Sometimes, We Want Prices to Fool Us

The retail industry can be a very confusing place. When big stores like J.C. Penney try to alleviate the nuisances of sending out coupons and holding “sales” by offering low prices all the time, their sales for the year end up dropping by 25%. Actually when most retail stores try to help shoppers get a fair price all the time, it ends up being a big mistake as many of the bargain consumers don’t trust the fair prices. Alexander Chernev stated that a fair price will only work when consumers have some context for how much items generally cost, which they do not. Since they don’t have all the information they tend not to trust the fair price as they are looking for a great deal.

But what really defines a “great deal”? When you look at most of the sales happening, you can see that it only appears to be a great price. In reality the price is rather normal as the pre-sale price has been marked up. People are so attracted to words like deals, sales, and special because it makes them believe they are getting a high valued item for a lot cheaper.

In all honesty, I think this is really funny but at the same time eye-opening. Just because something says sale, doesn’t mean it is worth the money. Sadly the straight to the point, lower prices everyday has had a negative effect for J.C. Penney.

URL:http://www.nytimes.com/2013/04/14/business/for-penney-a-tough-lesson-in-shopper-psychology.html?_r=0

-Jonathan Chan

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