Saturday, September 11, 2010

"Buy one, Get One Free" Or "Half-Off"--I can't decide which is better!!

It is difficult to not be manipulated by clever marketing, or unclever marketing for that matter (You believe when an item is advertised as "half-off" that it was ACTUALLY sold at the original price at one time, don't you??).  I can explain this to students all day long, but I am sure when they go to the store they are lured by the "sale".  Sellers engage in a concept called relative pricing.  If I have an item I want to sell for $50 and advertise it at that price I will NOT get the same response if I instead put a "manufacturers suggested retail price" of $100.00 and offered it for sale at $50.00, half-off.   Same price outcome but not the same sales response.  the first instance I did not give you are basis for comparison, the second I did...
""Behaviorial economist Richard Thaler has noted that consumers are really bad at making decisions about value and constantly need "reference prices" for comparison. A dress costs $80. Is that too much? Not if it's marked down 50 percent from $160. The trick is, that artificial $160 reference price may not really exist.""How Apple plays the pricing game
 I can cleverly do this with multiple items that are similar but steer you to the one I really want you to buy. Apple (and others) do this very well, but Apple may be the best at this "relative pricing" game...
""...Decoys explain why Apple often sells each gadget in a pricing series, such as the new iPod Touch's $229, $299, and $399 price points for different storage capacities. You may gladly spend $229 to get a hot media player, thinking it's a deal compared with the highest-priced version and not blink that you could instead buy an iPhone 4 at the lower price of $199 with more features.
The $399 "decoy" has clouded your judgment. Apple wins the best of both worlds - stoking demand for products that look like bargains and for all the decoys it sells at much higher prices. Yes, some people will spend $399 for a music player with slightly better technology - and Apple makes even fatter margins...."
If after reading this you still get fooled, well, at LEAST you are an educated fool...Ummm, that did not come our right, did it??? :)

How compromise choices can make you money
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