10 Ways They Put The Price Up Without Putting The Price Up

Revealed! Here's a list of ten cheeky tricks the shops are into, all in the name of the reddies. Your reddies. But first, a few basic rules of retail shopping by way of introduction;

The Secrets of the Head-Turners

A friend recently asked me "Why don't they make a ninety nine pence coin ?" She was, of course, missing the point. So I decided on an article to enlighten the non-marketers on the darker side of pricing strategies. You'll encounter most if not all of the following tricks that shops play on you many times every day, but you tend not to see it. That's how it works.

"Th' Arndale centre weren't built in a day" as they say in Manchester

Save means spend
A golden rule is that save actually means spend. I am a shop selling mobile phones and I want you to come on in and buy one from me. My phones are for sale to you for £50. You'd love a new phone. It would bring pleasure to you. But handing over £50 would bring pain to you. And my deal is that you only get the pleasure for the pain. Right ?

Well, not necessarily. If I turn your head away from the gap in your pocket where the fifty pound note was, and get you to concentrate on the remaining bits of small change you have left in your purse, then you'll walk out of my shop thinking about the new phone you have and the money you still have (rather than the money you just lost).

It works a treat. I bump in to friends and family all the time, laden down with retail goodies and keen to tell me, not of the damage affected on their bank accounts, but how much money they didn't spend. 

"I just bought this new iPod and saved £30!" would be a typical boast. The truth, which would sound more like "I just bought this new iPod and spent £200" somehow takes a back seat.

It's classic denial and we've all fallen for it. When humans are this dumb, marketing and it's sister competence, sales, becomes easy peasy. Don't worry I'm including myself in the insult. We are clever and dumb all at the same time. Good and flawed. That's the human condition. 

Such head-turning coupled with a lack of awareness of what just happened on the part of the customer has been the saviour of many shops for many years.

Psychology Pricing
The reason they don't make a ninety nine pence piece is that it would defeat the dual function of that price which is to disguise the fact that the product is really more expensive than it looks, and to enable the seller to put some change in your hand during the sales transaction. This is known in the marketing trade as "psychology pricing." They can advertise their prices with phrases such as "Less Than..." and "Under..." and like it or not, it works. 

Or to put it another way, the day they invent a ninety nine pence piece, watch everything in Britain go to £x.98. Overnight.

But this is obvious and its the kind of thing customers just put up with. Annoying but not catastrophic. Like bad street graffiti or ring tones. Likewise for Buy One Get One Free offers. Or is it?

How Shops Increase The Price Without Increasing The Price

1 Alter The Discount Structure

My local Tesco is a Tesco Extra - which means it's like a slightly large newsagents. It's more of a convenience store than a place to do the big shop. It caters for the lunchtime sandwich trade for local offices and performs the function of your old fashioned corner shop for local residents such as I. You use it to top up on staples, mainly.

I like fresh orange juice, and in my local Tesco Extra, all last year it was 99p per litre or you could get three for £2.50, thereby bringing the price per litre down to just over 83p. I'd go for the bundle - a step up on the classic BOGOF (more like BTGOF) - though it did mean heavier bags than normal for a visit to the corner shop.

Then, a good year into my habit, the deal changed. You had to look closely to notice the small print on the shelving text. All the imagery and fonts were the same, but it was now the same  99p per litre or four for £3-00. The classic BOGOF structure is still there but the minimum volume to activate it has risen. Four litres of juice is OK for the car boot but at your local corner shop, on foot, it's just a citrus squeeze too far. So I did what any logical orange juice lover with only two hands would do - I bought just the one for 99p and vowed to bulk buy at the big supermarket a the weekend with the car at my disposal. 

Yes, like a puppet on Terry Leahy's string, I put my own prices up from 83p per litre to 99p per litre. Beautiful. Strategy number one in the marketers list of "How to put the price up without putting the price up" is called "Altering the discount structure." And here are some more.

2 Stock Less of the Budget Line

Ever had to upgrade to posh bread, sausages or cheese slices because the economy range is out of stock ? It's not accidental. It allows the shop to increase your spend without giving you the impression it has meant to. You leave the building cursing your own bad sense of timing. They up the prices, you blame yourself. You know, us marketers didn't go to college for nothing.

3 Penetration 

I didn't even used to glance at Bachelors Mushy Peas until they were three tins for £1-00. Now I'm hooked and they're back at 48p per tin. Help!

Going in at low prices to gain market share and then upping the prices once need is established. We call it "penetration" pricing.

4 Skimming

There are always people willing to pay over the odds. The wealthy, the enthusiastic, the collectors - they are known in the trade as "early adopters". What's the point in JK Rowling pricing her new book at, say £7.99, just because she knows most people will pay that. Isn't she missing out on all those early adopters willing to pay twice the price ? What to do ?

Skimming is where you put your product on sale at a unrealistically high price for a week or two first, just to take the money of the over-zealous hardcore fans. Then drop the price to scoop up everyone else. Books in hardback at £20 when a fortnight later the very same book is a paperback for £7.99. New music releases. Likewise DVD movies, iPhones, and most gadgets and electronic goods play the "skimming" game. They are skimming off the cream, quite literally.

5  Seasonal / Event association
When VAT went back up to it's full rate last month, I noticed a requisite jump in the price of goods, right across the board, not just on VAT chargeable goods! When I asked staff at various places the reason for the hike, sure enough they trotted out the mantra - it was Gordon Brown not I ! But when I pointed out that the prices hadn't dipped when VAT dipped a year earlier, for example, on zero rated goods such as take away coffee and cakes, they smiled coyly. Better still, at a Cafe Nero in Manchester, the staff told me that the price had in fact dipped when VAT fell. All be it for just a number of weeks - just enough time for you to register the event before it creeps back up to it's normal level. Talk about sly.

Another great example of this is FairTrade coffee. The price goes up about £1-00 and the wording on the packet implies strongly that the price rise correlates to the new funds reaching the growers. Actually, it's usually the case that the grower gets a few pence extra and the shop is rubbing it's hands again.

6 Captive Product Pricing
Ever wondered why dishwasher tablets are priced at an ungodly premium, or snazzy razor blades, for that matter ? It's because having made the big investment with the Wilkinson Sword razor handle or Electrolux dishwasher, you've got to get the add-on or you can't use it. Doh! In layman's terms, they've got you by the balls. Marketers euphemism is "Captive Product Pricing". I call it Butlin's Holiday camp food provisions pricing. For obvious reasons.

7 Optional Extras

From BMW's being "famously under-equipped" to airlines charging you for ear phones to enjoy the  in-flight movies, these "optional" extras are more like mandatory extras. It's just a way of sending the price north. Come on, you knew it all along.

8 New Penalty Clauses Written into the Contract

Esporta, my local gym, of which I am a member, has just put some new notices up on the boards  where class schedules and details of the book and cinema clubs reside. Subtlety is the key again (as in 1, above) so it's blink-and-you-miss-it time. Replacing a lost swipe card goes from free to £10 and having a direct debit payment fail goes from free to a whopping £20 ! They'll tell you anything to cover themselves and shift the blame, should you choose to take them to task on such strategies. Don't bother. Take it from a marketer. They are putting up the price without putting up the price, so to speak.

9 Charging For Installation and/or Delivering

In 2008 I moved house and all incidental costs that go with such an activity almost wiped my bank account clean. I needed a BT router for broadband. BT insisted on a massive £125 installation fee, even though "installation" was "remote" and involves someone flicking a switch in Trafford telephone exchange or right-clicking a mouse. 

Before I even tried to negotiate the fee down I was offered the option of dividing the sum by six and adding it to my monthly bill. All that happened is that my monthly fee, billed on TV as a mere £14.99, boosted up to £36. It doesn't say that on the adverts, matey!

Likewise, when I order my food shop from Asda.com, I get the chance to feel environmentally friendly by booking a van already delivering to my block. But it still costs a fiver to order it. 

10 Changing the Physical Characteristics of The Product
Between 2003 and 2006 I was a member of LA Fitness gym in Brighton, England. I was partly sold on the idea that you get a towel on attendance. I didn't have a washing machine at the time so laundry was at a premium. The towels were occasionally acceptable but often disintegrated in my hands, didn't dry me at all - just displaced the water around my body in the direction I rubbed the towel onto my skin - and left half of the fabric as residue when I took it away from me.

Complaints were frequent but futile. By lowering the quality whilst keeping prices the same, they were effectively putting the price up. Without putting the price up.

The same thing in reverse can be seen at Starbucks. Don't you ever wonder why you are paying more for a Venti than a Tall coffee ? Hot water's just about free, after all. They are charging considerably more for a product that is effectively equal in value - just by changing the shape, size and name of it.

Pocket The Difference

In most of the above examples, the customer leaves the shop having spent more money either overall, or per item for the same goods, or both. And in most cases the seller can defend itself by pointing to the fact that the standard price per unit has remained the same. If prices go up in standard honest fashion, you may vote with your feet. Much better to charge more whilst ostensibly not doing so. That's a win-win for the shop and a win-lose for you. You're blissfully unaware so you're happy. But you're also lighter in the wallet.

It's like the bookmakers. No matter what new rules and deals they come up with, there's only one party ever going to pocket the difference. And it ain't you.

Turns out, when Napolean dismissed Britain as a "nation of shopkeepers", he may have been delivering a far bigger insult than you'd previously considered!