In some countries, there’s no such thing as regular price or sale price. Everything is negotiated. Buyer and seller haggle back and forth until both agree.
But here in the U.S., things are different. We don’t haggle. Instead, we shop for sales that aren’t really sales. And I believe this is so engrained in us, that we teach our children never to pay full price, to always “look for the sale price” or “wait until it goes on sale.”
Well, let’s take a look at how businesses create those sales. The widget store purchases widgets from the manufacturer for $25. The store knows it needs to sell them for $50 in order to pay for the widget, cover overhead, and make a profit.
But instead of bringing them into the store and putting them on the shelf at $50, they tag it at $75 to establish a regular retail price. Sure, they’ll sell some at $75 before they put it on sale. But when they put it on sale, customers knock down the doors.
We’re still going to pay $50, but we feel better believing we got a deal of a lifetime. And the store is making its full markup. It’s a game we all play. The business plays it with us. We play it with our self.
By the way, J.C. Penney almost lost their shirt not long ago when they threw out sale pricing in favor of “everyday low prices.” The consumer would have paid the same out-the-door price, but they missed not feeling that they were getting a deal.
There’s another part of sale pricing that drives me absolutely crazy. It’s the discounts that service providers extend to potential buyers.
For example, you call a home remodeling company to do whatever and ask for an estimate. The remodeling company gathers all the information, goes back to the office, and figures the cost of the construction project – labor, parts, whatever.
When the remodeling company returns to present the price, they say, “Mr. Smith, because I like you, I’ll save you 20% if you sign this deal today.”
There’s no real discount. He’s not going to save 20% on his 2x4s or ask his employees to take a cut in pay. And he’s not going to throw away his profit. He bumps up the price by 20% so he can extend the phony discount.
Well, we all know this. But we’re still suckered into it. It’s that cultural thing.
“Okay, Gil,” you ask. “You’re ranting. What happened?”
Thanks for asking. I ordered a new pair of glasses over the weekend. I picked out a frame and started asking about price. The total price quoted including exam, lenses, and extras was over twice what I paid just two years ago.
My comment to the clerk was a shocking, “You gotta be kidding!” Then, as I turned toward the door, I said, “Thanks. I think I’ll shop around a bit.”
Then this well trained young man, realizing he needed to do something, asked if I had vision insurance – which I don’t. But as soon as I said I have an AARP card, the price plummeted by 30%. (I think I could have told him I was a member of the Polar Bear Club of Cleveland and the result would have been the same.)
Even with the discount it was high. But I know that had he told me that net sale price first, I still would have had sticker shock.
But what gets me mad is that I know he had room to go even lower. But I didn’t haggle… I didn’t bargain because here in this country, we don’t do that.
I also know that when I get my new glasses and people see them on me, they’ll comment and say, “Great glasses, Gil.” When that happens, I’ll proudly and eagerly tell them about the amazing 30% discount I beat out of the guy.
Now, just between you and I, I’m not really discounting my blog posts by 50%. I absolutely won’t play that silly game. And the way I see it, full price or sale price, as long as you keep reading ‘em, I’ll keep writing ‘em.