Pi Attitude Zone: Material Status

Worth The Price?

Pricing is an elastic concept.  Shoppers tend to prefer a deal offering “50% extra FREE” to a one-third price reduction.  Which is odd, because in terms of pricing per volume the two offers are mathematically identical. 

The big advantage of the “free extra product” to the advertiser is that it shifts his product in greater volume.  This can translate to a marginal disadvantage for the consumer, who may end up with more of the product than he/she wanted or needed.  If it’s fresh food produce we’re talking about, this raises the likelihood that at least part of the volume sold will go mouldy at the back of the refrigerator, and end up being dumped in a landfill site.

In commodity pricing terms, it makes no odds which offer people go for.  Yet in terms of consumer perception, there are significant differences between a two-for one offer and a 50% discount.  The first makes the advertiser seem generous, while the second smacks of desperation, of selling at “fire-sale prices”.  Bonusing probably does little to damage the perceived value of the goods concerned, while discounting can prompt the consumer to suspect some kind of product inferiority.  The advertising sage Jeremy Bullmore drew attention to the perceptual difference between a bonus and a bribe.

This is just one example of how pricing can influence the way people think.  Not long ago Britain’s Office of Fair Trading issued a study that highlighted how the way prices are positioned can lead consumers into errors and misunderstandings. Examples cited included “drip-pricing”, which initially reveals an attractive  “baseline” price, but then later sneaks in other charges.  A case in point is buying airline tickets or car rentals online, where the starting price gets progressively loaded with taxes, fuel-levies, baggage-charges, mandatory insurance and “payment processing fees”. 

Other subterfuges cited by the OFT report were “sale prices”, “baiting” and “time-limit” offers. Sale prices compare the “discounted” offer price to a “previous price” which may have no basis in reality.  “Baiting” offers limited inventory to a few lucky opportunists, but quickly hikes the price to everyone else.  “Time-limited” offers can be engineered to expire before a significant number of shoppers can take advantage of them.

The commonest ruse is the type of offer that looks wonderful until you read the small print and realize that “terms and conditions” eliminate any possible advantage.  As the singer Tom Waits once sang, “The large print giveth, and the small print taketh away”.

Zone: Material Status Country: Europe Product – Business / Professional