There is a local car dealership who advertises that if they can’t beat the best price you get on a car, they will give you the car for free. The engineer and business person in me realizes how ridiculous this claim is.

Think of it this way. Suppose the cost of the car to any dealer is $12,000. You go to the dealer from the advertisement and their price $20,000. You go to another dealer and they will sell you the car for $19,500. What is the first dealer going to say? “Oh geez, I can’t drop my price $500. Here are the keys. You don’t owe me anything.” Really?

Instead of making $8000 profit, the dealer is making $7500 profit if he decides to match the price offered by the other dealer. Put another way, would the dealer like to make $7500 profit or lose $12,000 and just give you the car for free? Don’t take too long to answer that question.

There is a subliminal message here. The dealer is trying to reach the casual buyer who accepts their ad at face value. In other words, the dealer wants buyers who think, “Well, he must have the lowest price so that he doesn’t have to give cars away for free. Instead of shopping around for price, I should save time and just buy from him.” For the few people who do shop around, yes, the dealer with the ad will beat the best price the buyer finds. The dealer with the ad can raise their price a little bit to make more money from buyers who don’t price compare. And for buyers who do price compare, the dealer will beat the other offer and in these few cases, take a little less profit. At the end of the day, the dealer with the ad is still making money.

What are other tricks of the trade that businesses play that you should watch out for? You can see some of these even in stamp dealers. Here are a few suggestions I have.

First is the 99¢ deal. For example, take 100 people and see how many people will buy the same item for $1.99, but they won’t buy it if the price is $2.00. People read left to right. Therefore, the price is “One dollar and something ...” The price difference is a penny. But studies have shown that there is a non-trivial amount of people who will not buy the item at the $2.00 price because the price is now “Two dollars and something …” where the “something” is zero. By using 99¢ pricing, businesses increase sales. Customers think they are saving money when it’s really just pennies.

Second are prices that never include any cents. Usually these are prices that are several dollars or more in value. The stamp is “$20” and every price is the same way. The message the seller is trying to make is, “We don’t quibble over pennies. You’re buying valuable items and we don’t fool around making change.” The buyer thinks they are very sophisticated and they are dealing with an elite business.

A closely related third strategy is to show prices without dollar signs. The price of an item is “20” or “40”. That’s it! It’s still about psychology. Read this to yourself, “20” versus “$20”. You should have said “Twenty” and “Twenty dollars”. The impact of the word “dollars” makes it sound much larger than just the number itself. Again, some of it is a sign of prestige that we don’t quibble over small change. And by removing the dollar sign, it’s less sticker shock to the buyer.

Fourth is bulk pricing. The advertisement is something like this: “Two for $10.” What the advertiser doesn’t tell you is that they will also sell one for $5. The buyer thinks they need to buy two to get the special price. The buyer in purchasing more product and the seller is happy to generate extra sales.

Fifth is the “free factor.” The advertisement is something like this: “Buy one get one free.” Again, in some cases, the buyer can just buy one and the price is half of the regular price. But there is something else at work here. Buyers love the word “free” It makes them think they are getting something for nothing. In this case, the seller is hoping that by giving away something for free, the buyer will think, “Well, I wasn’t going to buy that. But since I’m getting one free, I’d better buy it and save money.” The seller just convinced the buyer to purchase something they normally would not have purchased. This drives additional sales.

Sixth and last is what I term “vague” advertising. The advertisement is something like this: “Save up to 65% off selected items.” Read closely. The advertisement does not say that every item is 65% off. If I put a display of stamps on the table and made that same claim, as long as one of those stamps was 65% off, I’m not lying. Other stamps could be full price, 25% off, or anything. Buyers see the “65% off” and think everything is at that reduced price. If they are saving 65%, sure, they’ll buy! The dealer is selling a lot more material because the buyers are buying more to save money, or so they think. The reality is that only a few items may be discounted that high. Many other items could be at regular price. In most cases though, other items are discounted, just not as much.

There you have it: my quick synopsis of some of the tricks that businesses use to get you to buy more. I didn’t go into a lot of detail and there are variations on these themes. Whether it’s stamps, furniture, automobiles, or whatever – it’s best if you step back a minute and really evaluate what is going on. Taking time to analyze advertising or really understand what a business is trying to accomplish with certain tactics could save you some money. I hope you found these tips useful.