The Behavioural Economics of Discounting - ABC article

Switchblade88 on 30/05/2019 - 14:30

An article I found on the ABC website.

Very fascinating read, especially how it applies to us OzBargainers. Really prodded me to think about whether something really is a good deal versus something that provokes regret-aversion.

I know that I readily try and grab good, time-limited deals - even if I can't really afford them - simply because of this avoidance of future remorse if I DIDN'T get that deal before it ended. This really applies to Aldi's tools & hardware for me - I don't REALLY need that swivelling float level, but if I DON'T get it there won't be any more available next week!

Having said that, learning the cycles of certain sellers e.g. Spotlight & Supercheap means that if I don't get a good deal, it'll come back down to the same price in the next 6-12 months anyway. Bunnings, on the other hand, doesn't ever disount - so finding a cheap deal on Ozito batteries then really pushes me to get them.

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  iDroid on 30/05/2019 - 14:43

  Bunnings, on the other hand, doesn't ever disount

  They say this but I've purchased many reduced price items from Bunnings.

  • 

    dcep on 30/05/2019 - 14:49

    you mean clearance item

    • 

      Switchblade88 on 30/05/2019 - 16:31

      +1

      Exactly. They don't have rolling discounts like The Good Guys, or HN, or any other retailer.

      Clearance, or Aldi price matching is usually the only time when you get good deals. The psychological assumption by the customer being that "Bunnings don't do sales, therefore I'm happy to pay their RRP".

      In contrast, Supercheap has their Club SCA deal that backdates sale prices for members - therefore it becomes "Doesn't matter so much about a sale next week, I'll get that price drop difference back anyway". Never mind this is in the form of shop credits - so SCA keeps the sale anyway - but it increases their gross sales whilst ALSO reducing FOMO on the good sales by their customers. Less FOMO = more spontaneous spending.

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  spackbace on 30/05/2019 - 14:59

  +2

  Good old FOMO.

  Too often we get in the habit of using this site to find bargains, and historical prices that yes, when you really need it you dont find it a satisfying purchase.

  I mentioned the same thing recently about Whirlpool vehicle quotes, random people on the internet supposedly quoting what they bought the car for without proof. Now if you can't find the car for that price, does that lessen your thought of your new purchase and you find it difficult to believe you got a bargain too? Absolutely!

  Certainly has it's good and bad points being an active member on here lol

  On the plus side, $129 for 10TB hard drive is something I won't see beaten any time soon ;)

  • 

    Switchblade88 on 30/05/2019 - 16:33

    Damn, I don't NEED 10Tb but now I've got regret on missing that deal!

    Was that the recent Amazon deal that got canned??

    • 

      spackbace on 30/05/2019 - 16:39

      Yep, mine arrived yesterday ;)

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  crentist on 30/05/2019 - 15:34

  +1

  I've noticed is that being aware of regular discounts on expensive/non-essential items makes the lower price seem regular, and the retail price like a ripoff.
  This then creates an aversion to buying at the regular retail price, but over time the feeling of discount at the lower price also diminishes.

  This then makes things unattractive most of the time, and not especially attractive the rest.
  eg None of us will buy a pair of Bose at retail for $450, but even at $350 it doesn't feel like a discount. This also applies to cheaper items, not just expensive things.

  It then means that if you kinda want a pair of headphones, you are making that decision based on a $350 price without feeling any discount. And often if you wait until the sale ends, you are now turned off and find it easy to ignore.
  In a way, this could lower spending habits for some, especially when time spent waiting for a sale is used to reconsider a purchase, and force retailers to keep things at lower prices more often than they'd like.

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  altomic on 30/05/2019 - 17:13

  +7

  After being on this site for a few years then this is my take on bargains-

  As an ozbargainer - it can be quite confusing. the loss of primary focus -i.e. "to score bargains"

  It can be quite liberating - no longer are you tied to the demands of finding bargains per se. Now you have reached a point of enlightenment where where you are looking for the IMPORTANT bargains.

  i.e. the bargains that really are important.

  But have you reached that point through the acquisition of every thing you desire, or through the conscious (or unconscious) cognitive processing? you now know (or Unconsciously know) that everything you have is enough and nothing more will sate nor address nor feed a need to purchase.

  I'm mostly at that point.

  Travel deals still interest me.

  But I'm at the point where I understand what is a good bargain. and have experienced the good bargains. therefore, unless it is fantastic then it doesn't appeal.

  E.g. Last week I scored 135 rolls of quilton toilet from amazon for $22.50 delivered = 16.67 cents per roll (9.26 cents per 100 sheets) -thanks to the $30 credit due to the cancelled 4tb WD drives. - that was cool.
  or on Monday when I went to pick up my 1 pack of woolworths 500gram cashews (the other 7 had been cancelled and refunded), The service person apologized for the lack of stock and said the store manager had approved a $25 gift card. Server then said she'd check to see if they had stock. They had stock and they honoured the original price.

  SO - 7 x 500gram @ $3 - $25 voucher (plus 1 pack they had in stock) = profit + free cashews. nice !!!!

  those 2 small wins made me happy - but in the theme of things (e.g. my salary, and the cost) - I can afford to pay full price for toilet paper or cashews. but really getting a "Bargain" is where the thrill is.

  plus knowing what a real bargain is, rather than just a "cheapest price yet" bargain.

  Bargain knowledge can therefore decrease personal bargain satisfaction.

  The higher of one then the lower of the other.

  E.g. recently qantas had a deal for Japan. ~$600 return. it had a lot of pos votes. I could not pos vote the deal as my last 3 trips to Japan cost ~$380.

  Before I joined ozbargain I would have celebrated $600 Japan return airfares. I used to live there. The regular return airfare was $1200+. but now I am more informed.

  The simple pleasure of buying something (ignorant of the price) and believing that you have got a "bargain" has been replaced by the underlying thought of "it is cheap….but can be cheaper?"

  Is the bargain truly a "bargain"?

  It starts to undermine our concept of "value"

  So you fall into these philosophical arguments with yourself.

  why buy product A when for a little less product B will do the same but it's not quite the same?

  For Example-
  Why buy a new car and lose on depreciation? get a near-new car instead.
  But then why not go for a 8 year old camry with low Kms? it's cheap and reliable! but it is 8 years old!! what's wrong with 8 year old car? nothing but it is not as stylish as a the newer design. but it is the same design under the skin -same engine + gear box, it will perform the same as a newer model , and it is cheaper!!

  Bargain ignorance is consumer bliss.

  But then when you have "true bargain knowledge" , that is you are truly "informed" of what constitutes a "bargain" then are you achieving true brain knowledge.

  Or are you moving away from Bargain-Zen.

  Maybe as we build/increase the realization of the true understanding of the value ($$) of a bargain that we move away from the actual acquirement of physical (or electrical -e.g. e-books) and move in to the realm of understanding of "the bargain" itself rather than the actual purchase.

  Maybe we are heading towards a Buddhist perspective. = it's not the destination but the journey which is valuable.

  Maybe we will transcend the actual purchasing of bargains but will seek higher enlightenment through the realization of the bargain itself.

  We will be destined to travel the world in robes , with no actual possessions, "purchasing" - ney acquiring free through heightened understanding, our accommodation and food

  TL:DR - real market/bargain knowledge can decrease the thrill of obtaining bargains

  • 

    kahn on 30/05/2019 - 17:48

    +2

    It looks like someone scored a bargain for a sheetload of weed.

  • 

    spackbace on 30/05/2019 - 17:58

    +2

    TL;DR - it’s the constitution, it’s Mabo, it’s justice, it’s law, it’s the vibe and aah no that’s it, it’s the vibe. I rest my case.

  • 

    Switchblade88 on 30/05/2019 - 18:37

    That was one heck of a wall of text.

    And I absolutely agree with everything you've said!

    As a mathematically-inclined person, I like to visualise the 'spectrum' of various bargains in my head - and it helps justify the variety of 'bargains' at different value points e.g. vehicles.

    Visualise it as so, using cars (my search for SUV's) as an example:

    • Horizontal axis being the price of the car. Cheap cars (e.g. Camry) on the left, moving up to '$80k investments' on the right.
    • Vertical axis being the 'Value' of the car - i.e. made up of the factors that influence our decision. Things like safety rating, number of seats, economy etc. The more features a car has the better, and the higher up on the plot point. I value economy and safety, so my 'values' are rated in my head accordingly.

    Now, you'll note that as you plot out your different vehicles, generally speaking the cheap cars will have less value, and the values added will increase fairly linearly as the price increases - so you get a plotline that rises from the bottom left to the top right. This is your average value.

    Then, you look for outliers above and below that line. Ford Territory is right in the average - its assigned 'value' is consistent with the asking price. Holden Captiva is well below - I've assigned a much lower 'value' due to terrible reliability. Hyundai Santa Fe is also above the average line - great features, but the price is there to match too. So you can then see several standout points above the line as you go up in sale price - these are the ones that are 'bargains'.

    Kia Sorento is a plot point well above the line. Cheap? It's more than a Territory or Captiva - but fuel economy of 8L per 100km on diesel pushes it well above the average line!

    Then my car search is narrowed down to a single vehicle model. Same idea again when looking on CarSales - value of a specific Sorento (i.e. age, kms, distance from me) versus the asking price.

    This helps me narrow my search right down to find the best of the best!