Retail Strategy Secret #16: Multiple Pricing

Multiple-Pricing

Welcome to the sixteenth post in our series of “Retail Strategy Secrets”!  Here you will learn the angles, approaches, and tactics retailers are using every day to try and separate you from your hard-earned cash.  Understanding these unlocks the door to spotting great deals, and you never want to pass up a Dealicacy…

Multiple Pricing

This method involves selling multiple like (or similarly themed) products for one overall price. Multiple pricing can be enabled through coupons, rebates, seasonal prices, and many other types of promotional markdowns – but you need not look any further than… your local grocery store for numerous examples.

5 for $10 Lean Cuisine frozen dinners, 12 for $1 Ramen Noodles, 8 for $4 Yoplait Yogurt, and the list goes on forever.  From a different angle, multiple pricing is used as the discount offer as well: 40 cents off 2 Procter and Gamble products, $5 off when you buy 10 boxes of General Mills cereal, etc.

Discount pricing and price reductions have become a natural part of retailing, and multiple pricing takes the game even further.  Not only is this strategy heavily utilized for markdowns and sales events, it is used alongside and *in addition to* other promotions.

Let’s look at a typical 8 oz. package of white button mushrooms, regular price $2.19 . See if you can spot what’s going on:

  1. 33% off sliced 8 oz. white button mushrooms
  2. 3 for $4.49 on 8 oz whole white button mushrooms

Assuming that mushrooms are on your grocery list, Which would you put in the cart?  The chances are pretty high that any given customer will opt for the whole mushrooms promotion (#2).   

This is despite the fact that option #2 costs 6 cents more than #1 on a per pound basis.  Even when shoppers suspect they might not get to the third package of mushrooms before they go bad. Not to mention that they completely overlooked the bulk white button mushrooms (not pre-packaged) right beneath eye level selling for $2.49 a pound: nearly 44 cents per pound less than option #1 !

Why does this happen?  Retailers know that consumers tend to purchase in larger amounts when multiple pricing is used as a strategy due to a combination of factors. The power of suggestion, perception of value, a bit of confusion, and even laziness on the part of the customer are all at play here.

From the suggestion standpoint, the retailer is keying on the value theme of “a lot for a little.”  Handwritten signs play to perception of value, implying that extra care was taken to set the price.  In the example above, we covered confusion (which was really the best price?) and the “laziness” factor (eye level products get the most attention).

And consider this, even knowing this is all at play, retailers can still bet on consumers forking over more money than necessary.  All you have to do is allow for a couple of kids and some modesty.  Who wants to block the dairy aisle by whipping out the calculator, pencil, and paper while running the numbers on:

1 gallon of generic milk
     vs.
sale price + “buy multiple for x cents off” coupon on 1/2 gallons

…with the kids screaming and throwing anything that is brightly colored and within reach into the cart?

So how do we beat this and snag our Dealicacy?  The key is in recognizing that more times than not, you don’t have to buy the full quantity suggested on the sign – handwritten or not. This way, you don’t waste money by buying more than you can actually use. Plus – in the event you have to make a snap decision and choose wrong – the extra pennies you end up spending over the best deal aren’t multiplied out over additional items.

And there’s much more to winning against Multiple Pricing. Some retailers go out of their way to make comparison shopping difficult using this very strategy. Ever shopped for toilet paper at a warehouse club? Let’s just say that Sam’s Club really “rolls” out the “sheet”.

Sign up for our free newsletter to find out more… you’ll be happy you did. 🙂

Next we cover “Pricing Below Competition” – see you then!

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3 Responses to “Retail Strategy Secret #16: Multiple Pricing”

  1. Issac Maez says:

    Interesting Article. Hoping that you will continue posting articles having useful information. Thanks a lot!

  2. Bay Bucklins says:

    Love the blog here. Nice colors. I am definitely staying tuned to this one. Hope to see more.

  3. Kymberly Bachicha says:

    Seems like whenever I get out they lead me like a horse to water. I tire of commenting sometimes but think I have to say woot to this overall. Been a real kind of deal. Peace out.