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Comment by blahedo | Hacker News Reader

It's down at the bottom of the article, but this:

> Penney will use whole figures when pricing items. In other words, you won't see jeans with a price tag of $19.99, but rather $19 or $20.

is actually my favourite part of the whole thing. Taken together, it's a major overhaul that says, hey, sorry, over decades we'd gotten wrapped up in all these little marketing tricks to increase our sales and bottom line, but we decided it was time to treat y'all like grownups for a change.

I hope it works out for them.

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My favorite as well. I've found myself in discussion with many on this logic for some time but rarely does it go mainstream. On a logical stance, all these moves represent honesty and no BS. Similar to when General Motors launched the Saturn line of cars with flat pricing. We owned a few in my family growing up and I remember my dad telling me one of the biggest reasons he bought it was because he knew no one else paid a dime less than he did for the same car.

That's a very good point. Four-square (the car sales strategy BS not the site) is one of the most dishonest tactics ever devised to subvert the buying process. Why should I have to deal with a gauntlet of crap that has been tilted so much in the favor of the seller due to decades of salesmanship trial and error? The basis of a good deal is mutual benefit, which can't be reached without honesty.

I've never heard of the four-square strategy. Link please? (And the google namespace is hard to sift through)

http://www.edmunds.com/car-loan/four-square-basics.html

In addition to the four-square article above, Edmunds has the fascinating account of a writer who went undercover as a car salesman. It includes the four-square technique, and tons more:

http://www.edmunds.com/car-buying/confessions-of-a-car-sales...

I've brought a financial calculator to these kinds of negotiations before, that cut through a degree of BS. Those guys are pros though, they found other things to work on and in part, succeeded.

Just search "four square car sales":

http://www.youtube.com/watch?v=HWuSTCj3Y4E

http://consumerist.com/2007/03/dealerships-rip-you-off-with-...

Are there any airlines that do the flat-pricing thing? None in the US that I'm aware of.

What do you mean by flat pricing? That everyone travelling between two cities pays the same fare? Because that certainly doesn't (or shouldn't) happen anywhere. Airline tickets are substanially different from standard goods (be that cars, clothing or whatever else)

Many, many smaller air services do. Helijet even lets you buy books of 10 flights half off.

stnd air (nyc-hamptons) harbour air (victoria-vancouver) helijet (ditto)

Why shouldn't it happen anywhere? What makes airline tickets so different? I think you're confusing the fact that airlines have gotten their operations so screwed up that they have to resort to crazy, opaque pricing with some idea that it's necessary.

I mean, sure, fuel prices go up and down, so it's not like prices should remain static from even day-to-day, but doesn't it strike you as absolutely weird that two people on the same flight may have paid wildly different fares?

For airlines travelling to China: Demand is different depending on whether it is close to Chinese New Year or not. Chinese people travel far from their homes to work and every Chinese New Year they return home to celebrate. There are going to be so much more demand then than most other months. As the demand changes but supply remains relatively constant, the price must change to accommodate.

I wasn't making the argument that prices should remain static regardless of demand, day of the week, or any other factor.

My point was that the airlines have created a pricing system so opaque that it can actually become a deterrent to travel. Why do people sitting next to each other on the same flight pay wildly different fares?

It's the same with clothing. Demand for fashion is extremely fickle, but the supply is relatively fixed- the stores order their inventory ahead of time and what they don't sell they have to put on clearance, send to TJMaxx, etc. And like flights, that trendy four-button blazer has a "shelf-life."

"Similar to when General Motors launched the Saturn line of cars with flat pricing"

And we all know now how well THAT worked out. Haggling, whether successful or not, gives the impression to the customer that they are in control and are 'saving' money.

Toyota in Canada doesn't allow haggling to the same extend as other manufacturers.

How about CarMax? They are flat pricing no haggle if I recall and they're going like gangbusters.

My guess would be they will haggle if the buyer wants to haggle. They aren't going to give up a sale. But, I've never shopped CarMax so I don't really know.

I had a roommate years ago that worked as a salesman at CarMax. He had about the authority to haggle as the kid taking your order at McDonalds. I think the volume is so high that if you don't want it at the marked price, someone tomorrow will. Of course, that was years ago at one lot. YMMV.

Saturn failed because they made crappy cars, not due to any problem with the dealership model.

I say so because it's true!

In the early days people loved the flat pricing and no haggling, and their Saturns. It wasn't until 96-97 when Saturn became just another Lego set GM marque, complete with haggling, that it all went down hill.

This could work in their favor in an interesting way. Shoppers often consider higher priced items to be more desirable merely due to cost. People perceive a $50 bottle of wine to be better than a $10 bottle, for example. So this could be a way for JCP to improve perception of the quality of their merchandise without actually putting it out of economic reach of their customers.

I would expect the opposite to happen. What you just described is exactly why sales work. An item is perceived as being better because of it's price, but hey look, I've been lucky enough to get it for less than it's worth. I imagine this will just bring them down into more of a budget clothing line.

On the other hand, it could be that the JC Penny name will retain it's feel of being worth X, while costing X*0.6 so consumers really will feel like they're always getting a deal at JC Penny.

Too bad there's still (post price) sales tax.

$20 is still $21.65 in texas...

One of my favorite aspects of that is that they're actually going to make a ton more money while making us feel like they're treating us like adults. Don't kid yourself: it'll be $20 rather than $19. So they make an extra cent, which isn't much, but if you multiply that by all the product lines and each sale every day ... at JCPenney's scale, that's significant.

I'm not criticizing it at all: I think it's better all the way round.

.0005% difference in margin. People's brains interpret $19.99 as significantly cheaper than $20, but as a marketing iniative, whole digit pricing may intice people looking for honest, straight forward pricing.

But don't kid yourself, adding a penny per transaction is not going to benefit the bottom line in the way your thinking.

I have always used the following when thinking about my money:

I always round up any price I see.

I always round down any money I have to spend.

"People's brains interpret $19.99 as significantly cheaper than $20"

Is this really true though? Is there some study that supports this? To me it seems simpler for the brain to round up to $20 when thinking about the price. I certainly wouldn't remember if something was $18.99, $19.95, or $19.99. They're all just $20 to me.

Yes, there are a ton of psych and neurological studies that back up this practice. It is one of those blind-spots in your brain. You peg on the $19 part of $19.99. If you stop to rationally consider things then $19.99 and $20 are effectively the same, but for most casual purchasing decisions you do not actually apply a significant amount of intellectual rigor. You may think that you consider $20 and $19.99 to be the same, but study after study shows that what you think that you are thinking about and what your brain is actually doing are not the same.

Interesting, I always feel like 19.99 = 20, but that is probably because of how my Dad taught me to add and multiply quickly by doing so rounding first then backing off from there.

It's actually 0.05% more for a $20 item, and if we estimate that $20 is the average price of all items it isn't very significant.

this is the kind of confused reasoning that has people thinking that if they "just do a little" then "it will add up to a lot". the basic problem is that you forget to shift frames when evaluating the significance of the sum.

for example, you might have heard that if everyone would "just" unplug their phone chargers (when not in use) then we'd save millions (or whatever it works out as) of watt-hours a year and so help avert global warming. and it is indeed true that if everyone does something tiny and trivial (relative to a household's total consumption) like that it will add up to an amount that is much more than one household's consumption. yay! but to estimate the significance you need to compare it to the total energy consumption of the entire country. and then it becomes tiny and trivial again, and will clearly make no significant difference to global warming.

similarly here - the total is way more than $20. gosh. but if you compare it to total turnover then it is a tiny percentage, which makes no real difference to the company.

in short: big changes on a global scale require big changes on a local scale.

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