The science of price

My colleague recently shared with me a slightly disturbing story. She was grocery shopping with her 15-year-old son. The boy took the cart up and down each aisle, and when the sign said "10 for $10," he automatically put ten of the item in the cart.

She finally noticed what he was doing. "Honey, you don't have to buy all ten." "Yes I do, Mom. It says ten for ten." "No you don't, you can buy as few as you want and still get the deal."

At the checkout, they confirmed that Mom was right. But is this always the case? A quick call to my local Jewel confirmed that indeed, a "ten for ten" can also be nine for nine or three for three. It just means the items are a dollar each.

My friend's son was confused. On the drive home, he asked his mom, "Why don't they just say 'A dollar each'?" She told him, "Because then you might only buy one or two. They want you to buy all ten." And then he said, "I see. So they are training us to buy more than we need."

Wise words, young shopper. I wonder how many people this fools. Did you know that "five for $8.00" means that the items are really just $1.60 each? Would you have bought all five? I always buy two orange juices when the deal is 2 for $5. I don't really need two cartons of OJ, but somehow the lure of a deal, a special promotion, is too good to pass up. I'm too impatient to do the math in my head, and sometimes I see a twofer and just assume it's cheaper. That can't be smart.

Pricing is a fascinating science. Why do you think everything is $19.99 instead of $20.00? Because $19 is still in the teens, it feels like a lot less than $20. Um, it's a penny less. But that "price point" theory prevails in almost every type of retailer there is.

What's most fascinating to me is how easily manipulated we are. How many times we are seduced by the "buy one, get the second one half off" deal. That second one is still costing you money! You are not literally saving any money - more is leaving your wallet! And rationally, you know this. But shopping is never fully rational, whether we admit it or not. In a desire to break the monotony of picking up milk and bread, we get excited by a deal. We feel we are "beating the system" when we discover ten for $10. We get emotional, and we grab ten items. Then we rationalize it later by masking our extra purchases with the word "savings."

And stores are definitely complicit in this process. By simply omitting information, such as "You do not have to buy ten of this item to receive the discount," they are tricking at least some people. They aren't conveying lies, and no one would win a court case against them, but they are only selling half the story.

You can't blame a store for trying to sell more product. It's their raison d'etre. But sometimes you have to keep that in mind when shopping. You may like the store, and want to support them, but buying more than you need usually means a waste of money, product, or both.

My colleague's son is still young - plenty of time to un-learn these strange habits that retailers have trained us all to have. But unless stores start owning up to their items' true prices, and practicing a little more honesty, he too will grow up having to watch out for ten for ten.


sara said...

Update to this post:

Yesterday I biked to the beach, and halfway there I realized I forgot a beach towel. So I stopped in Old Navy to grab one. When I got to the front, an employee said "You know, those are 2 for $15. One is $10.99, so you might as well grab a second one."

I actually walked back there before realizing how silly this was. The towels were mediocre, and I didn't want to spend $4 more on anything anyway. I didn't want to stuff a second towel in my backpack. I just didn't need another towel!

I had to go back, and literally convince the guy to let me buy just one. This was our conversation: "Are you sure?" "Yes, I only need one." "But they're 2 for $15!" "I know, but I only need one." "It's only $4 more!" "I ONLY NEED ONE." "Okay, that'll be $10.99."

It may be hard for you to understand, but I only buy what I need.

Stacy said...

I actually do think that stores like Jewel are getting better about "owning up" to how much their items actually cost--you just have to know where to look. On your Flickr page, you have a photo of "2/5.00" where the label actually gives you the rundown:

--$2.67 breaks down to a unit price of 14.8 cents each.

--2/$5.30 breaks down to a unit price of 14.7 cents each. A difference of .1 cents...

--But 2/$5.00 breaks down to a unit price of 13.9 cents each. A difference of .8 cents! How can I say no?!

I've actually learned to look at the unit price instead of the final price when I'm grocery shopping--I find it usually gives me a better idea of exactly what I'm getting for my money.

(It might have something to do with the fact that I used to buy all 10 items at the Jewel.)

Nancy said...

Your experience at Old Navy makes the point that your blog does people a service, by helping them become more educated consumers!

Dan Lockton said...

You've probably come across this before, but there are some interesting Retail tricks to make you shop highlighted by the 'anarchitect' group Space Hijackers.

Great blog, by the way - some really insightful observations and commentary!

Jeff said...

Like Stacy, you reminded me too of my habitual reading of the statutory ‘per kg / per ml’ prices (here in the UK), in a sceptical bid not to be fooled by all that trickery afoot! Yet, a few aisles away in the same store I’m totally seduced by the ‘round-pound’ value pricing – yes it does exist - of the Supermarket fashion ranges. In the value economy it seems, £3 (no pence suggested or shown) is the everyday low price for a pair of Jeans. Only this week I bought and disposed of cheap paintbrushes rather than endure the inconvenience of the clean up. Had I extrapolated the thinking I might have acquired a day’s disposable wardrobe to boot.

But wait a second, how do all these garments wind up at a round-pound sell-price?
Given the complexity of the modern supply chain, even the Grocer’s buying power can’t ensure it arrives at the store at a ‘round-pound’ cost. That someone at H.Q. sets those prices shouldn’t surprise, but the fact that it doesn’t feel more contrived does. Why in fact, does it somehow feel more honest? Perhaps it’s the refreshing break from all those ‘9s’? Or the wonderment of low, low prices providing permission-to-shop.

More likely it’s the same human failing that leads some of us to circle the same combination of eight ‘special’ personal numbers on the lottery ticket each week, but never daring to just tick off no.s 1 thru 8. I mean, c’mon, what are the chances of that?