Unless you have a degree from a top B School, even if you do-retail prices often don’t make a lot of sense. If nobody pays list price for much of anything, what’s that term even mean? How come some things always seem to be “on sale”? And what’s up with ending prices in 95 paise? Like they think you can’t round up?
The technical people will say that price is what a buyer and seller agree will be exchanged for a good or service. But in practice, you, the buyer, want to make sure that you’re not agreeing to overpay the seller. And that depends on understanding some of the more opaque facets of “the market,” such as the politics between manufacturers and retailers, the life cycle of a product, even the long arm of the law.
LESSON 1: LIST PRICE IS JUST THE OFFER PRICE AND SHOULD BE NEGOTIATED UPONCalling the manufacturer’s suggested retail price the “list price” makes it sound like an item’s carefully considered fair cost. In actuality, it’s the maximum makers expect a retailer to charge. To the extent that manufacturers do suggest a fair price to their retailers, it’s the maximum retail price (MRP). This usually isn’t public knowledge. Manufacturers want to give retailers a chance to sell for more, and retailers certainly don’t want to tell you when they’re charging above what they have to.
Can stores sell below MRP? Sure.
Can I do better? Maybe. Check smaller stores, which have less to lose by irking the supplier.
Watch for rebates at big-box stores, which generally stick to MRP in their ads. And online, look for sites that say “click through for sale price.”
LESSON 2: MRP ISN’T FOREVER. AS THINGS AGE, THEY GET CHEAPERNearly every product has a life cycle, whether correlated to season, changes in technology, fashion tastes or other factors. As products move through this cycle, manufacturers reduce MRPs. Jonas Tanenbaum, a marketing V.P. for Samsung, says that these days it’s not unusual for the company to lower the price of a TV three times during its year-long life cycle vs. once or twice in years past.
How do you put this info to use? “You’ll get the best bang for your buck when a product has been around for a while and there’s competition among manufacturers and retailers-basically, when the product is ‘mature,’” says Rajneesh Suri, a professor . Pinpointing this can be tricky, but patience will be rewarded. See what an item is being sold for at its launch, then check back periodically. When the Nokia phones are launched it is priced at a very high price but slowly and gradually the price goes down (Skimming strategy in terms of marketing).
LESSON 3: AND THEN THEY GET REALLY CHEAP Exploit end-of-life-cycle pricing by shopping for a product when its new version has launched. Today some of the Nokia cellphones cell for around the 6000 Rs mark when the initial price was Rs. 15000 to Rs. 18000
Shopping at discount retailers like factory outlets can also help you capitalize on life-cycle decline.
LESSON 4: SOMETIMES A “SALE” ISN’T A SALE You’ve no doubt seen an ad like this: “Was Rs. 250, is Rs. 150!”
A study published last year in the Journal of Marketing found that this tactic-called reference-price advertising-succeeds in making shoppers feel like they are getting a deal. Maybe you are, maybe you aren’t.
Many a times what happens is the price are escalated before reducing them. An item on a normal day was available for Rs.215 /- is hiked to 250/- and then reduced by 30%. So be careful when you go on a shopping spree in a Sale
LESSON 5: PRICE-MATCHING “GUARANTEES” MAY COST YOU MONEY Some of your favorite retailers may offer to meet or beat a lower market price. Sweet, huh? You’re wired to think so: A study in the shows that people generally perceive sales man with price guarantees who gaurntee that they would foot the difference if you get an item for less price as compared to prices offered by.
LESSON 6: HIGH PRICES CAN HIDE IN BUNDLES Retailers often group items together to sell as a package. Sometimes these “bundles” hide prices above MRP . You may see a low base price advertised, but there’s rarely a vehicle on the lot for so little. They all come with “extras.”
Your strategy? Separate good bundles from bad ones. Identify the components and see what others charge for them, then subtract that from the total to reveal the price of the main item. And of course, ask yourself if you really need all those extras.
LESSON 7: THAT 95 paise TRICK REALLY IS TRICKY
What’s the big secret about ending prices in 95 paise It’s simple, Research shows that people process information from left to right. In other words, the “1″ in Rs.1999.95 is more appealing than the “2″ in Rs.2000. You may not be able to stop that “1″ from attracting your eye. But you can avoid pulling out your wallet until you’ve reminded yourself that you’ll be parting with a 2000 plus taxes