In the 1980s, A&W was being clobbered in sales by the McDonalds ¼ pounder Big Mac. So they launched a one-third pound burger, and at a lower price. It didn’t work at all…because most customers thought a quarter pound was bigger, and thus a better deal, than a third of a pound. Perception versus reality and great marketing made customers think the Big Mc was a better deal and bigger.
In that same way, we lose our minds when there’s a sale: It seems logical to want to get a deal, lots of times, a deal isn’t a deal. But we see that big sale sign, our brain shuts down and our wallet opens up.
I was in a mall last week walking past a national retailer on my way to Tim’s. They had massive posters in the window promoting: Buy one and get the second at 50% off. OK, one a full sticker price, the other half price. That translates to a 25% discount. I’m not even going to question whether someone really needed two of whatever…
As I walked past the store, one of the staff was coming out, and it turned out that she was also heading for Tim’s and ended up right in front of me in the lineup. So I asked her if the 50% of the second item was going well? “Oh for sure” was her answer. “It’s better than when we have our 40% off everything sale.” WHAT? 40% off doesn’t do as well as 25% off? Yup – we’re suckers for the sign that says 50% off without ever looking at the fine print.
One more example. But this one is probably one of the most misleading and false ads I’ve ever seen. It ran on one of the CFL football games a few weeks ago: It’s an ad from Home Hardware. A realtor appraises a house for a family at $375,000. They then paint the entire house with some kind of Home Hardware paint and have a different realtor in to re-appraise the place. That guy says your place is worth $485,000.
Hands up if anyone on the planet really believes $300 of paint will increase the sale price of your home by $110,000. No – didn’t think so. I haven’t seen it since, so let’s hope it’s been pulled by complaints to the regulators.
George Boelcke – Money Tools & Rules book – yourmoneybook.com