Have you been paying more than you could probably get away with? Do you know that not everyone pays the same price for the same service that you received? How can you find the best deal for what you buy?
Price targeting is a tool that sellers often use, but if you’re aware of how it works, you can often get a better deal. The first question people ask when hearing about it is usually, “what exactly is price targeting?”
What is price targeting?
Price targeting is a method to get consumers to pay as close to their maximum price, when they decide to buy, as possible. Retailers love this approach because they can sell the same (or a very similar) product or service at different price points to different customers, thereby increasing revenue and profits. In essence, they’re trying to capture the so-called consumer surplus.
Why do they do this? Buyers are generally looking for the lowest price, and most consumers aren’t willing to tell the stores the most they’re willing to pay for an item. They’re looking to get a deal from the retailer, but their definition of a “good deal” is often subjective.
Price targeting in our lives
Organizations that use this method effectively include universities, coffee shops, and airlines. What’s the difference in education between in-state students and out-of-state students? Nothing, they share the same teachers, labs, and resources. Yet out-of-state students can pay 3x the price for the same education.
If you’re a high school senior or parents of college bound kids, check your state’s schools to if there are any high quality options. You could save quite a bit of money without sacrificing a solid education.
When you’re grabbing some coffee at the coffee shop, ask yourself if there’s a big difference between menu items. My husband spends around $2 for his Venti brewed coffee compared to my tall frappuccino for about $3.50 before taxes. Being aware of small things that like can help you decide what you’re willing to pay for and what you can cut back on.
And the next time you’re on a flight, take a look around yourself and realize that just about everyone paid a different price to be on your flight. These price fluctuations, along with subtle pricing difference between similar flight schedules, are meant to maximize revenue.
Take advantage of price targeting
How can you arm yourself and get a great deal? The big key is information. When more information is readily available, you have the power to make some more financially advantageous decisions.
Find out what other consumers are paying. Admittedly, you’re not going to be able to find that for everything, but the web has made it possible for you to get a tremendous amount of information. If you check out discussion forums in areas that interest you, there are usually people who are willing to share details related to deals that they’ve snagged.
Depending on the item you’re looking at, eBay can also be a helpful resource, as you can see what buyers are paying for at the auctions.
If you’re traveling, Better Bidding is a great resource finding out about successful bids on Priceline or Hotwire. That information can make all the difference between getting a good deal and getting a great deal.
When trying to find the bottom of the market when bidding on Priceline, we start by going low (usually half the best advertised priced) and then slowly increase our bid until it’s accepted – note that you can only re-bid on the same deal once every 24 hours, so give yourself time.
You can also use this principle for insurance quotes for yourself and your family. Use online resources to see what the major companies are offering and research the details on the policies. You may find that you can cut your bill drastically with a little legwork from home.
For those hunting for an apartment, rentometer can let you know the average prices for apartments in your designated area. Since housing is usually a big chunk of expenses for most people, you can save some considerable money here.
Your thoughts on price targeting
When I first discovered it, I thought this was a fascinating topic, and I’m sure you guys have some great ideas on it. Since some people are willing to pay more than others for certain goods or services, businesses would be foolish not to try to sell at multiple price points.
At the same time, if you want to cut costs, you can use price targeting to your advantage to get goods and services for significantly less than others are paying.
How about you? Are you aware of the practice of price targeting? What are your favorite tricks for cutting through the confusion and getting a great deal?