Food Fridays: Savings are Overrated
I’m tired of savings. I try not to think about them any more. And it’s made me a better customer when considering food, clothes, cars, and even housing. I’ll explain why through a hypothetical example.
Here’s a question for you: would you rather save $4 or $2 on the same item?
It seems that $4 is the clear cut answer. Savings are good; that’s what our parents taught us. This mentality is so ingrained that advertisers have started to exploit it.
Consider two ads for cantaloupe:
Store A (saves $4)
Store B (saves $2)
Store A initially sounds like a better bargain. You save $4 when you buy two cantaloupes compared to only $2 at store B.
But on further inspection, both stores are exactly the same. It costs $4 to get two cantaloupes. Store B is actually the better choice if you only want one.
The “savings” are different because Store A lists a higher unit price per cantaloupe of $4. While that could signal higher quality in store A, I can assure you from experience this is not true. So essentially, store A creates an inflated sense of savings.
There is a surefire way to beat advertisers. Always compute the unit cost of items on your own. In both stores, the cost per cantaloupe is $2 (if you buy 2), so it’s clear the prices are the same. It’s pretty easy to compare when you have the right tool.
So perhaps to thwart you, stores quote prices in abstruse ways, like $7 for 3 items, or buy one and get one 50% off. The complicated price combined with an emphasis on savings is the ultimate knockout. Most customers shrug at the small barrier of doing a little arithmetic.
This is a costly laziness. Not because you pay a few dollars more at supermarkets. But because clothing retailers, car salespeople, and even housing offers use the same tactics. You will rarely see commercials for how well priced an item is. It’s always about “limited savings” and “deep discounts”—this suits the stores fine because they can adjust the list price to inflate the savings. Even I fall into the traps from time to time.
But often, I try to decide what to buy based on value (more specifically, I mean marginal benefit) and price. I try to completely ignore the advertised savings.
5 Responses to “Food Fridays: Savings are Overrated”
The fact that store B offers you the option of getting one at the same discount is huge in my shopping habits. I’m always more attracted to 2 for x deals rather than buy on get one free for exactly this reason, and now I find I have a programmed distaste for buy one get one free deals.
By Joon on Jan 29, 2008
@Joon: Yeah, buy one get one free deals are often wasteful because you might have to eat more to compensate (or throw the spoiled portions).
By Presh Talwalkar on Jan 29, 2008
I love this stuff. The good news is that frequently you can buy one at the store and get the half price deal. Sometimes you have to ask. Life lesson: Don’t ever be afraid to ask for a deal - it costs you nothing.
From a gaming standpoint, the cashier has no skin in the game so they probably don’t care how much they sell a product to you for. They won’t sell lower because then they do have a vested interest - their job. They won’t sell higher because they might get caught and same interest - their job. This changes dramatically as the sales person begins to get comission on the sale. Which is why it pays the car salesman or real estate agent to be more sneaky about providing apparent extra value, or discount. Check out “Freakonomics” for the chapter on how real estate agent’s incentives change when they sell your home vs. their own. In one case their optimal strategy is the quick sale at slightly less and in the other it is wait longer and sell for more. Why does this work because when they sell your house they only get 2-3% of the delta in sales price vs. 100% of the delta when it is their own.
My food theory. Buy what you eat - eat what you buy. Does anyone know of a study showing on average how much food people throw away? This makes me relatively immune to savings ads, unless it is something I eat. It also, pays to know your stores. My wife and I buy different things at different stores - being relatively equi-distant and along work routes makes the transportation cost a wash. Prices can vary fairly dramatically. And know your seasons. For example, this weekend is time to stock up on soda at Safeway because of the two for one Superbowl deal.
By Clyde Smithson on Feb 1, 2008
@Clyde - Well yea, you don’t gain anything by buying a lot of stuff cheap but throwing it away…hence the extra-item at the B1G1F might not be so great, though I’d love to see that deal on something ridiculously large and perishable, like B1G1F “Tub of Tomatoes” or something.
By RohoMech on Feb 1, 2008
@Clyde Smithson: Nice points. Wasteful food is 100% loss. Not sure how much Americans waste, but some say we throw away about 1/2 of the food we grow:
http://www.npr.org/templates/story/story.php?storyId=6542578
I will try the 1/2 price trick next time. I am a little worried since those salespeople often do not care, being high schoolers with better things to do, and they just do what computers tell them to.
@RohoMech: Closest thing I saw was an ad for 5 Tombstone pizzas for $10–IF you buy 5 of them. Otherwise, its $3.33 each. Oh, the things we do to prepare for the Super Bowl.
By Presh Talwalkar on Feb 1, 2008