When you head into your local supermarket, are you drawn to the brightly coloured tags promoting a reduced price? You’re not alone, of course, if you are.
Why wouldn’t you buy something at a cheaper price than you can normally get it for? It’s the financially responsible thing to do. But have you, in fact, become an unwitting ‘victim’ of pricing psychology?
What is ‘pricing psychology’ and should you care about it?
Pricing psychology is a tactic used by retailers to understand which aspects of price will motivate customers to buy more.
Retailers who understand these motivations use them to their advantage, creating what they might publicly call a win-win situation. They sell more of their product, and the customer gets a good deal.
At least, the customer thinks they’re getting a good deal. But are they really?
Think back to those brightly coloured (yellow in the case of both Coles and Woolworths) special tags. What are they actually offering you? A cheaper price, obviously, but how are they doing that?
As a regular visitor to both Coles and Woolies, I’ve noticed that both offer periodic discounts on items by simply lowering the price. This will often be accompanied by a ‘20 per cent off!’ or ‘Half price!’ tag. For many, the immediate response is to pop the sale item in their trolley or basket.
The question is, would you buy this item in any case, or is it normally an occasional treat? If it’s the latter, there could be some pricing psychology going on.
Let’s say the item is a packet of biscuits. You take them home and offer them to the kids. The kids, being kids, love the taste! So when it’s time for your next supermarket shop, what will the kids say? They’ll probably ask for more.
And many parents, perhaps not you (depending on your willpower), will say ‘yes’, just to please the kids. But on the next visit to the supermarket, are those biscuits still on special? Almost certainly not, but you’ll buy them regardless. And they may even become a regular purchase. The pricing psychology has worked.
But wait – there’s more!
That’s one example of pricing psychology. Another simple one, that Coles seems to use far more than Woolworths, is making an item cheaper if you buy two. The big yellow ‘2 for $7’ sign screams ‘savings’ to you. Especially when you take a look closely at the much smaller print that says ‘$4.50 for 1’. So if you buy two, you’ll be saving $2!
And indeed you will be saving $2 – if you were always intending to buy two. But if it’s a snack item or some other treat, would you really have bought two? Perhaps your answer is, ‘Yes, I would have bought another one next time around, so I’m saving by buying now.’
Again, this is true – if you leave that treat in the cupboard unopened until your next supermarket shop. Do you have the willpower? I don’t, so unless it’s a staple item that I won’t be tempted to binge on, I avoid the ‘cheaper if you buy two’ specials.
The decoy
One particularly shrewd pricing psychology tactic employed by retailers is the ‘decoy effect’. This practice is used widely online and involves providing an extra product option.
Gary Mortimer, associate professor in marketing and consumer behaviour at the Queensland University of Technology, recently wrote about this. In its simplest form, the decoy effect involves adding a third particular product to the list of available items.
Prof. Mortimer uses the Nutribullet juicer to illustrate the decoy effect. In his first example, an ad offers a choice of two models. One has 900W power and five accessories and costs $89, the other 1200W power and 12 accessories at $149. Many shoppers will say, ‘An extra $60 for 300W extra power? No thanks.’
However, the introduction of a third model, with 1000W power and nine accessories for $129, changes the perception for many. This might create an argument along the lines that it costs $36 more for just an extra 100W – probably not worth it. But for just another $24 on top of that you’ll get another 200W. Bargain!
The mid-priced option, in this case, was introduced to try to sway you towards the most expensive option. And in general, it works.
The tip of the iceberg
These examples are just a few of many pricing psychology tactics used by retailers. Do such tactics bother you enough to change your habits? Perhaps not, but it’s good to at least be aware of how they’re being used. And you might just think twice the next time you see a yellow tag.
Are you a sucker for specials at the supermarket? Were you aware of the psychological ‘tricks’ retailers use? Let us know in the comments section below.
Also read: Six expert tips for second-hand shopping
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Was I aware, absolutely and I use it to MY advantage. I never buy something I don’t need because it’s cheap but I do buy multiple items when they are half price, and again only because I know I will be buying them again in the future. There are a number of items that I haven’t paid full price for for years now. It’s got to the point for me that if I can’t get the half price I don’t buy them, that doesn’t happen often as Woolworths and Coles tend to have many items on special on alternative weeks or fortnights.
Same for me, only buy the choc bars if they are a dollar or under, never full price or even half price. I know the price of most items I buy regularly and so know if its a real discount, if I’m not sure life up the specials label and look at the normal price.
If the product is a ‘regular’ on my list of groceries, I might think about purchasing a few of them, as I know that it could be some time before they come ‘on special’ again (around 6-8 weeks), and I know that I’d use what I’ve purchased in that time, and the discount is different each time.
I was surprised when visiting Coles recently and purchased on special some items, and I was awarded with a ‘discount’ – as in 6 for the price of 5, so I was even happier 🙂
We’re with Greg. We religiously buy our staples on special and many other “needed” products as well. We’re quite happy to have variety by buying the specials in the Biscuit or Chocolate aisles. And to move brands as appropriate for a better deal.
However, always check the $ per mml, gm or whatever. Not infrequently the specials can be beaten by other packaging options when you review the price per volume, weight etc.
Also complain at the counter when the price per unit is not displayed. Sometimes it may be an oversight, but a well known German outlet does seem to have more oversights than other retailers.
I have noticed that some items go up in price for about a month and then they say they are on special atb the old price
take fussy cat cat food that has gone up from 80cents /tin to now $2.00
next week it will be $1 6.oand even down to $1.20/tin and when it gets to $1.20 a tin people buy several tins and they run out so it goes back to $2.00 a tin
HOW can cat food jump up %150 in 3 years
the way pet food is going up in 10 years time no one will have pets as only the rich will be able to feed them .MY PET FOOD BILL HAS GONE UP $40/FN TO $90/FN and i am sure other people are in the s
What I am a sucker for is the half price smoked salmon in Coles. It may still be $40/kg, but the portions are such that the $16 reduced to $8 gives me enough for four meals and that $2 treat per dinner is good value to me. The spot half price because they are within hours of their “Best Before” or “Use by” date can be very good value for a treat that takes the place of my planned meal at a lesser cost.
I’ve seen the hot roast beef reduced by 20% simply because a new lot of the hots are going into the holder. I can get at least four dinners and four lunch sandwiches out of single roast beef serving. (A note to be aware of, the actual size of the portion of roast beef isn’t given as such on the pack as the size is dictated by the fact that its’ cooking time in the oven has to be the same as that of the 20 or so chooks that are in there with it. Usually delicious.)
“$11.98, or two for ONLY $25”. I’ve seen examples of this sort of tactic, but don’t recall specific instances. Something to watch out for.
Yeh I have had a chuckle about that too when I spot items where buying two is supposed to get you a discount yet buying one is cheaper. Also pays to check the size or weight of the products being offered as specials because similar looking items may contain more of the product and actually be cheaper by volume. I recently came across an example of coca cola 1.25 litre bottles on special at two for $5 but the shelf price per bottle was $2.10 so you lost 80 cents buying two.