BOGOF takes a holiday

santaSanta is soon due to end his 364-day holiday and pay an annual visit to his workplace.  I could tell that today by all the Christmas posters and stuff littering the shop windows in Durham.  Halloween is upon us, so “trick-or-treat” will soon give way to “penny for the guy”, closely followed by carol singers.  Then, sure enough, it is mid-December and the Easter eggs are back in the shops!

Remember, though, Christmas is a time of giving…especially to retailers!  We will all spend a disproportionate amount of money relative to our monthly income as the “festive” season approaches and the retail industry knows that.  As a consequence, the behavioural economists will be out to get our hard-earned cash with their psychological tricks.  Buyer beware – indeed!

This piece published by Chicago Booth is quite timely in this respect.  It highlights the ways in which retailers exploit our heuristics and biases to increase sales, especially in the run up to the big day.  We typically discount the future, for instance, so this time of year sees a growth of enticing offers on larger items to “buy now, pay later”, the logic being that it seems less expensive if we don’t part with our cash until April 2015.  Similarly, we can also expect to see all of the cosmetics counters in department stores offering free gift sets when we buy a standard purchase, even though this desirable free item is simply a cheap bag full of samples (still, we can wrap it for someone we don’t like that much, can’t we?).

The “special offer” that almost completely vanishes soon until the new year is the “buy one, get one free” (BOGOF) deal.  I find these fascinating as they are a relatively recent invention in the scheme of things.  When I was younger, the same offer was simply called “half price”!  BOGOF off is a much clever development though because, although economically the same, it means we have to buy double the quantity in order to get the item at half-price.  Smart!

BOGOFs are hard to find from early November, however, except in the supermarkets.  They typically go on holiday until January.  Why?  Because retailers want us to work just that little bit harder to find the best deals, thereby increasing their profits during a crucial sales period.  This is the reason we see items in Boots with the little green Christmas trees on them – we buy three items with the trees, the cheapest item is free.  More a case of “buy two, get one free” (BTGOF).  Oh now that is clever…..!

Comments are closed.