VeraSage

Jon Manning

Why?

Behavioural economics pricing experiment.

- Jon

Philip Arnfield

I suspect that many more tee shirts will be sold from the first rack because, relative to the other 2 racks, the tee shirts offer greater value to the customer.

Consumers love a bargain, by buying 2 tees from rack one they are saving $9. No such saving on the next 2 racks!

We are strange creatures.

Leigh Caldwell

I’ve noticed recently that a few places which charge “$N for two” will happily sell you a single one for $N/2.

If there’s no price for the single item then I think this would be the default policy.

I’d suggest that this is metered price discrimination - capturing people with a higher willingness-to-pay by selling them an extra product rather than charging a higher unit price.

The $30 vs $19.50 just seems like a regular promotion, no mystery there.

So the question is whether the presence of the three racks alongside each other changes the dynamics of any individual rack. You didn’t mention whether the products are significantly different but from the pictures I’ll assume not.

I think the $30-for-two and $15-for-one racks probably support each other, by providing a cheaper option for people who only want to spend $15, while attempting to anchor better-off people to a default purchase of two shirts. If I were setting this price I’d make sure that the $30-for-two shirts were slightly different to the $15 singles. They wouldn’t have to be objectively better than the singles, but if one range has stripes and the other has a texture (say) then people may project their own assumptions about quality onto the different products.

There are lots of behavioural experiments which show this kind of thing: if you sell people Mars bars and Snickers, and charge a higher price for Mars, they will like it more; while if you switch the pricing they’ll mysteriously prefer the Snickers. No objective quality difference but people take the cognitive shortcut of assuming higher price = higher value.

I don’t know how the presence of the $30/$19 rack would affect this. Its role may simply be to confuse the consumer, so that they are more likely to be affected by subconscious cues than to make a rational calculation - which is exactly what the store wants.

Or it may be a bit more specific - about making the consumer assume that the $30-for-two shirts are actually the same as the $19.50 shirts, and therefore they are getting a discount by buying the pair; while actually they are identical to the $15 single shirts.

I am not entirely convinced that retailers always know what they’re doing in this kind of situation. It may simply be random experimentation or even a supply-chain-driven decision. But I’d like to think they are making a calculated and cynical design choice.

Ed Kless

Leigh, I am with you. If it is, in fact, intentional, I think the answer is positioning the 2 for $30, 1 for 19.50 as the better deal. They seemed to have more of them and were probably trying to move them out.

Thanks to all for answering.

Brenda Richter, CPA

I shop at Ann Taylor & Ann Taylor Loft all the time.  They always have different “deals” going on.  Also, don’t forget to bring the coupons they send in the mail so you can get an additional % off your entire purchase.

As for the tee shirts - I don’t like to spend a lot of money on casual clothes.  If the tee shirt for $19.50 could be worn with business wear or business casual, then 19.50 for a long sleave tee shirt is a pretty good deal.  If the tee shirt is purely casual then it shouldn’t be more than $15.  Knock off $5 for short sleave tee shirts.  The next issue is color and fit.  So if it was really nice tee shirt and they only had one color I liked and it fit I would buy one tee shirt for $19.50.  However, if they were casual tee shirts I would only buy 2 tee shirts providing they had 2 decent colors and they fit.
In reality when I go to ATL the nice colors are XS or PXS.  The Ms & PLs are always ugly colors.