Would you pay full price

[bremersm]

A thread on Orient Watches got me thinking. Some of the brands I see on Threads and Dappered are very popular because the discounts they offer. I am speaking mainly of Orient and Bonobos. We have been condition to pay 50% off or more for their items.


Now that they are not offering these steep discounts will you still shop there?

[alan]

That's an easy question for me since I don't pay full price for anything.


(I guess I do occassionally pay full price for food.)

[jason_carreira]

No, not for anything I can think of... But Bonobos and Orient will still have discounts, just not as big as they used to.

[trash]

I can't remember the last time I paid full price for anything.

[greg_s]

Almost never. The only things I really ever pay full price for are the rare purchases for something that never goes on sale (Duluth Pack bag or the like).

[LesserBlackDog]

I pretty much avoid paying full price. With watches, list price is virtually always completely inflated, anyway. Chinese-made Invicta watches that are readily available at $60 are listed at over $500 - but for less than $500, you can get a brand new, Swiss-made Hamilton that's listed at $800. Even the "high value" brands like Seiko and Citizen are guilty of the same MSRP inflation. The Black and Orange Monsters are listed at around $500 but usually go for ~$200. Many of the Seiko 5 models are listed around $185 but actually sell for $50-80.


The retired 50% Orient discount was only impressive when you don't take into consideration the fact that many watches are available for less than half their list price, anyway. The main difference with Orient is that there are only a handful of Orient retailers in America, so there's not a lot of competition to drive the price down.


Like greg_s, the only products I'll pay full-price for are items that rarely go on sale, usually because they are US-made or something similar. Some things are worth forking over the extra cash. But some things really aren't.

[jason_carreira]

To Ben's point, I did pay full price for my Oak Street shoes... They don't do sales and there's none available used.

[drew2]

I've come to the realization that Banana Republic & Gap's constant coupon-spam is indicative of the "real" prices of their clothing. They'd do us all a favor if they just discounted everything at 40% off and had real sales once in a while.


I think it takes some conditioning to ignore the retail price tag and not get drawn into the whole, "Man that's a good deal," or "I feel like I scored big," type of thinking.


Case in point, I found a John W. Nordstrom cashmere scarf at The Rack for $20, which, quite honestly, is the max I'd ever pay for a scarf at this point in my wardrobe rebuilding process. Being the end of winter, it was a rather "impulsive" buy since I don't really need another scarf, but when it came in the mail and it had the original $95 price tag on it, I didn't want to return it like I intended to--impulsive purchases are killers on the wallet--because I felt like it was a good deal whether or not I needed it.


I shouldn't be buying things for the sake of buying things--that's easy to get into the habit when I see deals posted on Dappered every weekday

[jessy_diamond]

@Drew, about BR & Gap, isn't that what JCPenny is trying to push right now?

[Cannon]

There aren't many things that stay full price long enough for me to pay it. I would feel a bit dumb and wasteful if I bought something from Gap at full price.


I usually cave with J. Crew because they don't have many full-site sales, especially on the things they know they can sell. Most other places get me in on a sale.

[nicholascrawford]

I spent a lot of time studying pricing strategy for my master's degree, and it's a bit of a personal interest for me too.


What we see in retail, generally, is a Price Skimming strategy. Picture, if you will, a glass of raw milk that has settled into layers with cream at the top. The top layer of cream is the opening MSRP price that's sky high. A product debuts at this point with fanfare and Esquire write-ups. It's ridiculously higher than the actual manufacturing cost, but the point is to create a sense that this is an expensive, desirable, high-quality product. The first to purchase are in a small group that will bite not because of price but because of a hunger for anything new. Actually, they might pride themselves on how much they spent. These are not the folks that stood in line for 24 hours to get the latest iPad - these are the folks that paid $3000 for a new iPad on eBay, had it overnighted to them, and don't even open it because it's not about the iPad...it's status.


Next, there's a sale or discount. Nothing is sold out yet because hardly anything sold at the MSRP. Picture another scoop out of the glass of milk. These folks saw the influencers with the status have this item, and now they want it too.


Another, steeper sale comes through that slurps up more milk as the masses start to bite at a lower price. It's not so much status now, it's about getting value. Sure, it dilutes the luxury image a bit, but we're in the business of selling.


Later, it moves to the clearance rack. Still twice the manufacturing cost, but that's normal for retail. Sizes are decimated, it's getting out of season...it's getting to the impulse buy stage.


So why, you might ask, would a company go through the trouble of doing this? Why not have straight-forward JCP pricing?


There's money left on the table that could be in the company's pocket if they hadn't sold to each customer segment at the highest amount they were willing to pay. Sure, some wealthy folks might not find it until it's already on sale, but even if a handful bought it at the peak, it's pure profit for the company. Plus, it's an ego thing on both ends of the spectrum. The cream buyer feels they got in before everyone else. The bargain shopper feels they got a deal on a luxury item.

[nicholascrawford]

So what about Orient and Bonobos? They went a different route. They chose the Penetration Pricing model. I'm not making up the name.


This is the Groupon model. Actually, not unlike Wal-Mart in the early days when they would break into small-town USA, lose money the first several years with their exceedingly low prices until the competition could stand it no longer, then soak up all the business as the only player left in town. Groupon is no Wal-Mart. But they're telling small businesses that they can get tons of exposure and break into the market by offering great deals.


Orient's 50% off coupon? Same thing. Bonobos with Groupons and 50% off codes? Penetration Pricing. It bridges the Price Skimming model by saying, "hey look at the sticker price - you're getting a deal!" Except the lowest prices are offered right at the beginning. This is bound to fail. Airlines tried offering low fares to last minute bookings, and it only backfired when someone sitting on the plane discovered that they had paid 6 months ago only to have the seats surrounding them sold for 70% off.


I digress. Penetration Pricing is great for bargain shoppers, but it's a rough way to build loyalty because your reputation is on price (and marginally: service, quality, etc) but price first. Once that price leadership is gone, you better hope you still have loyal customers. Eek.

[nicholascrawford]

Price Skimming is here to stay, for the foreseeable future. We'll also continue to see companies forever try to differentiate their product to establish value and justify their higher prices. In an age of instant, we can research prices across the web very easily.


The psychology of it is extremely powerful. As much as I know what marketers are doing, I still tend to get sucked into going for whatever has the greatest percentage marked off.


For lack of a better understanding of quality, we have to use price as a guide for comparing the quality of different products and brands. There's a reason GAP has 3 brands. There's a reason Proctor & Gamble has 164 different brands (Hugo Boss? really?): they want to stuff every shelf in the store so that every option is one of their options.


I love it, and I hate it. =)

[drew2]

@Jessy: Yes, except one problem: Gap and BR generally have a more popular following. So I'm more apt to buy something from either of those stores than JC Penny. If I want to shop at JCP, I'll go to Macy's


@nicholascrawford: Thanks for sharing that insight. Maybe being more aware of marketing techniques, their psychological effect and my usual response will help curb impulse buying.

Maybe.

Maybe...

Wait, if you know more about it than I do and you're still sucked into it just like I am, I'll throw in the towel, haha.


By the way, is there a name to the technique of selling things one or more cents less, e.g. $99.99, $99.97, $99.95 versus $100, and the effects on purchasing?


Edit:


I found the answer to the question above: http://en.wikipedia.org/wiki/Psychological_pricing

[greg_s]

Insert "penetration pricing" joke