Tricks Stores Use To Get Us To Overpay

While recently catching up on my offline reading, I ran across a small piece in the April 2010 edition of Money magazine. The column features William Poundstone, the author of Priceless: The Myth of Fair Value (and How to Take Advantage of It). The article points out ways to combat stores sometimes gimmicky pricing techniques aimed at getting us to pay more than we normally would for a particular item.

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Photo by auntjojo

In the article, Poundstone makes the point,

“When you have to estimate the value of something, you use a mental process called anchoring: You decide what’s fair based on what you know.”

That’s exactly what most of us do when we march into stores to pick up a particular item, like a new portable air compressor (a recent item I decided to pick up to inflate tires at home and on the road). In my head, I had an idea of how much a portable air compressor should cost – somewhere in the $30-$50 range. My estimate was loosely based on similarly-sized gadgets I’ve seen, and bought, in home improvement stores, such as mini shop-vacs, cordless tools, etc.

I also took some time to scout around online to determine which model and features I was interested in, and to get an average price from online retailers. Since I was buying the air compressor just before an upcoming trip, purchasing online wasn’t really an option, unless the cost savings were significant enough that I could still pay for expedited shipping and come out ahead (not likely).

Back to my trip to the home improvement big box store. Armed with my Amazon.com print out reflecting the model and price of the Black and Decker Air Station (a safe choice in my price range), I went straight to the hardware area and located the item. It was $39.99, just a dollar more expensive than the online price. After sales tax, the final price was comparable to what I would have paid with online shipping, so I was happy to just buy it in the store and have it for our upcoming trip.

Beware of the 10/$10 Deals

Unfortunately, not all purchasing decisions are created equal. Neither are store sales and signage. Our local Kroger frequently runs 1o-for-$10 deals on particular items throughout the store. In theory, these are great deals. However, they have a way of skewing that anchor Poundstone refers to. Shoppers automatically want to buy more of the item simply because it is marked 10/$10.

I’ve even caught myself falling for this trap with things like spaghetti noodles, condiments, and other 10/$10 goodies Kroger often puts on “sale.” Normally, their store brand ketchup runs between $1.29 and $1.39. We pick one up every couple months when we open the backup from the pantry.

But when those babies go on the 10/$10 deal I feel compelled to clear the store shelves. After all, five bottles of ketchup at $0.29 off is over a dollar in savings! Recognizing I don’t have to buy more than one item doesn’t seem to help either. The 10/$10 offer often compels us to buy more than we would if they were simply price $1.00 each, just as Poundstone mentions in the article.

My shopping trip invariably winds up with me returning home and asking, “What the heck am I going to do with five bottles of ketchup?” Stockpiling is a good idea, but there is only so much room to store this stuff.

A more recent example involves Kroger’s “Buy 8, Get $4.00 Off” promotional. I don’t mean to pick on Kroger; we actually like the store and do nearly all our shopping there. During this promotion various items around the store are tagged with a special sticker. If you buy eight of them, you get $4.00 off of your bill instantly. What a deal! That’s a family-size bag of Doritos!

So what do we do? We run all over the store buying things we don’t need to get up to that magic number of eight “specially marked items.”

How to Avoid Overpaying

When you enter the store, it’s a good idea to take along both a physical list and a mental list. The physical list is an easy one – it’s a list of items you need for meals and snacks over the next week or two. But the mental list is where you’ve anchored some idea of how much these things cost, and how many items you really need.

Armed with both lists, you’ll be able to resist the temptation to pay more, or buy more quantity, than you were willing to before entering the store. And no store promotion can move that anchor.

What other strategies do you use to avoid paying more? Do any of you keep a price book to track the cost of items over time, or from different stores?

*This article appeared in the Carnival of Money Stories: Final Four Edition

Comments

  1. I’m always amazed by the amount of psychology involved with sales. Especially grocery sales.

    I’m even aware of some of the tricks used, and yet still sometimes I bite at the bait offered :)

    They say the best techique is to create the shopping list before you go shopping, and to make sure you aren’t hungry when you go…

  2. Going to the grocery store prepared and with a list can really save on cash. I find if I’m just running around and browsing, I tend to throw a lot more in the basket or cart.

    It may sound traditional, but I find looking at grocery store flyers can make a difference. For example, last week there was a promotion on butterball turkeys featured in the flyer and I went out and bought one, and had my family over for supper.

    There are also some pretty cool grocery store sites out there that offer printable coupons through their newsletters. I haven’t explored this option a lot yet – but I will!

    Nice post.

  3. I used to keep a price book however, when gas prices skyrocketed I realized more often then not it’s worth it when gas & time were figured in, so I just get the item at the nearest store.
    I tend to do my grocery shopping on a monthly basis at a store that gives volume discounts so I save a bit there.

    3-4 years ago the Kroger here had cases of canned food on sale cheap (don’t recall price anymore. I grabbed one of everything that I knew we’d eat. We’re still working on those & we had to throw 4 cans away when they expired :(

    I try hard now to be mindful of expiration dates – last year we threw out a box full of expired food, much of it bought on sale at a great deal… I’ve also been watching what items we’re really heavy consumers on & have been trying to only stock up only on those (like diced tomatoes).

    One store near me recently had “Buy a pot roast & get a bag of rolls (6), a 5lb bag of potatoes and a 5lb bag of carrots free”. I was all giddy until I went to grab the pot roast – they were an average of $15 each…. I pulled out a receipt from last month (I need to clean out my wallet more) and sure enough the store had raised the cost per lb on the roasts by almost $2. This nearly doubled the price of the meat and made all the “free” things come out to cost the same if not a bit more in the long run.

  4. I am unusual in that I avoid the grocery store all together. I buy staples by the fifty pound bag and store the contents in foodgrade buckets. Our vegetables we buy for cheap through the farmer’s market, auction or grow our own. We can our butts off during the summer and eat all year round. If we need something that might come from the grocery store, we first check the local salvage grocery store, then go to the Dollar General. Failing those outlets, only then do we go to the regular grocery store. In addition, International stores will likely have staples like rice, lentils and spices much more inexpensive than even store brands.

  5. Those 10/$10 deals are fabulous if you use a coupon. My wife has used a 75 cent coupon on some of those and got 10/$2.50 in the Grocery Game. But we stockpile items that have a long shelf life. I tell her, “It isn’t shrimp — it won’t go bad,” so we stockpile pantry items regularly.

    Sometimes, the store will allow you to buy just one, or two, or four and still get the same price. Our local Kroger is really good about that.

    • @Ron: It’s possible to score a few 10/$10 items for free with a $0.50 coupon that doubles. And you’re right; Kroger is usually pretty good about letting customers do this w/o buying large quantities.

  6. One of my favorite “tricks” is not really a trick at all, it’s just price comparison between store brand vs. name brand. In most situations, the store brand is 20 – 50% less expensive than the name brand unless there’s a really good sale on the name brand. For staples such as sugar, flower, vinegar, beans, rice, standard canned soups (tomato, chicken noodle), most cheese, etc. the quality is the same. Had a co-worker who used to work at Kraft in their IT department. He said they’d run a batch of cheese then half of it would go down the line to get the “Kraft” packaging, and the other half would get “Best Choice.” Same cheese, different price.

    Another “trick” is to use coupons in conjunction with sales and packaging deals. For example, Heinz spaghetti sauce in a can is the same product they put in a jar, but it’s usually cheaper than the “Always Save / Generic” in the glass jar because you can pack more cans on a pallet than jars. Also cans are less likely to break in transit which results in lower shipping costs. So I can buy the same ounces of name brand sauce for about 25 cents less than the generic sauce in a jar, plus the name brand offers a coupon for 25 cents off any two containers of a certain size (which my store doubles). I can’t make my own home-made spaghetti sauce that cheaply, and it stores for a long time so stocking up when they are on sale is a real bonus.

    I do also favor “Always Save”, because often they are cheaper than store brands like Kroger, Best Choice, and Sams Choice. Sometimes quality is an issue, but for the staples I mentioned above there isn’t any difference I can taste except for a very few items (wheat crackers / Wheat Thins for one).

  7. Since reading Coupon Mom’s book, I’ve started keeping a price log. I’ve been grocery shopping for nearly 30 years and had never done it before. What an eye-opening experience. You really do need to know what things USUALLY cost. For instance, I found that cutting up my own stew meat from a regular roast saved me over $2 per pound. I also know when the price on milk or hamburger is a real deal or not. It also lets me know when it is cheaper to shop at Sam’s Club for a certain item.

  8. On the 10/$10 deals, ususally there are a bunch of items on the same sale together. Like cans of veggies: 2 cans each of peas, carrots, corn, green beans, kidney beans for the $10 might make more sense than 10 cans of peas alone. I do this with cereals of the same brand that are BOGO.

    Also, looking on the price sticker on the shelf will calculate the price per ounce or pound. Compare the price of one size vs. another of the same item- sometimes it’s cheaper to buy a bunch of small cans of tomato sauce rather than one larger one. Or compare the sale price of a name brand item to the store brand that’s not on sale and I find that the price is still more expensive for the name brand on sale.

  9. @Sid – The can vs jar is a great tip, except for when it is tomato based food (ie. tomato sauce). The reason is that the acid leaches whatever chemical coating they have in the can onto the food. You don’t have that problem with a jar.

    Being poor college students, my husband and I purchased 20 cans of chili for $10 one time. We were eating chili several times a week, but we still were not able to finish it up. When we sub-lease our apartment, we “accidently” left the cans of chili behind. However, at the end of the sub-lease, we came back to the apartment to find that we still had 10 cans left. We ended up tossing it away. Now I would not eat canned chili even when I get it for free.

  10. I have found that at the stores near me here in California they are getting VERY STRICT on the multiple items rule.If you don’t buy all the items,i.e. 5 for 5,10 for 10 you will not get the sale prices.
    We have very limited storage space and with only 2 of us it just doesn’t make sense to buy in bulk.We waste more than we might have saved in the first place…And that’s not being frugal at all!

  11. After allowing myself to be lured into the Mega Cart Buster Sale at Kroger, I’ve decided to just price match what I need at my Super Center Walmart. I get the price, without having to buy items not really needed.

  12. The 10/$10 sales are not always bad deals.

    Especially if you split the costs with friends and/or family as many people do.

    The bottom line is not just cost, but how/when you will use and expiration dates.

    If you would not buy something if it were not on sale, you shouldn’t be considering it because it is on sale. That’s a good place to start.

    It’s great to keep track of prices when you can, but as some have said, driving around to price compare can be tough (and even if you have priced it online, you still end up in the car to get to a store. What happens when what you want is out of stock? A raincheck won’t help if you needed that item for this week’s meals.)

    People raving about coupons always makes me wonder what they buy. The only coupons we see are for branded products that are ALWAYS way overpriced than similar store or generic brands.

    We use coupons for the very few items that we buy branded because of quality, etc. (Very few indeed)

    We could never save any money if we used coupons, no matter how much they are because the prices are just too high on the items for which they are available. To me, that is the ultimate “con.”

    Ultimately, if you know what you use and your own consumption patterns, that’s the biggest aid to not being enticed by sales.

    FYI: We buy some stuff (non-perishables) in bulk on sale from amazon. When it has sales or discounts or specials. We can really save a lot.

    If we had big box stores, we’d buy stuff there but we live in a major city, have no car and the cost of a taxi to get there obviates any savings. (Yea, we can find ways to store stuff. It’s the transportation that is the problem. It’s also hard to find people who want to share a ride cause they too usually fill up their cars when they go!)

  13. I constantly have to remind my husband than unless it says “when you buy X” you don’t have to buy the listed number of items. It’s a hard lesson to learn for some people.

    I just do a lot of coupon-combining. It’s especially interesting here, as Fry’s (Kroger) doubles your coupons up to a value of $1 and Safeway here rounds all coupons up to $1. So one week I got 20 boxes of Quaker bars for the $1.50 it took to buy up a bunch of coupons online.

  14. We’re careful to only buy what’s on our list unless the price is amazing. If we stock up, I’m very careful on not buying that item again for a long time.

    Since we use recipes and pre-plan our meals, we don’t have many problems if we stick to our list.

    Even if I splurge (Skittles and chocolate are my weaknesses), I take it out of my “fun” money so I don’t feel too guilty about messing with our grocery budget.

  15. Most times I’ve been in a store, they give me just one for $1 if it’s marked $10/10. Don’t know if I’ve just gotten lucky or what.

    I have precisely one gimmick: I buy everything with a 2% rewards card. It has a really low limit so I have to pay it off twice a month, but other than that it’s great. Given this 2% gimmick, I feel somewhat empowered to pay $0.10 more to not buy pasta in bulk.

    Though when it comes to stockpiling, consider that having an emergency food supply of staples that don’t expire isn’t the worst thing ever.

  16. The Kroger buy 8 get $4 really confuses people because they show the price on the shelve as if you are buying 8 but when you checkout the $4 comes off the whole bill. Also you only get the $4 off once is not 16 get $8. So people will buy more than 8 of the participating items thinking they are getting it for the “special price”, but they aren’t.

  17. I always plan my meals around the sales flyer. I don’t use many coupons, as I don’t buy many prepackaged items-they work for canned goods and household products. I cook for one, and I have found that most stores will work with me on perishables. If it is a BOGO that I can’t use up I will ask to purchase one at half price and the manager will allow it 9 out of 10. I shop Safeway and my independant store here as I won’t shop at Walmart. Safeway’s website has a way to download coupons onto their rewards card which I have found helps for brand items I do buy, like detergent and cat litter.

  18. I don’t want to “pile on” Kroger, but the whole supermarket trickery is part of the reason that we do most of our grocery shopping at ALDI. If there’s one near you, you should definitely check it out! One caveat – they don’t take coupons, so if you’re a coupon guru, ALDI might not be able to beat those types of deals that Ron mentions above.

  19. Not all Alid’s are the same. .. my Aunt in Chicago swears by them and does most of her non-Costco shopping at them.
    There’s two in my region(Nebraska) one smells of rotten meat to the point I can’t stand it & the other I found bugs in the onions I was going to buy (Manager didn’t care when I told him).
    I admit I frequent neither store – the smelly one I’ve been in twice in ten years & the other I’ve been in once last fall. So maybe I had bad timing?? Regardless due to my experiences and the prices I saw I think Aldi isn’t that great.
    I buy in bulk & eat extremely little processed food so maybe my view isn’t average.

  20. I agree that a lot of coupons are for products that are way over-priced, but there are also a lot of coupons that enable me to afford to feed my family. I could never buy a block of generic cheese anywhere for 50 cents, but with double coupons, I can and do get this type of price frequently by pairing the coupons with door-busting sale prices.

  21. indeed.. one retailer trick ive been onto for many yrs now.. and preach to others where apropos = grocers / big retailers bulk pricing switch’ary! our brains imply the larger the buy.. the better the bulk discount riiiight?.. WRONG..
    almost across the board at all major grocers.. if one actually reads ‘per ounce’ and such price tag details an/or fires up cellphone calculators and does the math.. you will find 99% of the time for decades now.. retailers actually charge you more for a 20# bag of sugar.. than they do for 4 5# bags! which sux because not only is it unethical; it adds to packaging / landfills oppositive to our times needs for less packaging!!

  22. tech9iner – you are soooo right. There are several items we get that I’ve noticed that on. Many stores have the price per oz on the shelf tag allowing to just compare numbers however, I’ve been teaching my kid to not only compare those tags but to also do the math is the tag doesn’t say.
    I recently noticed this is the case with my dish soap – a friend was telling me to get the bigger bottle instead of the 99 cent one & the larger bottle had twice as much soap for 2.39 – an extra forty cents for a bigger bottle! Yippee!

  23. Sam – Funny you mentioned the dish soap. I just had the same experience last night at the grocery store. 2 smaller bottles @ $.99 vs. the larger one @ $2.29?!
    It does pay to check the price per volume, but some places get tricky and put price per pints on some and price per quart on different brands and I have no idea how to do those conversions:)

    • no worries ie your mentions ‘conversions’.. print out a little conversion table ie ‘pint – ??ounces’ etc. for shopping trips.. take calculator or get used to the one on 99 of 100 cellphones for yrs now.. wuallah! ;]]

  24. I do it the hard way – I divide the price by the oz sited on the bottle. Although I remember once something had listed the contents in liters but I just looked at something in a large bottle that was a liter & looked at how many oz were on the label. Yes, it was more work but it keeps me entertained & the two grocery stores we go to the most are small so it’s easy to do something like that in only a moment.
    I wouldn’t have done it if i was at one of the super duper Walmart’s that are the size of a town. Those exhaust me & put me in to a state of mindlessness on the prices – I’m too busy avoiding being run over or dodging running kids.

  25. There was a sale going on for like “8 for $8″ for a bunch of random items.

    For some reason, if you spent 8 dollars, you’d get an 8 dollar coupon for your next purchase.

    With this, I was able to get around 57 pizzas for one + 7 candy bars for 8 cents by buying 8 at a time, running to my car, and picking up more.

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