Sale Prices are the Regular Prices?

Recently, in my MKTG 211 class (with Professor Barbara Mellers), we discussed the actual definition of a “sale” and how corporations have trained consumers using anchoring techniques into believing they are earning great savings when they purchase a product for its discounted/sale price.

Our conclusion? Sale prices are intentionally misleading.

The majority of companies actually sell products at the “sale” or “discounted” price for the bulk of a selling season. The “original” or “regular” price is simply a reference price for companies to print on the tags of products so that they can deceive consumers into believing products on sale are great deals. This strategy is referred to as a high-low pricing scheme, and occurs when firms set prices at an initially high level for a brief period of time and then discount the product for the majority of the selling period. Consumers have been trained to believe that the greater the difference between the reference price and the sale price, the greater the savings. However, if companies barely sell products at the reference price (both in terms of unit volume or monetary value) then can this price really be considered the original/regular price? Companies even mark-up original prices before holding sales so their margins are increased, despite leading consumers to believe that they have actually slashed prices. The modern promotional and bargain-driven culture further trains consumers to expect products to be on sale regularly, and to use the difference between reference and discount prices as the sole metric for finding a good deal.

Developing a solution to combat companies’ opaque pricing schemes is complex. With regards to developing a standard reference price across industries, perhaps companies should use the MSRP (manufacturer’s suggested retail price). Using the MSRP would prevent stores from abusing price markups in order to implement deceptive high-low pricing schemes. However, using the MSRP could lead to lower sales and therefore encourage manufacturers to potentially artificially inflate their own MSRP in order to preserve high-low pricing schemes.

Another proposed solution is to list a product’s complete pricing history on the tag. By listing the complete pricing history, companies cannot be accused of withholding important product information from consumers. In addition, consumers would be able to clearly see through high-low pricing schemes. However, a complete pricing history could be an overwhelming amount of information for consumers, especially on a small price tag. In addition, many large retailers and discount stores (where high-low pricing schemes are prevalent) do not even use price “tags” on their products but rather price labels on the shelves where the product is stored. A potential alternative to having complete pricing history available on the product itself is having price scanners throughout a store where an interested consumer can scan the item in order to learn its entire pricing history. However, this system could be expensive for companies to implement.

For now, until a solution is developed and relevant legislation is passed in order to protect consumers from the aforementioned deceptive pricing strategies, consumers can protect themselves simply by being aware that sales are not necessarily real sales.