Bear with me - this is kinda long. I visited a local shop for the first time last week. On each item offered for sale, there was a large tag. Top line was labeled “MSRP” with an outrageous sum beside it. So, first of all - does ANYONE pay MSRP?? Are the manufacturers all that proud of their products that they overprice them so much?
Second line on the tag was “Our Price” and it was half of the MSRP. Under that was “Sale Price” which was 25% off “Our Price”. So at this point, I’m supposed to believe the product that the manufacturer deemed worth $100 can be had for a mere $37.50…
But wait, there’s more!!
When you enter this shop, a salesperson comes forward with a sheet of paper sporting a price matrix. If the price tag is as described above, you take an additional 25% off the bottom price. If there is a single red dot on the tag, you get 50% off. And should you find an item with two red dots, you take 75% off the bottom price. The handy-dandy sheet of paper does all the computations. So my thingy with the MSRP of $100 could cost as little as $9.38…
What’s the point?!? Why not just put the bottom line price on the bottom line? Do people really like playing these games? Maybe I’m not the “typical” consumer…
Yes, people enjoy these games. (ever watch home shopping club??? it’ll give you a clue what some folks are willing to pay for “objet’s d’art” and more).
MSRP, is just that. In some cases (like the playstation type stuff), it’s difficult to find anyone who will offer it for less than that, but for more run of the mill stuff, it’s common.
Furniture stores and appliance stores in particular do the sale thing to death. “hurry, only 2 days left”…til our next sale.
Point is that some people will be more likely to purchase an item if they feel they’ve gotten a ‘deal’ on it. and ‘some’ is all they need.
This is just marketing to the (largely) ignorant masses. They get what they want, the store gets their money, and they both are happy.
If the person buys something for ten bucks, psychologically it’s like “whatever. I got it for 10 bucks.”, but when they feel like they really got the better of the store, they’re like “Yeah baby! I gave it to them alright! The original price was $100. That’s right! $100!!! and I got it for just $10!! I am a master shopper! I am the bargain king! I will return to this store seeking more incredible bargains!”
My favorite is the “overstock” sales. The last time I shopped for furniture the salesguy did the old “our warehouse is overflowing and we’ve got to move, move, move this merchandise!!” I asked why they didn’t hire a purchasing agent that could buy a little smarter so the warehouse wasn’t always so full. He seemed stunned and took a break. (Probably was the first time he’d ever really thought of it).
They do the marketing ploys because they work so very well. They give the glory to the customer. YOU are a smart shopper. YOU got a great deal. YOU have the upper hand. That way THEY keep making money
Oh, I’m quite certain this is wrong. After all, the guy that sold the car to my son told him, he wasn’t even making any money off the deal. (do I need to include the “rolleyes” smiley here?)
There is another, more practical purpose, for the MSRP, also called “list price”.
The cost of goods to wholesalers is typcially determined by applying a “multiplier” against the list price. If the list price is $100.00, and the multiplier is .045, then the wholesale price is $4.50. Typically, the wholesaler will then divide his wholesale price by the reciprocal of the profit margin he needs to maintain. For a 20% margin, he would divide $4.50 by .8, and sell the item for $5.63.
By using artificially high list prices, manufacturers need produce a pricing catalog only one time per eon. The pricing catalog, which typically contains lots of technical and product information, along with the list prices, is usually a large, sometimes multi-volume, reference guide. When the manufacturer has a price increase, he need republish only a new set of multipliers, each of which is tied by a one-to-one correspondence with the catalog numbers (or part numbers) listed in the pricing catalog. Those multiplier sheets are small print compact tables that are relatively cheap to produce.
Nowadays, with computers, the issue is more one of maintenance than of book size, but the essential reasoning is still the same.
Guess it’s just me - the whole pricing game seems silly. I have no problem with manufacturers and retailers making a profit - that’s what capitalism is all about. I must be a bottom line kinda person. Cut away the fluff and tell me what it’ll cost me. I’m a busy person and I don’t want to play these silly games…
Hubby keeps telling me I’m not the average consumer. I should take that as praise, eh??
I thought about this thread yesterday while I was shopping at Kohls. I’m looking at sheets. Regular price: 79.00. Markdown price: 29.99. Special clearance discount: 70%.
WHAT IS THE PRICE FOR THE LOVE OF GOD??? Every single item in that store is marked with a price, then a markdown, then a percent off. You have to be Rainman to figure out how much an item costs. Just mark the price and let me outta there!
It costs whatever the company thinks you are willing to pay for it. A gap shirt costs $45 when it comes out because that’s what people will pay. A little later in the season, people don’t want it as bad so the price goes down to $25. Right before the next season starts, the Gap just wants to get rid of it. Then you find the same $45 shirt in the bin in the back of the store for $12 bucks. Get the idea?
I have no problem with things being marked down like this - I understand what’s going on. What I don’t get is the practice I described in my OP - I can’t just look at a price tag - I’ve got to cross-reference with a chart on a sheet of paper. Whatever. They didn’t gert my business anyway.
