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Product discounting tricks

RRP Discounting

Discounting can save you a lot of money but do your research and make sure it is really a discount.

If it says 25% of the RRP or "Save 25%" you need to find out what the 25% is really being calculated off. Don't just take their word for it. The manufacturer usually decides the RRP (Recommended Retail Price). Often retailers don't sell it at that price to begin with. In fact many manufacturers grossly inflate the RRP. The jewellery trade is rife with this. Items come in from the manufacturing jeweller with RRPs that can be three or four times the selling price. Buy a ring and take it straight to a valuer and you'll see the difference.

a jewellery shop window display

The RRP is not the selling price - just look at any jewellery shop

Extended warranty

You can save lots of money but be aware of the extended warranty trap. In big ticket items like kitchen appliances, from mixers to refrigerators, retailers will drop the price to almost cost price and make their profit not on the sale of the item but on the sale of an extended warranty.

The simple truth is that over 99.7% of all products breakdowns occur within the warranty period. If the warranty is over one year old, chances are they'll call it reasonable wear if you claim after one year anyway. Given the fickle nature of business, who's to say the manufacturer will be around in two year's time. Today it's highly likely the manufacturer didn't actually make the product either. It was probably made in some factory in China.

Finally, stop and think - that item will be a year old, no longer shiny and new or state of the art. It will be worn and although one part has broken down, others will be waiting to break down somewhere else when that part is fixed - you'll be without it while it's being repaired and it will come back, still second hand. If the product was so good to start with, why do they need to extend the warranty beyond the "wearing in period" anyway? (because they know it's highly unlikely to break down and they got money for nothing.)

By the time you are on the extended warranty period, you would probably look at replacing the item with a newer one with better features, if it broke down anyway. This is especially true with electronics and electrical goods.

Take the discount, forget the extended warranty and you'll come away with a genuine saving.

Waching machines for sale in a department store

The profit is in the extended warranty - do you really need it?

Specials

Keep in mind that shops are there to make money and you are the cash cow they want to milk, for every cent. If it's on special, then it's either stuff they need to get rid of (close to "Use by date" or slow selling, taking up valuable storeroom space) or it's a draw card, to bring people in the door who will buy their other products in the shop that are overpriced to cover the discounting. Buy the specials but be aware of the prices, compared to other shops (that are not on special), and similar goods elsewhere in the shop. Here's a few tips to help you avoid the traps:

  1. One way to combat this is to prepare a list before you go shopping. Anything not on the list that looks like a good buy, it had better be an exceptional buy before it goes into the basket.

  2. Don't use a shopping cart if you can avoid it. Use a hand basket instead. If you have to lug it around the shop, you will think twice before putting extra stuff in it. It will also discourage you from stopping too long and looking at every aisle.

  3. If you have to bring the kids, keep them occupied as you shop. Use "find" games or vebal memory puzzles, to distract them. You will find the kids love this quality time. Every so often you can reward them with a spending limit that they can choose something for that price or less. It is just as effective at a $5.00 limit as at $10.00 and teaches them the meaning of budgeting.

  4. Specials may not be the cheapest item. A common trick to move old stock, is to place it on special near the checkout or some other prominent place in the store. People assume it's the cheapest brand. Often it's not. On the shelf you'll often find a cheaper version. It pays to check before you put it into your basket.

Endorsements

Does this sound familiar?

Shops, especially supermarkets rely heavily on impulse buying and changing your perception, what they call "branding". You wanted to buy a loaf of bread which should have cost only $3.00 but came away with two loaves for $7.10, some cheap cakes as well as the special Omega 3 twenty two grain spelt gourmet rye loaf as recommended by Xavier Duchamier, the 22 star chef at Franc's Pont Noir Hotel for the Rich from Rehab. His smiling face glowed with health and wellness at you from the bread stand advertising placard and the cheaper loaves were on the very top shelf but these were at eye level, so you paid $3.55 for a loaf.
It's got to be better for you because Xavier endorsed it, isn't it?

Chef smiling at a loaf of bread

It must be good if the chef endorses it, right?

Sounds dumb?
It is but we all fall for it and that's why celebrities earn so much. Companies will spend millions on endorsements because they work. The truth is, the celebrity is acting for money, just like they do in the films and on TV. Their manager, if they are really diligent will make sure the product doesn't hurt anyone and that's often as near as the celebrity gets to endorsing the product.

Glass of milk

UV and Milk
Milk is highly reactive to ultraviolet light and should be stored in a cool dark place (don't worry the fridge light does go out when the door closes). Exposure to ultraviolet light makes milk go off much faster.

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Bar - Gold bar with Granny Smith Apple

The Shelf Trick

This is really low and unscrupulous. A retailer places a special in the same place every day for a few weeks. The special is well signposted. After a while, when the regular customers have grown used to this, he will only stock the specials with a quarter of the number of items, so the stock on the shelf runs out. The next door product, the same item but a different brand and more profitable, is stocked with double the number of items. The aim is to get you to believe you are picking up a special item, when you are picking up the competing product. Here's a real example:

Bottles of milk on a supermarket shelf

Looks innocent enough? . . . Can you spot the trap?

This is very common with milk in supermarkets. The containers are often very similar. Coles here in Australia actually sells their own brand of milk for only $1.00 a litre. The packaging is very similar to another more expensive brand and the two brands are kept on the shelf, side by side.

Bottles of milk on a supermarket shelf

The trap exposed, there are too many istances of this for it to be coincidental.

Just in case you didn't spot all the tricks they used to get your money, here's what they did:

  1. Notice the similar packaging colours of discounted milk on the right to the higher priced milk on the left.

  2. Although it is an advertised special, it is below peak sight line, where the label is less distinguishable from a customer standing at the display, making it easier to pick up the more expensive brand by mistake. At the checkout, most customers will not spot the mistake. Those who do, will be reluctant to go back and change it, losing their place in the queue.

  3. There is no divider or gap between the two brands, to increase confusion.

  4. There is less of the cheap milk and it has not been faced (pulled to the front of the display) like the expensive brand, so it is easier for the customer to reach for the expensive brand.

  5. The price tag is not in the center of the discounted milk display. Standing front on to the fridge it is exactly half in front of the expensive and half in front of the discounted milk. I took the photo standing in front of the expensive brand.

Update - 12th June, 2014 - Same Coles store is still doing this trick.

Bar - Gold bar with Granny Smith Apple


Basket of Fresh herbs

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