers are now willing to deceive consumers to make the sale,” e told The New York Times.

Retailers today have to do more and more to catch and keep customers’ attention. But the problem comes in when retailers, in an effort to gain attention or solicit a sale, actually manipulate the price of a consumer item to in an effort to proclaim the biggest deal out there.

However, this practice is not without consequence.

A few years ago, Overstock.com was the focus of a lawsuit brought about by a California court due to its pricing strategies — and was subsequently fined a whopping $6.8 million.

In its defense, Overstock said it was using ‘standard industry practices’ to come up with its ‘list’ or ‘original’ prices.


Though the FTC declined to comment on this case, David C. Vladeck, the former director of the FTC’s Bureau of Consumer Protection said, “If you’re selling $15 pens for $7.50, but just about everybody else is also selling the pens for $7.50, then saying the list price is $15 is a lie.” He added, “And if you’re doing this frequently, it’s a serious problem.”

With this in mind, retailers do really need to consider the honesty of list pricing. If no one is buying something at the list price, is it really a list price?

New study finds that sneaky pricing costs consumers more money

The Wall Street Journal recently ran a story that featured commentary from Dr. Akshay Rao, a marketing professor at the University of Minnesota, who has found that consumers often make a simple mistake when it comes to comparing prices. For example, is a 33% discount the same as getting 33% more for your money?

Not exactly.

In his analysis, he found that if a gallon of, say, ice cream costs $9, then a 33% discount would save you $3, making the price $6, or $2 per 1/3 gallon. But if you received 33% more ice cream for $9, you be getting 1 1/3 gallons of ice cream — at a cost of $2.25 per 1/3 gallon. So, the 33% discount is a better deal than getting 33% more for the same price.

He said this error is especially pronounced in so-called double discounts, which may not be as big as they seem.

In another example, if you took a discount of 40% on a $1,000 suit and compared it with a double discount of 20% off with an additional 25% off, it would seem the latter would save you the more money.

“The immediate reaction is that you are getting 45% off,” he said.

But in actuality, the both discounts get you the suit for $600, although it seems like the double discount should save you more.

These cases exemplify why you should always do the math when comparing pricing.


RELATED: 8 money tips that will transform your finances and save you thousands

Three steps to ensure you get the best price

1. Comparison shop

If it’s a deal you want, the best way to know if you’re truly getting a great bargain or not is to comparison shop. Google Shopping is one way to do that: Just type the name of the product in the search box into https://www.google.com/shopping, and sort by review score, low to high price, or high to low price. If you’re out and about, another way to comparison shop is by using apps. Check out these free apps that can help you find the best price!

2. Use coupons

Another way to get the best deal possible is coupons. If you’ve found the absolute cheapest price, one way to break the price barrier is having a coupon ready that will drop the price even lower! Check out these ways to get the best price using coupons.

3. Always check the unit price

As we can see from the above examples, even if something is a higher percentage off, looks can be deceiving. That’s why it’s important, especially in a grocery scenario, to look for the unit pricing on an item. This will ensure you’re absolutely getting the best price!

More ways to save money

Aftermarket liquidator stores are also a great way to find practically new merchandise that was returned for an incredible bargain.

And finally, another way to get an awesome deal on something is to get it second-hand, either through a site like eBay, or through apps that allow people to sell their used stuff.

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