Plus Shipping Costs

For Christmas I gave various different family members a calendar of my photos (ever to my surprise this always goes down well). To create my 2013 calendar I used Vistaprint. They are very good - all I have to do is upload the photos onto their website, choose the exact format I want and the delivery address. However, their pricing strategy is annoying.

The headline figure to print one calendar is £7.

I wanted 7, which cost about £4 per calendar. So far, so good. They encouraged me to buy in bulk.

The bad news...

These prices did not include shipping costs. Or VAT. But by the time I had discovered this, I had already invested too much time and effort on the Vistaprint website to bother going elsewhere. So I paid up the additional £20. Yes, £20.

Conclusion: Vistaprint cleverly induced me to use their product with a low headline price, but I finished the transaction in a bitter state of mind; reducing the likelihood that I would use Vistaprint again. Keeping customers can be hard when you follow the surcharge strategy.

BOGOF

We all like a good deal. Getting something for less than it should be is great feeling. And some deals are just too good to turn down.

So it is with good reason that retailers obsess about making us perceive their goods as a good deal. A myriad of 'special offers' and 'bargains' are out there, each one trying desperately to lure us into a different shop. Each one trying to make us think that it is an offer simply too good to refuse. I dread to think how many times we will read Buy One Get One Free! over the course of our lifetimes.

Another example is Boots which recently ran

Every Third Item Free!

For once, the small print was interesting. 

All the items you are buying are ranked in price order, high to low. Then every third item is free. So if you were buying three things, the cheapest would be free. If you were buying six things, the third most expensive and the cheapest item would be free. So it is a better deal than getting the two cheapest items free from six. 

But I'm not sure many people would bother to read the small print on an offer for toiletries. On more expensive products, such as electronic goods, I would expect consumers to spend time understanding small print. But not when it comes to low cost items such as shampoo and razor blades. 

In conclusion, Every Third Item Free! is a good eye catching offer, but it is also complicated. Simplicity was sacrificed.

Why Three Options?

I'm going to start with a confession: Over the course of my time as a student I have spent a lot of time in coffee shops. Starbucks. Costa. Nero. You name it, I've been there. One of the things which intrigues me about said coffee shops is that they tend to offer three different sizes of hot beverage. Small, Medium, Large. Tall, Grande, Venti. Primo, Medio, Massimo.

Why three?

 

Could it be that there are precisely three different types of people who buy coffee, each preferring their own exact drink size? 

Given that the actual sizes of mugs differ between the franchises, I think not.

Could it be that the manufacturers of mugs only do precisely three sizes?

Unlikely.

Or, could it be that coffee shops know some behavioural economics?

When offered three options we are likely to prefer the middle one. This is because we are risk-averse and regret-averse; we want to avoid being on an extreme. If offered two sizes of drink, we'll choose whichever one we like. If offered ten, we'll be overwhelmed by the choice. If offered three, we're likely to choose Medium; Grande; Medio.

Of course the thirsty will still go for the Large, and the thrifty for the Small. But by offering three options Starbucks, Costa and Nero maximise their revenue. They cater for all and simultaneously nudge people who would have bought Small into purchasing more coffee. 

So there you go: not all my time in coffee shops was wasted...

Corporate Charity

Last night on the walk back from the local I passed the premises of a local letting agency. Whilst gawping at the cost of renting a house in Nottingham I noticed something odd. The shop window had a large picture of a football team captioned with

Castle Estates are the proud sponsors of Pegasus YFC

Why did they sacrifice prominent advertising space for this?

We can but assume that Castle Estates reckon they'll earn greater profit by advertising their community work, rather than another property.

This would fit with a larger trend for businesses to conduct prominent 'good works'. Sainsbury's and Tesco both proudly sponsor charities. 'Corporate responsibility' is the name of the game. You do not have to be overly cynical to think that they are doing this to attract custom from approving consumers.

But why?

Why does it attract consumers to know that firms are giving some (probably minimal) amount of their profits to good works? As all profit comes from the pocket of the consumer anyway, surely this charity just means higher prices? Would it not be more efficient to shop somewhere uncharitable, thus paying less, and then give your savings to the charity of your choice?

If behavioural economics has shown one thing it is that people don't just care about simple monetary gain. We are complex beings with complex motives. We like to feel good and charitable as we buy our groceries, so Tesco sells us that feeling by giving to charity. Meanwhile Castle Estates proudly supports our community.