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Cleaning up sale pricing

Published 4th March, 2016 by Neil Nixon

Cleaning up sale pricing

Justin Binks, director of Sebo UK, offers some words of warning.

'Buyer beware' and 'too good to be true' are phrases that come to mind when one considers how consumers are manipulated by certain vacuum cleaner manufacturers who regularly use the lure of 'sale' prices. Everyone likes a bargain, and there is no reason why manufacturers and retailers should not use a sale to sell goods that are genuinely reduced from their normal price. The problem comes when the bargains that consumers think they are getting are not actual bargains but the result of fabricated price structuring.

Strict government guidelines exist relating to sale pricing that attempt to protect consumers by ensuring price reductions are genuine. The most important point to note is that, broadly speaking, before prices can be reduced in a sale, an item must have previously been sold at the higher price for at least 28 consecutive days. In addition, the item must not be offered at the sale price for any longer than it was sold at the higher price.
While adhering to the basic principles that these guidelines set out, some vacuum cleaner manufacturers do not embrace the underlying spirit. They instead employ a policy of 'high-low pricing' where they purposefully set an item at a high price to give customers the impression that this is the correct price for a product and then, 28 days later, significantly drop the cost and present it as a deal that is too good to miss. These tactics are not confined to vacuum cleaner manufacturers but they are rife within our industry amongst certain brands. For those involved, there is a very real danger that, after a while, this contrived means of attracting sales will taint the brand because consumers become savvy to the yo-yo pricing and simply wait for the next sale reduction.

More worryingly, there are trust issues with retailers who become upset that they have bought at one price and are potentially having to sell at a price lower than they paid for the product. Retailers also have to deal with disgruntled consumers, unwittingly caught out by these fake bargains, who have bought at the higher price only to see exactly the same product being sold for significantly less than they paid.

As has been seen with Black Friday, the benefits for retailers of large price reductions are often short lived. The idea being established in consumers' minds - that, if they wait, there will always be another better and bigger bargain - creates unsustainable peaks and troughs in the market and undermines acceptable margin levels.

In the longer term, the manufacturers who consistently offer high quality products and attempt to sell at a fair price at all times are likely to be the real winners, along with the consumers who realise that a bargain is not necessarily what it appears, and quality, ease of use, and reliability are worth paying for.

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