Reference Price Advertising



"Was $119. Now only $89!" You have seen ads like this, as well as similar signs in the stores. Regardless of whether the retailer ever expected to sell a single unit at the $119 price, you feel like you are getting a deal, and that is the point.

Some states have laws requiring that these are at least honest advertisements. This means the store must have the item for sale at the stated price for a certain amount of time before they can claim that it was the "normal" or "regular" price. Many comply by having it at that price for the absolute minimum time required. Often, they don't actually expect to sell any at the "regular" price. It is solely there to make you feel good about the new price.

Another way some retailers use this tactic is by having many similar models of a product. For example, a furniture store might have several mattresses that are very similar. They then rotate which one is on sale, so there is always one that looks cheaper by comparison. If this appears to be the case, certainly don't pay the regular price.

Of course you can save money in this situation by buying one of the "sale" items. But what if you like one of the ones that is at the "regular" price. Since they never expect to sell these at that price anyhow, the store manager may give you a similar discount if you ask (or insist). Otherwise, you can wait until it is that model's "turn" to be on sale.

Price Matching Scams

Many stores have found that it costs them nothing to guarantee the lowest price. They claim that they will match any competitor's price, and that may be true. But then again, they will only match the price on the exact same item - and they may not carry the same models as other stores. Also, they are very aware that we rarely check the prices of many other stores before buying - and almost never after buying.

Research shows that when a store advertises that it will match competitors advertised prices, we generally have the impression that they have lower prices than other stores. This impression is there even when they are one of the higher-priced stores around. Again, this is because we often just don't check the prices at other places.

The few customers that actually compare prices and demand a reduction don't cost the store much. Meanwhile, the store gets to sell for more than other stores to all the "average" consumers. By the way, a study done by the Consumer Literacy Consortium in 2002 found that buyers who spent 16 minutes comparing prices online save an average of $100 on a TV. Do a little comparison shopping if you want to save money.