Dilbert on intentionally confusing pricing | Hacker News Reader

Dilbert on intentionally confusing pricing

dilbert.com

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What a relief to see a dilbert.com link here that goes to an actual Dilbert comic, rather than Scott Adams blog.

(For my money, these few panels are more insightful and entertaining than any of the long dilbert.com posts that have been posted here in the past few weeks.)

One of Scott Adams' great insights, but I'm surprised more people don't notice it. Any time you have a professional seller and an amateur buyer, confusion is the persuasion technique of choice.

Car dealerships institutionalized the practice decades ago in the form of the 'four-square worksheet', where they try to introduce as many variables as possible so that they have plenty of places to hide their margin. This is why car salesmen hate it when you don't bring in a trade-in or use in-house financing. It's hard to baffle someone when you're only negotiating a single number.

Funny story:

My wife is really smart, particularly with finance and the like (she's an academic accountant). So buying a car mostly involves me sitting around and playing on my phone while she works out the details.

So my wife goes in knowing to the dollar what she's going to pay. The car guy (certified used) attempts to obfuscate things by talking about the monthly payment. She must have told him 10 times that the monthly payment was irrelevant as far as she was concerned. The guy was desperate to introduce that monthly payment variable...it obfuscates things and anchors you on what you can afford as opposed to what your spending overall.

We ended up buying the car for exactly what she was going to pay (about 10% off the ask) using our own financing... that guy was clearly not real happy with how that turned out.

Yep, you'd think that an easy cash sale would be attractive to car salesmen, but it screws with their compensation system to a degree that they'd just as soon tell you to suck a lemon. I suspect the reason a lot of dealerships created 'Internet desks' to sell cars at invoice was to keep their salesmen focused on the deals where they could still bamboozle someone.

I took accounting from a guy who used to be a used car salesman. He told me that most customers are focussed only on the monthly payment. They simply did not care what the price was, just that monthly payment.

Perhaps he (and the dealership) were making more money from the financing than from the sale of the car itself. I wouldn't be surprised if that was the case...

here is a really good story of a journalist working "undercover" as a car salesman: http://www.edmunds.com/advice/buying/articles/42962/page001....

Would be funnier if it wasn't so true in a lot of areas (mobile phone operators spring to mind. I don't know how it is in other parts of the world, but in the places I've lived in Europe, most operators have different pricing depending on time of day, day of week and the operator of the person you're calling(!))

That's actually motivated by various mechanisms. Phone usage peaks during the day and during the workweek, falls at night and the weekend. So they try to encourage usage during the off-periods by lowering price. Classic pricing for fixed capacity infrastructure. Similar to hotels, airlines, theaters.

Network operators have different transit deals with other operators, at varying prices, so that's why calls to different operators may have varying prices.

Network operators have different transit deals with other operators, at varying prices, so that's why calls to different operators may have varying prices.

Disclaimer: I work in the carrier/service-provider facing side of the VoIP industry and have done a lot with inter-carrier reciprocal and access settlement in the US.

Be that as it may, passing the vicissitudes of such cost structures to the end-customer is a form of intentional obfuscation. It reflects a desire to bamboozle the customer, and also shift more risk onto them. For some reason, it works elsewhere in the world, but doesn't work in the US from a marketing perspective; your cell phone air time costs the same irrespectively of the jurisdiction you are calling, which can range from standard NECA tariff metro RBOCs to ultra-expensive rural ILECs wielding huge access charge forebearances (e.g. ye olde Iowa free conference calling scandal), and therefore, regardless of what the IXC hauler charges the mobile operator to get the call out of the Bell tandem and to the terminating LEC.

My point is, the variable cost structure of any non-trivial business has thousands of variables that can change on a monthly, daily, hourly or even per-minute basis. It is the job of any reasonable business to digest that through a risk management formula, statistical forecasts, etc. and arrive at a set of assumptions that can be presented into a standardised pricing structure accessible to the customer. The price can fluctuate based on market segmentation and salesmanship (airline tickets, enterprise software, etc.) but it cannot possibly involve a set of thousands of simultaneous equations that are up to the customer to (very improbably) mentally solve in an (improbably) adroit fashion. That is something only healthcare gets away with, as well as inter-business settlement regimes that have well-oiled processes for dealing with complex assessments.

Can you imagine if the bus fare changed hourly based on the precise availability of routes, drivers, who is out sick that day, how much overtime was owed last night (if applicable), etc?

On a smaller scale:

A strange one I've noticed only in the last year or so is non-monotonic pricing on fountain soft drinks at places like gas station convenience stores. I'm not talking about the marginal ounce, but the total price: they'll have a 16oz cup for $1.29, 22oz for $1.49, and then 32oz for $0.99! The latter is featured with a big yellow sticker on the soda fountain, and maybe an outdoor poster. Of course, all of these are probably an order of magnitude higher than the input costs, but it's (intentionally?) confusing and disorienting. I've got to pay more for less, and more if I want the one that will fit properly in my cupholder.

It's not so strange when you think about it. My understanding is that soda costs basically nothing to produce (I could be wrong, of course, but part of the benefit of not drinking alcohol much is that lots of bars don't charge me for soda, and refills are often free at restaurants), so it doesn't really doesn't matter what they charge for it.

With that in mind, it makes a bit of sense to charge less for more, since people will see the big drink for "little" cost (which still has a massive margin) to be more appealing. They think they're getting a better deal.

If the large drink doesn't fit in a standard cupholder, then those people have to pay a premium for the convenience, and the retailer wins again. It's market segmentation, and it works.

Fountain drinks costs like 5 cents max when you scale large enough (McDonald's level). This is why they can roll out their 'any sized pop for $1' thing during the summer and laugh their way to the bank.

And weird, bars usually charge for soda. Soda is usually like the single highest margin item at any establishment. Their so high margin that buffets can give you infinite refills so you eat less, and still make money off their pop.

It really depends on the bar.

If I'm at a pub, or basically any alcohol-based venue that has a proper food menu, then yeah, I'm likely to get charged for every drink. At a "local bar" type of operation, or something like a Royal Canadian Legion branch (I don't know what the American version of this is, but it's basically a bar for ex-service men), then I tend not to get charged. It's a designated driver thing, primarily, but they don't really care if you're actually the DD.

Last Saturday, my girlfriends work had their Christmas party, and I ordered two Cokes.

Bartender: That'll be $2.50, or are you driving? Me: ...? Bartender: Non-alcoholic drinks are free for designated drivers. Me: I could say I'm driving... Bartender: You could. Me: pays $2.50

For restaurants, it's just like you said, margins are so high that refills are free. That first drink costs less than any single alcoholic beverage, so I save money right away, and every drink thereafter is pure profit (or more accurately, pure non-loss).

"(I don't know what the American version of this is, but it's basically a bar for ex-service men)"

VFW: Veterans of Foreign Wars.

Or Amercian Legion.

Thanks for the info. I knew they had to exist, but I haven;t so much as stepped foot in the States for over a decade (making me no more than 15 when I was there), so I wasn't familiar with them.

I worked at a Burger King in 1991. We counted our 'food cost' for a medium soda drink at about 8 cents (IIRC large was 10 cents) - that included the cup and an average amount of soda. I'd think that the cost may have gone up a bit over the past 20 years, but probably not too much.

> And weird, bars usually charge for soda.

The key is to say, "I'm driving, I'll have a Coke." I've never been charged.

>My understanding is that soda costs basically nothing to produce

Absolutely true. I can't disclose dollar figures, but McDonald's owes a considerable amount of its profitably to Coca Cola.

This makes me mad. The gigantic drink at McDonalds doesn't fit in my drink holder... Well, it fits in the hole but its so top-heavy that it falls over before I even get out of the parking lot. I have to pay more to get a sane sized drink, not waste things, be healthier, etc. Lame. Gosh, think how much less mad I would be and how much more money they'd make if the top two sizes were just the same price? I actually avoid McDonalds for this very reason. I know, I am not one of the sheeple that just blindly accept it. For that I pay. sigh

You're right, you're definitely not a sheeple. After all, almost no one ever hates on McDonald's on HN.

Tricking people into thinking they are getting a great deal by providing them with inadequate baseline is by far my favorite dark pattern, second only to "does not contain enriched uranium"-kind of labels on food products.

It's called anchoring: http://en.wikipedia.org/wiki/Anchoring

Basically, you put a stake in the ground and you measure relative to it. Of course, the stake is so wrong for the buyer that anything is really a good deal in relation, but not necessarily in absolute terms.

I don't buy soda nor do I have a car, but could you not buy the large soda, grab a smaller cup (since as far as I know you can just take a cup next to the soda fountain) and win by emptying the soda into the cup that fits? You could either choose to first drink the remainder or spill it outside.

At most places I know, you pay for full price of the cup even if you opt not to fill it up. It's their way of pre-empting clever scams like this.

That reminds me of tuna. Usually a larger package of something has a lower unit cost. But often, a 12-oz. can of tuna costs more than two 6-oz. cans of the same brand and type. And it's the normal price, not a sale price.

my calculator here tells me that 32 fluid ounces (US) == 0.94l. Surely you don't have cups that hold almost a litre!?

Indeed they do. Some are designed that the top 2/3 is as wide as a 2-liter bottle and the bottom 1/3 is the standard size of a cup. Though this works in theory I've rarely met a cupholder that could, in practicality, hold this monster.

Generally the cup holders are either right up against the dashboard, shifter, or door. So the cop 2/3 wouldn't fit anyway. Cupholders in the back seat are usually in the center, unobstructed. but you can't sit 2 big gulps next to each other.

Allow me to introduce you to the wonders of the Double Gulp. It's 1.9 liters of your favorite colored sugar juice, or Slurpee

http://en.wikipedia.org/wiki/7-Eleven#The_Big_Gulp

well, um... er... wow. I'm not sure how to respond to that at all.

Every store charges $199.99. The intention is to affect you differently than $200.

What would happen if a retailer said "We want a straight forward relationship, and not to manipulate you, so unlike the bad guys we are providing straight forward pricing"?

Not every store does ".99". The companies that charge ".99" or similar are trying to hook you in on a good deal, while the others that round it naturally are trying to hook you in on a good quality product. Since most consumer products are just pointless (shiny!) crap I think we see more of the ".99" used. :)

Some stores use the cent portion to encode extra information: 0.87 indicates a clearance item, 0.55 indicates a refurbished item, 0.20 indicates a damaged item, and so on.

On a tangent, does this usually affect everyone in the same way? i ask this b/c right now i'm debating w/ my co-founder over some pricing and he wants to do the $0.99 thing and I want to do flat. The argument is that it sounds more enticing if you knock off the 100th percent, psychologically, which I can see that POV.

The original point of the .99 pricing is so that the cashier needs to open the cash register to make change, thereby producing a record of the transaction. It reduced theft by the cashiers.

What on earth is going on in that URL?

It was designed by Mordac, preventer of information services, naturally.

Seriously though, it reeks of corporate Java programmers doing Web programming for the first time, doesn’t it?

Much better one: http://dilbert.com/fast/2010-11-21/

P.S. Dilbert’s “fast” interface is as nice as any comic site on the web. Simple is the name of the game.

P.P.S. I love how the link to it is hidden in the page footer under the title “Linux/Unix”

Two years ago, when dilbert.com was redesigned, Adams talked about the Linux/Unix fast page in a blog post: http://dilbertblog.typepad.com/the_dilbert_blog/2008/04/dilb...

He doesn't explicitly say this, but I think the only way he could convince the owners of the site to have a stripped-down page was to say that the normal design was not usable on Linux. Certainly they want to push people to use the other features and spend money; neither of these things are pushed on the fast page.

I'm negotiating car insurance at the moment and see this pattern all over the industry. Policies are so elaborate and multi-faceted that they're almost impossible to compare. Intangibles like quality of customer service are also difficult to measure.

If someone's looking for an idea for a startup - Yelp for insurance companies would be a lifesaver for me right now.

I noticed this at the grocery stores. They introduced odd fractions. One week something would 5 for $4 or 3 for $3.50 etc. Also they put the sale signs in black letters on red cardboard so they were very hard to read. And of course they placed expensive things at eye level and cheaper things less accessibly.

Just about every price label (near me, at least, in all grocery stores) will also include a price-per-quantity. Easy comparison, as long as one isn't measuring containers while another measures ounces.

I believe there's a law in California that requires grocery stores to put that stuff on the price labels.

I generally think that should be the case. To do otherwise is pretty much intentionally misleading customers.

I'm in Wisconsin, don't know how other states / nations handle this sort of thing.

The problem is that some grocery stores (or products, it could be either) use different quantities. For example, one product might be price per quart and another is price per gallon. I've even seen volume and weight being used for similar products.

I frequently shop by looking at the price per amount comparisons and it drives me crazy when you're looking at two different toothpastes and can't make an effective comparison.

It is my understanding that this meets the legal requirement, but also satisfies the business desire to confuse the customers trying to make a decision based on the greatest value for money.

Well then stop buying toothpaste by volume.

Nokia has pretty confusing numbering for it's phone ranges - consecutive numbering hasn't usually coincided with a more feature-rich (better) phone. Another example of segmentation?

The worse culprit of this I have seen is DSW.

They have color coded stickers that correspond to 30-70% off each item. So if you want to figure out how much it actually costs you have to do the calculation in your head.

What makes this so obscene is that they actually individually print the original price on that colored sticker; it's not like it would be any less convenient for them to put down the actual new price.

They do have giant charts at the end of every aisle that spells out basically every permutation possible. I don't think it's intentionally confusing as in the comic, however. They're trying to anchor you on "30% off!" rather than 30% off of $145 ($101.50). I've definitely seen people spend who are looking at two pairs of shoes who end up buying the more expensive pair just because it's some percentage off.

I like how the web makes this kind of thing harder...

reminds me of this whole AMD/Intel TDP/ACP/Max power/Sustained power. Making sure you are comparing apples to oranges...

I noticed this at Target while wandering the aisles today - 3 for $8 of X? How many people do that math in their head?

I've become so used to this practice in grocery stores that I "do that math" rather compulsively when I see such labels.

I'll admit that the average consumer won't bother, but it's really not hard:

8\3 is 2, that's pretty obvious. So you're buying three items for $2.xx each, so $6 is allocated, leaving $2 unaccounted for. Again, three things, so you're adding 1/3 of each remaining dollar to the individual price - 2x1/3 is 2/3 or .66.

$2.66 per item. It's really simple math, but again, the average consumer probably just can't be bothered to do it. Part of the problem is people who have just convinced themselves that math is "too hard."

I can't believe no one has mentioned payment gateways yet. First example that came to mind for me.

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