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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

#61

Post by mcv »

maaaats wrote: post #51

Up until 2009 in Norway, it was illegal to advertise products with unrelated additions ("tilgift"). Not strictly related, as here it's the same product. But this made it illegal to do promotions like "buy our car, get a free iPad", "buy this coke, get a chance to win prices". I think consumers wanted the law gone, as it looks like we missed out on deals other countries had. But it makes it harder to compare and trick…

So even on an electoral level, consumers get fooled by this and want access to shady deals. That's going to make it really hard to get fair consumer protection laws.

(Though maybe it's not surprising that people get fooled in politics.)

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

#62

Post by mcv »

mojuba wrote: post #54

The shady economics of a non-functioning close button of an annoying "Subscribe to newsletter" popup. Bottom line: it works but also sends a negative subliminal signal to the visitors that a given business is desperate. Just something for website owners to have in mind.

I increasingly tend to close popups on websites by deleting them from the DOM through dev tools. Not the most user-friendly method, but it's quite thorough.

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

#63

Post by yitchelle »

legatus wrote: post #55
joshvm wrote: post #41

Earlier quoted context omitted.

Not a textbook, but Freakonomics is in that ballpark. It's (un-) surprisingly hard to find academic information about this on Google because all the results are click bait articles about how to improve sales, rather than peer reviewed theory.

Thanks, I'll definitely look into Freakonomics. I agree it's pretty hard to find info on this topic from an academic perspective, and it's really unfortunate, as I believe it is important for the wider public to understand these tactics and why they work.

The book "Predictably Irrational" by behavioral economist Dan Ariely that was mentioned early on in the article is also a good read. It does not directly related to pricing strategy but provide good insight to the irrational decisions that we make, and the BOGO falls into that category.

In a similar vein, I have just finished "Nudge: Improving Decisions About Health, Wealth, and Happiness" by Thaler and Sustein. This might be worth a look as well.

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

#64

Post by chippy »

dspillett wrote: post #53
chippy wrote: post #32

> Most online clothing brands offer ‘free’ shipping, with the catch that you have to meet a minimum purchase amount (often $100) to qualify. Some 58% of consumers will add additional items to their cart — often things they didn’t originally intend to purchase — just to “save” $5 to $10 on handling fees. You will find people vigorously defending their behaviour when challenged on this. For example: Amazon Prime. Amazo…

> and yet people will defend their spending saying that they are "saving" money I've never seen Prime as a purely money-saving scheme. It possibly does save me a bit overall (but not every month, for sure) on the things I genuinely want next day, but I also get the convenience of weekend delivery which either isn't available or is very expensive without Prime (from Amazon or other options), or certain drop-site deliv…

> Is paying for convenience inherently wrong in your world view?

I was channelling the spirit of the article.

But for me it's not that something is convenient on it's own, it's 2 things. Firstly, it's that it's shady and manipulative and that people will defend this when challenged by saying "oh it's okay I don't like to think about it, it's convenient".

Secondly because a BOGO offer (or Amazon Prime) lowers the cognitive load it is explicitly a convenient thing for us. our brains think we are both getting a deal and we are having a smooth ride. It's easier to not do the economics and it's easier and smoother for us to think less even if we spend a little bit more.

>There is also the utility value of not needing to think

>Shopping around can be time-consuming

>Spending...cognitive effort to save money

Now, making money isn't wrong, nor is hacking on psychology, but I don't see any comments in HN defending BOGO. We all like to think we are rational and that it's others who are the crazy ones.

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

#65

Post by underwater »

paganel wrote: post #39
pattle wrote: post #29

Earlier quoted context omitted.

> 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 getti…

What I ended up doing in order to avoid this is that I’ve been buying from the same brands for some time now, i.e. the same soap, the same shampoo, the same butter (truth be told, for butter I fluctuate between two brands), the same chocolate, the same detergent etc. This way I don’t fall for tricks like the one you mentioned because I almost don’t care about any other brands and products than the ones I’m really int…

You're not exactly beating the system. That's just plain old brand loyalty, which companies love. You've stopped shopping based on quality or value, and they can turn a profit without investing anything into marketing.

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

#66

Post by tyfon »

chrisdone wrote: post #60

I feel that there is a wealth/background effect here that could be studied somewhat too. I think people who don't have to worry about money are less likely to pay any attention to discounts and deals. Having come from a council estate, there is a certain mindset behind getting a deal for everything, making your little money go as far as possible, buy one get one free, or discounts on anything, or coupons to get into…

When my wife comes back from shopping I often jokingly ask her 'how much did you "save" today' and she laughs back.

We're in a quite good position so it doesn't matter as much but it's often easy to get lost in the rebates and forget how much is actually spent.

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

#67

Post by ocfnash »

thaumasiotes wrote: post #24
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…

Actually I think we're in agreement here: I didn't make it clear but the nominal figure to which I was referring was the magnitude claimed free. By saying "extra free" they get to write down 10% instead of 9%.

I also agree the difference is small in this case but I'd argue:

  * Small wins are still wins.

  * The difference is not so small with bigger percentages.
Imagine I decide to tweak my margins for a time and sell 1.5Kg of cereal for the price I previously sold 1Kg. I could say "33% free" (relative to old price) or "50% extra free".

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

#68

Post by maaaats »

pattle wrote: post #29
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 getti…

Even without discount on the more expensive one, it can be used as a marketing trick to make you buy more expensive. For instance offer three versions of a product: $1 branded as cheap/bad, $2 branded as good, $5 branded as luxury. The last one exists mainly to anchor the value of the $2 as also cheap and to make you buy it. If one only had the choice between $1 and $2, most people would choose $1 option.

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

#69

Post by chrisper »

tyfon wrote: post #66
chrisdone wrote: post #60

I feel that there is a wealth/background effect here that could be studied somewhat too. I think people who don't have to worry about money are less likely to pay any attention to discounts and deals. Having come from a council estate, there is a certain mindset behind getting a deal for everything, making your little money go as far as possible, buy one get one free, or discounts on anything, or coupons to get into…

When my wife comes back from shopping I often jokingly ask her 'how much did you "save" today' and she laughs back. We're in a quite good position so it doesn't matter as much but it's often easy to get lost in the rebates and forget how much is actually spent.

Also with these "deals" you often also have to ask yourself:

Are you buying it because it is cheap or are you buying it because you need it? Often people buy stuff they don't need because it is on sale "right now."

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

#70

Post by mojuba »

mcv wrote: post #62
mojuba wrote: post #54

The shady economics of a non-functioning close button of an annoying "Subscribe to newsletter" popup. Bottom line: it works but also sends a negative subliminal signal to the visitors that a given business is desperate. Just something for website owners to have in mind.

I increasingly tend to close popups on websites by deleting them from the DOM through dev tools. Not the most user-friendly method, but it's quite thorough.

Doesn't always work though, some web sites also manage to block scrolling of the main content which may not always be easy to figure out (esp. on messy web sites with megatons of JavaScript code, HTML and CSS).

And surely there are browser plugins that help you remove annoying DOM elements in one click?

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