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The shady economics of ‘buy one, get one free’ deals

thehustle.co

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Re: The shady economics of ‘buy one, get one free’ deals

#21

Post by rlue »

What makes this really interesting is how living in an economy where prices are both set by the seller and non-negotiable causes consumers to equate asking price with value.

As a consequence, BOGO feels like a better deal than one item at 50% off MSRP. A 50% discount is a change in the asking price; the value of this item must have depreciated in some way for the seller to want to get rid of it (e.g., this garment is going out of season), and the price I'm paying is a fair deal that I'm happy to accept because I don't need to indulge in extravagances.

But in a BOGO deal, the asking price hasn't moved (or, as the article discusses, may actually be inflated); the fact that I paid full price means that it retains its original value, and the one they throw in is simply an enticement. In other words, I purchased an extravagance at full price, but it was a deal because I walked out with two. The amount paid is double the previous example's, but the perceived value is fourfold.

This isn't even getting into the actual value of perceived value (cf. the sticker price of wine vs. its perceived quality). Really interesting stuff.

Re: The shady economics of ‘buy one, get one free’ deals

#22

Post by karambahh »

JeanMarcS wrote: post #8
consp wrote: post #6

Fortunately some of this (bloating the price just before a sale to cover the cost, note: e.g. day before) is illegal where I live. Though it doesn't stop shops from trying. It does give the customer some extra power. If for instance the shop fails to sell all stock and dumps it afterwards you can try to claim the difference as this falls under deceptive practices. The buy one get two variant is fine as long as there…

Same in France. So when sales time arrives, you can see some items prices rising up a week before (which is, de facto, legal as long as you do it in advance)

The rules are slightly more complicated.

You are only allowed to discount items already in stock a month before the start date[0] That's why the back of the shop is fully loaded by boxes a month before the sales period starts.

The rules seem silly because it's an open secret, all companies jack up the price and stock up just before... but you'd be hard pressed to find actual proof:

"I ordered 50k items to the supplier just 30 days before, I meant to buy only 50, fat finger mistake, so we had to discount them".

"Yes, the reference price is based on the highest price we had on record among our 500 stores. Yes, I know it was more than twice the median price, fat finger mistake but hey, who does not make mistakes, 14€99 is too similar to 5€50..."

[0]https://www.service-public.fr/professionnels-entreprises/vos...

Re: The shady economics of ‘buy one, get one free’ deals

#23

Post by mcv »

ChrisSD wrote: post #4

> A coffee mug that usually sells for $10 + $3 S&H will go for $13, with FREE shipping. I actually prefer this. It's much better than shops that activity try to hide shipping costs until the last moment. Also it makes comparing prices quicker.

Shipping cost can vary a lot, though. Especially in the internet age where it's easy to order things abroad. When I order from a Dutch webshop or from amazon.de, shipping is generally free, but when I order from amazon.com, it's not.

So that means the webship has to know where I live and what kind of shipping I want. Granted, Amazon probably already knows this, but when I use a new webshop, they can't know this, and I don't want to have to tell them before I can see the price of their items.

Re: The shady economics of ‘buy one, get one free’ deals

#24

Post by thaumasiotes »

ocfnash wrote: post #11

I quite enjoy mentally parsing these "offers" in logically equivalent ways. E.g., "buy one get one free" as "only sold in units of two" or even "each purchase of one requires compulsory purchase of a second". As a child I remember considering the difference between "extra free" and "free" which I used to see on cereal boxes. Sometimes the box claimed "10% free!" but other sneakier boxes would claim "10% extra free!".…

> Sometimes the box claimed "10% free!" but other sneakier boxes would claim "10% extra free!". The latter allows the marketer to quote the same nominal figure for a smaller absolute quantity.

I'm not sure they're trying to be sneaky. The difference is too small for anyone to care about:

- 10% free! (purchase price pays for 90% of the cereal)

- 10% extra free! (purchase price pays for 91% of the cereal)

(Also, it's the first option that indicates a higher unit price, not the second.)

Re: The shady economics of ‘buy one, get one free’ deals

#25

Post by newnewpdro »

theli0nheart wrote: post #18
dalai wrote: post #9

Earlier quoted context omitted.

On the other hand, if you want to buy two of them they cost $20 + $3 S&H or $26 with free shipping.

Why is this surprising? Undesirable, sure, but shipping additional things costs additional money.

That greatly depends on the things.

Re: The shady economics of ‘buy one, get one free’ deals

#26

Post by zulln »

theli0nheart wrote: post #18
dalai wrote: post #9

Earlier quoted context omitted.

On the other hand, if you want to buy two of them they cost $20 + $3 S&H or $26 with free shipping.

Why is this surprising? Undesirable, sure, but shipping additional things costs additional money.

Not as linear though.

Re: The shady economics of ‘buy one, get one free’ deals

#27

Post by mcv »

ocfnash wrote: post #11

I quite enjoy mentally parsing these "offers" in logically equivalent ways. E.g., "buy one get one free" as "only sold in units of two" or even "each purchase of one requires compulsory purchase of a second". As a child I remember considering the difference between "extra free" and "free" which I used to see on cereal boxes. Sometimes the box claimed "10% free!" but other sneakier boxes would claim "10% extra free!".…

I strongly object to calling something "free" when you can't get it for free. If I'm required to purchase something to get it, it's not free. Things like "10% free" should not be allowed to be called that. It's a 10% discount. Free with the purchase of something else is also not free, as I'm still required to pay money.

Re: The shady economics of ‘buy one, get one free’ deals

#28

Post by karambahh »

outime wrote: post #17
consp wrote: post #6

Fortunately some of this (bloating the price just before a sale to cover the cost, note: e.g. day before) is illegal where I live. Though it doesn't stop shops from trying. It does give the customer some extra power. If for instance the shop fails to sell all stock and dumps it afterwards you can try to claim the difference as this falls under deceptive practices. The buy one get two variant is fine as long as there…

It also happens in online marketplaces like Amazon but luckily there are tools to track price changes like https://camelcamelcamel.com/ (disclaimer: not affiliated at all, just a happy user). Wish there were more tools like that but for retail.

I love reading the graphs of camelcamelcamel. It's sometimes entirely obvious that two pricing algorithms are fighting for the buy box.

You can also see when an item is reaching its long term date[0]: 180-days(or 365 on some markets now) in inventory point: sudden drop in the price. The margin can get negative because the long term fee is very hefty.

Say you sell SD cards or a similar low volume, low cost item: at a certain point in time, the storage fees will be larger than profit, selling them for 0€01 then makes sense...

[0]https://sellercentral.amazon.com/gp/help/external/200684750?...

Re: The shady economics of ‘buy one, get one free’ deals

#29

Post by pattle »

rlue wrote: post #21

What makes this really interesting is how living in an economy where prices are both set by the seller and non-negotiable causes consumers to equate asking price with value. As a consequence, BOGO feels like a better deal than one item at 50% off MSRP. A 50% discount is a change in the asking price; the value of this item must have depreciated in some way for the seller to want to get rid of it (e.g., this garment is…

> This isn't even getting into the actual value of perceived value (cf. the sticker price of wine vs. its perceived quality). Really interesting stuff.

I fall foul of this trick quite a lot when food shopping. For example if I'm buying a box of cereals and I see one is priced at £1.80 and another is priced at £2.50 but is on sale from £3.50 I'll buy the more expensive one because I'm under the illusion that I'm getting a good saving and a better quality product. In actual fact though I've just spend quite a bit more for a marginally better, if not the same quality item.

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