It’s Discounted, but Is It a Deal? How List Prices Lost Their Meaning | Hacker News Reader

It’s Discounted, but Is It a Deal? How List Prices Lost Their Meaning

nytimes.com

67 pointssciurus50 comments

There is a law in the UK that says for a product to count as being on 'sale' (introduced due to the almost legendary state of permament en-sales-ment some UK shops seemed to inhabit), it must have been for sale at the higher price for a certain minimum amount of time. Therefore on sales fliers you will see little footnotes actually specifying the dates the product was for sale at the higher rate.

Of course, one still suspects tomfoolery - the date ranges are suspiciously short, and it doesn't have to be every store in a chain. Tempted to feel sorry for some poor mark in some remote outpost who accidentally paid the higher sacrificial price...

I remember my own sad experience with sales, rushing to sign up for a new kitchen before the "Februrary 20% off" sale ended. The sale ended alright - only to be replaced by the "March 30% off" sale. I was a wiser man after that.

Clearly you should have waited for the 120% off sale in December.

I work at an e-comm retailer, and we sometimes will have two sales within 28 days of each other. If a product is in both sales, we have to indicate in the second sale it had been on sale within the last 28 days.

I found it surprising when this came up, because I don't recall seeing that footnote on any other site, ever.

Also, there is a town somewhere in the North of England/South of Scotland where all the big sofa/kitchen retailers never discount their stock. As such, they can claim it's been on sale at full retail value somewhere in the UK for the last 30 days, and other such foolishness. It's silly, really.

There are two sets of regulation - one under consumer laws about pricing and one about how they can advertise those prices. A retailer can comply with one but breach the other.

https://www.asa.org.uk/Rulings/Adjudications/2016/3/Argos-Lt...

Yes, this is another example of the US having terrible consumer protection.

This is a good opportunity to remember that http://camelcamelcamel.com/ exists, although I can't say I've used it much myself.

The article focuses on how a high list price can deceive consumers into thinking they're getting a good deal. That's true but it's not the whole story.

Sometimes a high list price is combined with custom discounts to extract the most money from each customer. You see this more often when a market is closer to a monopoly, e.g. enterprise software with high lock-in.

In microeconomics you learn about the supply-demand curve. Normally there is a gap between the price the customer is willing to pay and the price the supplier is willing to accept. Depending on the market price, some of this gap is the consumer surplus, and some is the producer surplus (i.e. value gained by each party).

When a supplier has the power to set their price depending on the customer, they can capture all of the value under the demand curve and maximise profit at the expense of the customer.

A related strategy in retail is coupon discounts. Price-sensitive customers will take the time to use the coupon (when they otherwise would have not purchased), while others will pay the list price. This helps maximise the profit overall.

> A related strategy in retail is coupon discounts. Price-sensitive customers will take the time to use the coupon (when they otherwise would have not purchased), while others will pay the list price. This helps maximise the profit overall.

But not when a simple search for 'retailer coupon' reveals a million click jacking links designed to extract a free commission.

"Price discrimination".

At a place I worked, our CEO said that most businesses only paid about 60% of list price. The list price was inflated so that the people who were buying would get rewarded by their companies for knocking the price down so much

"We are selling this at a discount of %30 of this completely arbitrary price point" is a meaningless statement. This kind of hand-waving around price isn't exactly new.

I used to buy these bags of frozen chicken breasts every week. They were always $10. One week, the price shot up to $13. I didn't buy them that week. The very next week was labor day weekend and they were advertised as "on sale". The price? $12. They went back down to $10 a week or two after that.

I'm a little surprised people who shop online are influenced by "list price." I'm influenced by the amount of money leaving my wallet. If it's $5 cheaper to buy an item at website X rather than website Y, I'll do it, unless shipping costs eat up the savings. It's not really that inconvenient (versus a retail store which requires you to go to another store and possibly return if the prices aren't better there). But I'm looking at "how much real money is going to leave my account" rather than "how much imaginary money am I going to save".

If you didn't have a reference that the chicken breasts usually cost $10, I suspect it would have affected your purchasing decision.

Warehouses selling to retailers here in NL do that a lot! You get more discount the more you buy or if you make a deal with a salesperson, but I don't think anyone pays the set price with 0% discount because it is around 15-30% more expensive than some online seller.

Tax too. Sometimes Amazon will have a better price and free shipping (and prime) but due to CA tax it'll be cheaper to order from out-of-state (free shipping is pretty common). Amazon also doesn't really do many coupons, so promo codes are more likely to work at smaller places or the mfg website (usually only worth it for larger purchases).

I've been following Amazon prices the past 7 years. I'm not doing it scientifically, but I'm trying to be fair. Im using am/fm Portable radios as a item to study. The radios are a Sony portable radio, and a Kaitko portable radio.

Both radios have gone up in price, and the price increase seems unrelated to inflation.

I like Amazon, but they are not the cheapest in town anymore, at least in the catagories I buy.

What are you people buying? What are the good deals? I don't see deals like I used too. Is it just me? I know I don't buy a lot of crap, like I used to-- so my perspective might be skewed?

I've read in multiple places about Amazon's main pricing strategy, which isn't all that different from what Walmart employs. They pick specific brands/models/categories of product at which they will absolutely be the cheapest. Everything else is just regularly priced. So if you follow a 'non-standard' product for them you would probably find that it probably is about the same price everywhere else- with one exception: there have been bot-price setting wars by different sellers that have escalated the prices of arbitrary products to insane levels. This is where you see the $200k toothbrush or $1m used book.

I do the most of my shopping at Amazom because I can build up my basket through the week/month and just do one order without leaving my house. Price checks to different retailers in my area find that usually Amazon is slightly less or exactly the same price and I don't have to spend hours going to the retail store. Finally, I can get it all in one place instead of going to Target, Home Depot, and wherever else.

https://www.boe.ca.gov/sutax/usetax.htm#Personal

https://www.boe.ca.gov/sutax/usetax.htm#Overview

> Generally, if sales tax would apply when you buy physical merchandise in California, use tax applies when you make a similar purchase without tax from a business located outside the state.

----

> Tax too. Sometimes Amazon will have a better price and free shipping (and prime) but due to CA tax it'll be cheaper to order from out-of-state (free shipping is pretty common). Amazon also doesn't really do many coupons, so promo codes are more likely to work at smaller places or the mfg website (usually only worth it for larger purchases).

You may not want to publicly admit to tax evasion.

This is why consumers should be ruthless in their own way in buying stuff. Don't concern yourself with the discount but rather the effective price with the product value and its alternatives. Use peer ratings on products, compare prices online, price tracking sites. I've placed stuff on my Amazon wish list and a few days later seen it for a lower price. If a retailer is pulling a fast one on me, I just stop using them.

It seems to me that many of the objections in comments so far assume that people are efficient and rational consumers.

Economics often assumes that. Politics sometimes assumes that.

It's nearly always an incorrect assumption.

It's rational to claim that people are efficient and rational consumers even when they aren't, because there are clear economic and political benefits to pretending the claim is true, even though truly rational and efficient individuals can see it's utter nonsense.

We are approaching a world where every consumer can have perfect information and thus start acting truly rationally. If im buying something >$50 I'll quickly google it just to make sure i can't get it cheaper at another store.

So assuming we significantly enhance a person'a knowledge and senses, we can make them rational in one specific scenario.

We'll have our spherical cows god damnit!

Now, we just need to work on putting computers in front of every other human decision making process and we can finally have homo economicus.

Some markets this sucks like mattress. No two chains sell the same mattress. It may look the same and be made by the same manufacturer, but it will have different logos and model numbers between stores.

The one that annoys me is blatantly fake RRPs.

There is a Chinese watch maker behind the brand "Thomas Earnshaw", capitalising on the London watchmaker who was a pioneer in the field centuries ago. They claim their full RRP is somewhere in the region of £600 for one of their automatics. I don't think they've ever sold one for that price - they sell them in the £150 range on the basis it's "so cheap!" to so many consumer.

They're not awful watches, but really, they're £50 automatics, and should be sold as such. By insisting that they are £600 watches, and the constantly offering deep discounting, they are basically playing games with the consumer and almost tricking them into paying 3x their true worth.

If you're not that educated about automatic watches, you're not sure what the difference is between movements and which ones are worth money and which are not, it's hard to not be hoodwinked.

I think for a while certain PC and laptop manufacturers at the lower end of the OEM market played the same games, especially on bulk account deals going into education and healthcare markets, especially in the UK. Go look inside a Viglen or RM machine and tell me that they are worth the list price. They aren't, but it looks good on paper when somebody "negotiates them down because of the size of the order".

Have you told Advertising Standards? They'll investigate how often the product was sold at various prices points.

For example, see this recent ruling: https://www.asa.org.uk/Rulings/Adjudications/2016/3/Argos-Lt...

Invictafication is a word I've seen used to describe this as well. Invicta watches are at a constant 80% to 95% off retail!

Far worse are Stauer and Daniel Stieger, you can see their cheesy ads in magazines, comparing their watches to the name brands and sale prices of $69 USD with a retail of $499

That sounds like a marginally legitimate form of the old white van speaker scam.

A guy in a parking lot approaches you, offering some hi-fi equipment under a ruse like "the warehouse ordered too many" or "it was left over after an installation job". They show you brochures or fake invoices with high list prices. The equipment is of course cheap garbage, worth far less than the supposedly discounted price.

https://en.wikipedia.org/wiki/White_van_speaker_scam

I'm from Brazil, and the government is worried that the problem here is even worse, for example the first year Dell made a brazilian black friday sale, I bought a computer discounted from 4900 to 4300, but I had to cancel the order the next Tuesday after a personal problem. The non-sale price was from 4250 to 4050... so Dell "sale" in Brazil meant bumping the actual price from 4050 to 4300 and them claiming it was a yuge discount from 4900, a price they never practiced.

If I'm willing to pay $40 for a coffee maker, it doesn't really matter what other people are paying. My value judgment of the coffee maker is purely internal: Either it's worth it or it isn't. As long as the device performs to specification, I haven't actually been defrauded. I did have some greasy marketer or 'data scientist' grope around in my lizard brain, but that's to be expected. There's nothing wrong with running a search to see if anyone has a cheaper one, but this should be done after you've decided its objective value to you and not before.

Same reason you don't buy a house by comparing its list price to similar local sales, or trending house prices. That kind of thinking is how people go broke.

Here's some other strings marketers like to pull:

* Only 1 left in stock

* Only 12 hours left on this sale(possibly with a countdown timer visibly ticking down)

* $300 cheaper than our premium model, but has most of the features. What a great deal!

* 5% of your purchase goes towards starving children in Africa

* Buy it in a bundle for a discount.

You know who actually routinely has clever marketing, though? Coca-cola. When they did their campaign printing common names on all the bottles, I bought several of them for people I knew. I thought that was a nice touch. No false urgency or manipulation.

> If I'm willing to pay $40 for a coffee maker, it doesn't really matter what other people are paying.

You don't always know what a reasonable price for the thing is.

Telling you "you can afford it", or "it's worth it", or things like that is a very common way for people to overcharge you and make you feel good about it.

I always run the other way when someone asks me what I think something is worth, or if I can afford it.

So yes, it does matter what other people are paying, if you want to make the most of your money.

Why does it matter what a reasonable price is? I mean, it matters in the downward direction, in terms of trying to capture back value that would be captured away from you if you just stated, bald-faced, what you valued the item at.

But in the upward direction, it's actually better to not know the price other people are paying, I think, because anchoring effects can be shockingly strong. Consider that a night at the movies can cost more than a year's subscription to some streaming services. If you didn't know the price of movie tickets—what other people are willing to pay—would you consider them to give you as much utility as a year's movie streaming? If not, then the anchoring effect is screwing up your sense of how much you're willing to pay.

Try this, sometime: decide an actual dollar value for how much enjoyment you would extract from taking up some fancy hobby (say, archery) without knowing how much the equipment costs. Then look up the equipment cost. The proper response should be to balk if the cost is higher than your estimated value. But what people almost universally do instead is to convince themselves that there is at least as much value in the item as there is cost.

Some video games cost $2. Some cost $70. The graphics might be fancier on the $70 one, but the amount of time you'll actually spend engaged with the game is likely completely uncorrelated to the price. You buy the $70 game because you assume it's worth it. You buy the $2 game because you also assume it's worth it. If you didn't know the prices others paid, you'd likely be completely unable to guess which was which.

> Same reason you don't buy a house by comparing its list price to similar local sales, or trending house prices

Except you should do that otherwise you could overpay and in some cases be refused finance as a result!

Also, they absolutely appraise house prices by those metrics, along with square footage. A house selling for less in a neighborhood will also cause the appraisal value of other similar houses to drop. People get upset about that even if they have no intent to sell their home.

The appraisal value is absolutely important when using lenders. My house appraised for 25% less between two local appraisers within 5 months of each other - the higher was during low housing movement. This forced me to bring in even more money and nearly caused the seller to drop and wait for a cash buyer (common in high retiree areas).

That appraisal value is not terribly important to retirees though because they tend to buy for keeps instead of caring about resale value as much as, say, a first time home buyer would.

I (and I suspect most others) cannot accurately value a product without points of comparison. We rely on the market to conduct the price discovery process. If thousands of people have bought an item on Amazon, and it has many great reviews (including some that call it a good value for the money, and none that strike me as fake), then I judge that the price is a good one. There's nothing morally wrong with introducing a new product with a high list price and a heavily discounted sale price, but I'm probably not going to purchase it until I see whether the market will bear that price.

There's a couple techniques for determining the intrinsic value of something to you:

* Look at the direct labor cost: My last W-2 job was something like $45/hour after taxes. I'd probably work an extra hour to get a coffee maker that'll last about 3 years. This doesn't really help price anything below $1000 or so, since the prices tend to meld together. But I definitely want to quit work 2 weeks earlier, so the entire bottom floor of my house is devoid of furniture(which might sum to $3000).

* Look at opportunity cost: I can live on about $800/month with bills/housing/etc. So $40 is 1.5 days of runway on savings. Would I rather have an extra 1.5 days of time to launch my next project, or would I rather have a coffee maker? It's possible the coffee maker would pay off.

* Look at ROI: Someone bought me a Keurig as a gift, and the K-cups that it uses are ridiculously expensive(something like $1/cup). Buying a coffee maker that uses bulk grounds is cheaper. You can make a spreadsheet comparing the 'status quo', 'buy new coffee maker', and 'attempt to find or make cheaper K-cups' options.

* Look at risk mitigation: Suppose I lose money hiring an unreliable freelancer. Maybe I've lost $1000, and I'm considering buying a Dale Carnegie book for $20. I think the techniques in that book can turn at least 1 in 50 freelancers around, so it pays for itself in expected value on the very next freelancer I hire. Or maybe my site went down the other week and I lost $15000 and I'm considering spending $500 in dev time to go bug-hunting in that area: It pays for itself if I estimate at least 3% probability of finding another bug of similar magnitude.

Similarly, I wanted a 3rd new monitor to expand on my 8-year old dual-monitors. I estimated its value at $500, and ended up buying whatever was the best quality monitor I could get for $500. I think it was listed as half-off on Newegg.

It's worth paying someone $20 every month or so to clean the grass around my sidewalk, if you look at what the city would fine you if you don't(risk mitigation) and looking at wage costs.

A quart of ice cream is probably worth $20 to me, since I rarely eat it except on somewhat special occasions. I usually pay $4.

Actually, I'm having trouble thinking of a single thing that I can't determine an intrinsic value for that's worth buying, and which I would need to defer to the market to decide on a price.

I'm not sure exactly what you're saying, but it does matter if others are paying $20 for the same or similar coffee maker — it tells me I've been taken advantage of, wasting money that could have been used in better ways.

Seeing all the supposed $5,000 LED TVs on Amazing selling for $1,200 is always a good laugh...

A tangent, but it was a fun conversation recently with the girlfriend in Hawaii staying at the St. Regis. (Hawaii has a hotel rate 'fairness' law) Inside the closet there's the legal statement: "Suite maximum daily rate $9,600". You're never going to see that rate unless either the Olympics come to town or it's New Year's Eve... "no, we did NOT pay $10k a night" ... "wow, but that's what this costs!? Wow!" ... "No... no... but how else would you comply with a maximum rate law?"

In Romania the law requires all retailers to display the maximum price markup they have. Dutifully every single retailer displays the same notice "This store practices price markups between 0 and 300%" (over 300% notices exists, but are rare).

Wow, 300% is low for maximum markup in the US. Small clothing stores, for example, have approximately a 1000% markup. I worked at one such store, and the store only turned a profit in November and December (due to rent being so high).

I recently bought a new screen, I went online searched for models in my price range. went over specs etc to find which model I like the most. Then did a final price search on that monitor. I got it 60 cheaper than the price I got on the first search. (in this case I bought for €180 and elsewhere it was listed €240) This is what I usually do when searching for something, if you look at the specs you don't have to be an expert to find out what is important, and if it is too confusing then read some bad reviews on the product you are searching for.

I really don't understand why consumers care for relative price changes in the first place, rather than comparing absolute prices. Is price information really so scarce? My first step is always to check amazon to get at least a rough estimate on the range of prices for a given product or product category.

Many people still have assumptions of the pre-Internet age: things aren't ordered online, they are purchased in local stores. The stores have sales which are significant: buying on-sale can be 20-50% cheaper than buying off-sale. And the information on sales comes from advertising sections shipped with the local newspaper, or by big SALE signs in the store.

I think it is a deeper, subconscious psychological trick. "It's a special offer and it is limited time, I should get it while I can." Like, appeal to opportunists, or something? Of course, you're completely right and we rational people just override this and do not fall for such cheap tricks.

It's a standard marketing trick - because it works.

It's why shady online marketing sites always have a "Special discount for today only!" tag. And - protip - why some automatically offer a 10-20% discount if you try to bail on the transaction.

Giving people just one year of simple economical education about such stuff would probably have a huge financial lifetime gain for large amounts of people. Sad.

I've never really considered list price to be relevant because it's not generally that hard to compare prices via relative means for luxury items.

For example, I know that a standard pack of chocolate digestive biscuits are 50p. Based on that I can figure out whether some fancy cake is worth buying.

This falls apart a bit in some places (is a home really worth 800000x as much as a chocolate bar?) but generally it works for me.

It does have the effect of reigning in spending which I consider a bonus.

To elaborate a bit - I don't particularly mind spending £2 for something that could have been gotten for £1.50. I mind spending £2 for something which is almost identical to a different item that I could get for 20p.

I think this is where many people fall down. Getting an expensive brand of shampoo at a discount is meaningless if it's still 10 times the cost of regular.

I used to sell chairs online, and this particular vendor had an extremely high suggested retail price. I couldn't find anywhere that actually sold it for that price. I don't think it's aspirational like the article suggests, I think it's to help all of the distributors. If the mfg can change a number and help everyone downstream increase sales, that's a windfall for them.

That's why it's always important to compare prices. Start at Google not Amazon :)

If you're in the US, go shopping for a pickup truck. Ford, RAM, and Chevy will all come off the list price (shown on the Monroney Sticker) by $8000 or more with practically no arm twisting.

Sure, it's the Manufacturer's Suggested Retail Price. But the signal I get from this is that the vehicle was never worth that much.

All the musician's online sites do this. It's price anchoring, just like at JCPenney, etc.

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