Pricing Decoy - Bargain Hunter Trap

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  scotty on 12/09/2013 - 11:32

  +1

  It's more of an issue when you have full control of consumer's choices. The assumption is that the shopper is already on your site and they will pick one out of all the choices you have presented.

  Not really the case here. At least for most OzBargainers they will spend time doing research to find (1) alternate products, or (2) alternate merchants.

  So, iPhone 5c or just spend a bit more for the latest iPhone 5S? Nah, I'll just go over to Google Play and grab a Nexus 4 for less than half the price.

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    AnyPrice Helper on 12/09/2013 - 11:54

    Great example Scotty.

    Looking at the different options of the same product. I like how Coles/Woolworths show $1.50 per 100g or 100ml. Sometimes the 2L bottle is not the cheapest!

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  djones145 on 12/09/2013 - 11:39

  How do you spot a price trap like this? Is there a resource/website that show this information transparently?
  How would you like to be presented, if this particular info is out there somewhere?

  Lol sounds like a focus group

  should we go to ur website? cause u can assist us with this

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    AnyPrice Helper on 12/09/2013 - 11:52

    Our site can't do that yet :[

    But gathering the collective brain power here. Maybe will give us an insight on how to help making this info available.

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  Ughhh on 12/09/2013 - 12:04

  How do you spot a price trap like this?
  Is there a resource/website that show this information transparently?

  Imo, for things like tomatoes, the only thing you can do is to get out more and pay attention to prices next time to get an idea of what the general price is.

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  BlazinPast on 12/09/2013 - 13:34

  +1

  I experienced something like this before.

  I was buying a jump rope from Rebel and was looking through the options. I had no idea which one to choose so I just looked at the price tags amongst them. There was a $5, $8 $10, $15 and $20 ropes. I used the logic that the more expensive jump rope was probably the better product (in terms of material and speed). Thus, I didn't want to buy the cheap $5 or $8 ropes because I thought they'd just be slow and would tangle a lot. But the $15 rope had a deal where you could get 2 for $16, that is, $1 more to get an extra one. Since it was $15, I thought it was a high quality jump rope, and paying $1 for a 2nd one was a great deal. Anyway, I ended up buying it and it wasn't that great.

  That was probably one of the best psychological marketing tricks that I've fallen for. It was probably a $6 rope that they bumped up to $15. If you bought one for $15, they make a $9 profit. If you buy 2 for $16, they make a $4 profit. It's much easier to sell 2 of those ropes through that selling technique since no one would buy 2 ropes if it were just $6 each.

  I've used this selling technique when selling multiple quantities of an item to friends before and it works a charm. Since they see an 'expensive' (relative to the rest) price tag, they think it's a premium product. If they were to pay a fraction more money to get a 2nd one, then they think it's a great bargain.

  It's sort of hard to explain in text but yeah.. ;)

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    Rode on 12/09/2013 - 13:44

    I really hope were just experimenting and you don't mean to rip off your 'friends' using that technique.. Instead you should be warning them of such strategic pricing! :)

    But yes I agree, marketing can be clever and oh so sneaky.

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      BlazinPast on 12/09/2013 - 13:59

      Haha yeah, there were 2 earphones for $5 each. I sold them for $15 each or $17 for both. If I had sold one, I would've made a $10 profit. If I sold both, I would've made a $7 profit.

      As opposed to not using this technique and selling them $7 each. They would think it's too cheap and be suspicious. And there would be no incentive to buy both either.

      Either way, they were actually very good earphones so my friend ended up getting a bargain for the price he paid anyway.

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        Rode on 12/09/2013 - 14:31

        I guess it depends on the type of product sold. Something like earphones usually come in pairs anyway right? If not, it would be weird using two standalone earphones together.

        Maybe you should have said, buy 1 earphone for $15, 2 for $17, or for $25, i'll include a brand new jump rope which retails at $15! Haha.

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  blahman on 17/09/2013 - 03:18

  If you're interested in learning more, I recommend checking out the book: Predictably Irrational by Dan Ariely who is a professor of psychology and behavioural economics at Duke and MIT. Great read about how much we make decisions on relativeness to very arbitrary reference points. One of the things covered in the book is decoy pricing. Very easy and amusing read.

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  rekabkram on 17/09/2013 - 09:50

  The tomato example doesn't hold up at all for me.

  1. Shop keeper no.1 pays a premium for his space because it is conveniently positioned, shop keeper 3 gets a cheaper spot because he is in an inconvenient position.

  2. Shop keeper no. 1 would have sold a certain amount of tomatoes regardless of the price due to his convenient position, shop keeper 3 would have sold less due to his inconvenient position.

  3. Shop keeper no. 3 is dealing with more customers so he has more expenses. Bags, workers and so on.

  So what does shop keeper number 1 have to gain by splitting his profits? He's using his manpower, his real estate and spending more on rent. Why is he doing all of this? So that he can line shop keeper number 2 and 3's pockets… I don't think so.

  I realise that the argument is that they are selling more tomatoes at a higher rate but why a shop keeper would go to expense to help out another shop keeper is beyond me.

  As for the rest of it, that's exactly why Ozbargain was created. We are people who don't want to be suckered by pricing like this, we would rather sit and wait until an attractive price comes along for the model that we deem to be the most suitable and damn what they want to sell.

  It's people like us that kept the Hp Microservers in production, they were insanely highly priced but a very good system. They were priced out of the market and when they went to sell them off they realised that they had created a niche market, the price was raised slightly to make it viable to keep selling but the numbers of people that they were selling to we're far greater than their intended market so they had to switch their pricing from low sales high yield to low yield high sales.

  Apple are possibly the best company in the world at suckering people, they aren't just selling their product they are selling their brand and their image.
  They products rarely go on sale, they were (not so much anymore) the exact same price in every store and they had lower specs than their competitors. But they have an image and are a status symbol. They may possibly be the only tech company that has high sales, average tech(so products cost less to make) and high margins.

  The best advice that I would give someone who is constantly caught out by this kind of price trap is -

  Step back, think about your wants and needs. Check out pricing in various places, this is incredibly easy thanks to the Internet.

  Lets take the given example of the iPod touch 5th gen.

  • Apple price $249/$329/$439 for 16gb/32gb/64gb

  • Big W price $238/$318 for 16gb/32gb

  • Kogan price $322/$452 for 32gb/64gb (including $23 shipping)

  So by going around Apple from a quick search on 2 other sites you can see that the price point hasn't changed, it's not the store aiming you towards a product in this case so you need to make the call on what specs you want. If its 16gb/32gb then you could save money further at by shopping at Big W by either using ING's 5% offer or Entertainment book gift cards ($100 gift cards for $95).
  This drops the Big W price a further 5%.

  • Big W price $226.10/$302.10 for 16gb/32gb with ING/gift card 5% saving.

  By shopping at Big W over Kogan/Apple you can also get rewards points.

  So how do you get past their pricing models? Don't. Work with them to ensure that you are getting the best bang for your buck.
  Do some research, I've got mates who have said I'm being cheap because I do a quick search to find the best specs for me and best price but a 5-10 minute search can save you heaps. Example, someone buying from Apple would have to spend ~$27 more to get a 32gb iPod than I would because I spent a couple of minutes looking it up.

  I think the old saying 'Don't work harder, work smarter' can be adjusted to 'Don't spend more, spend smarter'.