PRICE MATCHING BY BUYERS AND PRICE MISMATCHING BY SELLERS

The price match should have reduced the price by a dollar from $7 to $6. Instead, the cashier reduced the price to a dollar --- a reduction of $6. The customer noticed but didn’t say anything. This wasn’t for her personal benefit but to protect the cashier from getting in trouble for the mistake.

That’s noble, but would the customer in this real-life example have been concerned about the cashier if the price were higher than expected?

Justification

We’re great at justifying to get advantages. Have you heard or used arguments like these

• stores overprice
• you didn’t make a mistake
• you had to do extra work to get the price match
• the store doesn’t lose money overall because unaware customers are paying their higher price (the store didn’t lower their price even when you showed them they were charging more)
• the store should train their staff properly
• if the store had the lowest price, there would have been no need for a price match

What’s The Real Price?

You can only compare prices when different retailers sell the same product and publish their prices. They’ll often match prices when you provide proof. Sometimes they’ll reduce their prices temporarily to match a competitor (e.g., when we ended 10 years without a TV).

Mismatching: When You Can’t Compare

When you’re buying financial products, what’s the lowest price? The options might be tailored to you, which makes comparisons difficult. There’s rarely an easy way to check online. Prices might not be negotiable, even if you have proof. While you may not be able to much about the price, you can get better value by selecting a better advisor.

When you can’t compare make good comparisons, you risk getting poor options. For instance, Freakonomics found that real estate agents encouraged clients to buy/sell quickly, rather than wait for a better price … but left their own properties on the market for longer and sold for higher prices (see the video in tips for first-time homebuyers).

Sellers have ways of justifying their actions

• the higher margin choice isn’t necessarily “bad”
• selling takes work and maybe you took extra time
• showing more options might confuse you and stop you from buying (see the jam experiment)
• you’re better off buying what they have in stock
• you’re not forced to buy

Both buyers and sellers have ways to justify their actions. Buyer beware. Seller beware too.

Links

• How to get a better price: the Future Shop case study
• Money-saving tips for car shopping today
• 12 timeless tips for wise shopping
• Why do you care what your insurance advisor gets paid?
• Is the Paradox of Choice not so paradoxical after all? (Freakonomics blog, Dec 2009)
• image courtesy of Billy Frank Alexander

PS Imagine a world without price matching (or mismatching)