But Is It a Bargain?

“Everyone expects a deal on the Web. But some sellers are willing to deceive consumers to make a sale.”

For nearly 30 years, School of Business Professor Larry Compeau, consumer advocate and retail expert, has been researching pricing strategy and consumer behavior.

“Increasingly, companies are inflating retail prices to exaggerate consumer savings,” Compeau says, “The perception of a great deal is an inducement to buy.”

The perception of a great deal is an inducement to buy.

That’s because people attach different kinds of value to a purchase, says Compeau. “There is the acquisition value and also the transaction value, which is derived from the deal itself. Exaggerating savings is a way of increasing transaction value.”

The issue is complicated by the fact that there is no objective method for determining a fair retail price. Historically, manufacturers set retail prices that were consistent with what the manufacturer believed products were worth.

But over time, and with the explosion of Internet shopping, that process has eroded.

“How a price is set is an issue that is now before the courts,” says Compeau, who has testified as an expert witness in a number of high-profile cases related to deceptive or illegal pricing.

“Retail prices have to be bona fide, and states have laws in place to try to ensure that,” he says. “For example, if a store sold at least 50% of its stock at a certain price before it was discounted, then that’s an indicator that it is a legitimate retail price. But if they sold 1% at that price, then the list price point is likely fictitious. Another indicator is how long a retailer has offered the item at a certain price before it is discounted.”

So can consumers get a deal?

“Sure. But most of the time they don’t. It’s simple logic: Items can’t be on sale all of the time.”

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