Save Money With Pricing Secrets

If you want to save money on that next purchase, it can help to know the pricing secrets of retailers. Here are a couple of those secrets.

The Minimum Advertised Price

Pricing may not make much sense at first look. Why, for example, does whole wheat pasta cost three times as much as regular pasta, when regular white-flour pasta requires the extra trouble and expense of taking parts of the wheat out? Of course, economists will tell you that price is determined by what the market will bear, and that is certainly an important principle to understand, but does it always apply in real life? Sort of.

Lets start with a look at the "manufacturers suggested retail price." Sometimes also called the "list price," what does this really represent. In theory, of course, it is the price that the manufacturer suggests to the retailer. In practice, it is generally the maximum price a retailer can charge. (Who really wants to buy something that is priced higher than the MSRP?)

There is another price that manufacturers suggest to retailers, though. It is the MAP, or "minimum advertised price." This is not an absolute minimum that retailers can sell for (and they certainly want to sell for more if they can), but they risk upsetting suppliers if they sell for less than this. How can a manufacturer convince a retailer to carry a product if competing retailers are selling it so cheap that it is difficult to make a profit on it?

To determine (approximately) what the MAP is, you should check several stores for a product. If they are all advertising the product on sale for around the same price, it is probably close to the MAP. The big box stores often stick to the MAP in their sale advertisements. You can sometimes find sales that price the product below the manufacturers minimum advertised price at small stores. Smaller stores have less to risk by angering suppliers, so check the smaller stores to save money.

Be aware, though, that some stores will sell below the MAP because they are selling incomplete products. If it is a computer, for example, you might have to buy a keyboard and speakers separately. If others are selling a complete product, compare the total cost of everything you need to get a product that is functional at these "discount" stores.

Prices Ending In 99

We all know that $29.99 might as well be $30, so why do retailers use this ploy? There is a simple explanation: Because it works. Even if you automatically round up a price like this, you may not have looked at it in the first place if it said $30. This is because we process information from left to right, so you see the "2" before anything else, and this is more appealing than a "3".

Your mind is thinking "20-something dollars" versus "30-something dollars." Even if your next thought is "Oh, it's $30," you are already looking at the product. That certainly makes you more likely to buy it than if you never stopped to look at it.

Also, retailers get caught in this game whether they like it or not. For example, once gasoline retailers started pricing a gallon using ".9" cents, how could any of them stop? Imagine if all the other gas stations had gas at $2.99 and 9/10 and one had $3.00 on the sign. The difference on ten gallons would be a penny - not worth driving further. But us drivers just see that they are the most expensive.

What can you do with this knowledge? You might save money by always rounding up those prices and so being less tempted to buy - which you probably already do. Also be aware that the 9/10 caught your eye at the gas station, but a penny or a tenth of a penny savings won't justify going out of your way. You'll save more money just stopping at the first reasonable station.