Love a bargain? Experts warn shoppers they're not always what they appear to be

RNZ News

4 days ago

You'll often see sales advertised as having prices "up to 70 percent off" but an experts says in practice only a small number of items would be discounted to that extent.
Photo:
Yiting Lin / RNZ
Who doesn't love a bargain?
But marketing experts are warning shoppers to be wary about discounts and promotional activity, and say they're not always everything they appear to be.
Many shops offer to beat a competitor's price. But it can be harder to claim on this offer than it might seem.
Often, it has to be an identical item, in terms of packaging and brand, with the product in stock and available for same day delivery or collection. Usually, shops offering this option will also require that the competing retailer is in New Zealand with physical stores.
Marketing expert Bodo Lang, from Massey University, said it could save customers money but they would usually have to spend a lot of time finding comparable products.
"In some cases, stores use this technique even when they are the only retailer selling a particular type of product. As a result, an identical product may not be available at any other retailer, rendering the guarantee worthless. Consumers may not realise this and are therefore misled into believing the retailer offers the lowest prices, making them more likely to shop there."
University of Auckland professor Mike Lee said it was a good method for shops to get competitive intelligence via their customers and could also convert them to their brand.
Lee said loss leaders worked for retailers because they would cut the price on an item they knew customers would really appreciate but that nearly no one would buy on its own.
The expectation was they would then purchase other things at non-discounted prices to make up for it.
The Warehouse
was accused
of using eggs for $5 and $8 cheese as a loss leader to get people in the door.
If you go into a shop with the intention of buying one item, you haven't really saved money if you then buy two or three but one of them is half price.
Lee said this method relied on "bulk saving" mentality.
"Bargain hunting mentality kicks in, and it's hard to resist, the perceived value of getting an item you wanted for half price," Lee said.
"But you have also just spent one-and-a-half or two-and-a-half times more money that you thought you would."
If you're shopping online, you might see a notification pop up on the screen that someone has "just bought" an item.
These sales notifications are designed to create a fear of missing out and encourage you to go ahead with a purchase, as well as showing you other items that are available.
"It's applying scarcity and social proof principles," Lang said. "If others are buying this then it must be good. This helps to reduce perceived risk for customers."
The Commerce Commission requires that these claims can be substantiated.
But in some cases, particularly for retailers operating from other countries, they may not be real. It's possible to buy "fake notification" plugins for websites.
You'll often see sales advertised as having prices "up to 70 percent off". But Lang said in practice only a small number of items would be discounted to that extent.
"Consumers may not be aware of this, enter the store, and are then exposed to persuasive marketing, increasing the likelihood of a purchase. The key point is that the 'up to' qualifier is legal, but it can be misleading to everyday consumers."
Shops can also be a bit creative with the original price they use to show a discount.
"The 'was' price may have only briefly been the regular price or may reflect an artificially inflated recommended retail price (RRP) from the manufacturer. This technique is highly effective in making a discount appear more substantial than it is," Lang said.
The Commerce Commission said retailers might be misleading customers if they did not charge the price quoted, or the claimed usual price was one of many prices at which the business commonly sold the item.
"If a business routinely sells products at a promotional price, then the promotional price becomes the usual selling price. It would be misleading for a business to keep claiming it was discounting a price when the discounted price had become the usual selling price."
Retailers can make a product seem in high demand by implying that it is scarce.
"Brands or retailers can do this by limiting the availability of an offer through either time or quantity restrictions," Lang said.
"An example of a time restriction is the use of phrases such as 'limited time only' or 'hurry, sale ends soon'. A quantity restriction example would be 'limited to two per person'. Both types of scarcity cues are effective in giving consumers the impression that a price is unusually low and will not last. Thus, increasing the likelihood of purchase."
Even the use of colour can make a price seem like it's as discount. A red or bright yellow band around a price label, for example, might give you the impression you're saving money - even if you aren't.
"These techniques have multiple aims. The immediate aim is to generate interest in a product or store and thereby secure a short-term sale. The longer-term aim is to influence consumers' price image of a store, ideally making them believe that the store offers the best prices and encouraging them to use other stores less frequently. Or, ideally, not at all," Lang said.