Exploiting consumers

Retailers, in efforts to lure customers, frequently offer discounts.

More often than not, customers are misled or being exploited – or perhaps they are just mistaken.

An article in a recent issue of the Journal of Medicine stated consumers are ignoring reality. For instance, they much prefer getting something extra free, rather than being offered something cheaper.

Apparently most people cannot deal with ordinary fractions. They fail to realize that a 50 per cent discount in quantity is the same as a 22% price discount, inferring the former represents “better value”.

Thus, in a new experiment retailers sold 75 percent more in a bonus pack when it offered an equivalent discount even after all other effects such as a wish to stockpile were taken into consideration.

Customers evidently have a blind spot favouring a discounted product. In a trial, when offering two deals, the 33 per cent extra free or one-third off the price, the discounted item is selected, by far the preferred choice, yet most respondents considered the two offers the same value.

Studies have shown that in other ways retailers can take advantage of consumers.

If a product were presented at double discounting, shoppers are more likely to consider it a bargain. For instance, consumers would prefer a product that has been reduced by 20% and then by an additional 25% over one that has been subject to a one-off 40% reduction. Yet, the price is the same in both instances.

As a consumer, this columnist has noted that usually a package of soap with say a dozen bars is more expensive than three packages of four each.

Marketers should take heed of these lessons. When promoting au automobile’s efficiency, for example, it is more persuasive to mention the extra miles per litre rather than the comparable percentage fall in fuel consumption.

At fault here is our education system that seems to lack a real understanding of fractions – too late now for most shoppers.

What is needed, therefore, is for retailers to display unit prices in stores and in advertising. That would assist the hapless consumer and be more honest.

There are lessons for smart retailers; clearly they should take heed.


Bruce Whitestone