Supermarkets know you look at products on the shelf from right to left. Picture: File Source: news.com.au
WHY has Kmart ditched the "$4.99" price tag in favour of "$5"?
Why do the supermarkets focus their price wars on things like milk and bread?
And if a product's price tag is more expensive at the check-out than it is on the shelf, how can you get it for free? (Scroll down to our tips to find out).
Retailers have a number of ways they push you to buy certain products. News.com.au spoke to Kate Browne from consumer group Choice, and customer behaviour expert Gary Mortimer to find out retailers' tactics.
The "just noticeable" difference
Retailers often change prices just below the noticeable difference – for example changing the price of an item from $2.92 to $2.97. The first two digits are the same so a 5 cent increase won't attract attention, but 5 cents multiplied by the sales of that item in every store over a year could lead to thousands of extra dollars in profit.
But supermarkets are wary not to do this with items like milk, bread, Coke, popular cereals or eggs.
"Small incremental price increases on other products go unnoticed because these products are not on the shopper's radar," said Dr Mortimer, from the Queensland University of Technology.
Dr Mortimer said Coles refined its understanding of its customers' most important products when it relaunched its FlyBuys scheme and asked customers to pick their five favourite products for a discount.
"They were able to work out very quickly what are the top lines people buy," he said.
"They took that info and now you see, for example, sausages and mince are the big ones in meat so they do a big display of them and make them the same price, sausages $5 a tray.
"That will purvey to the shopper Coles is a good value supermarket."
But Coles spokesman Jim Cooper denied the offer was designed to gather information on customer purchasing habits.
"[The FlyBuys introductory offer] wasn't an offer designed along the lines claimed by these retail experts, it was an offer designed to give customers a discount on the products they buy," he said.
"We've already got a pretty good idea of the products people buy from the items scanned at our checkouts."
The middle-priced product is the one they want you to buy
Australian and US research shows that the first price we see becomes the "anchor" price and acts as a reference point for all the prices we see after it.
Because most Australian consumers read from left to right, the lowest price on a supermarket shelf is often shown on the left. This price acts as the anchor point that directs us to the mid-point, which we assume is the best value.
Ms Browne said: "Psychologically you're always going to want a midpoint, so whatever business arrangement they have with suppliers, it will be in their best interests to push what [products] they want to move and whatever they are will be in the midpoint."
The end of the aisle is the most valuable place in the supermarket . Picture: Tepper Katrina Source: news.com.au
Whole dollar prices are more appealing
Have you noticed a lot of shops have ditched the "$9.99" and "$49.99" price tags in favour of a rounded off figure?
Ms Browne said this was a tactic department stores like Kmart had started to use.
"Everything's $5, none of the 95 cents or 99 cents business," she said.
Ms Browne said people had become so used to seeing prices ending in 99 cents that it had lost impact.
"We always got told that's a trick," she said. "Visually the rounded price is very striking."
Dr Mortimer said retailers round off dollar figures because consumers then believe the item is discounted.
"It's that sale mentality of ‘Everything in the store just $5, $10'," he said. "You'll notice they have varying prices in the aisles but at the ends it has to be a double zero figure because that conveys a message of discount and low price."
A Kmart spokeswoman said the retailer implemented rounded pricing because too many numbers were "just confusing for people and too hard for them to work out".
The new pricing was rolled out after the retailer's "Expect Change" ad campaign which launched in 2010.
"We understood we had to clean up our store and win back trust with customers, so we were telling our customers to come try us again," she said.
"We focussed on what the customers want - it's easier for you to work out prices when you've got 10 items and want to add it up."
The right place
Most people veer right when they walk into a shop, which is linked to most of us being right-handed.
Ms Browne said if retailers want to sell things quickly they will place them to the right of the store when you first walk in.
"If it's raining they'll place umbrellas to the right," she said. "They tend to be extraneous items that you're more open to buying at the beginning of the trip."
The end of the aisle is the sweet spot
Research has shown the most common path to travel in-store is around the perimeter, dipping in and out of the aisles as needed.
As a result, the ends of each aisle are the most profitable part of the store and that space is sold to suppliers.
"Retailers make money from selling off that really prime real estate," Dr Mortimer said.
Dr Mortimer said suppliers pay for this space because food retailing is a very low margin, high turnover sector.
"There's not a lot of margin in the food prices in baked beans and canned veg and cereal so suppliers need to turn over a lot of volume in order to make a profit, and the best way to do that is to have their products in the most premium spot," he said.
Other classic retailing tricks
- Retailers often position discounted goods that are sold at a loss at the front of the store to entice customers inside – Choice has found some liquor stores often use cheap cartons of beer as the "loss leader". The discounted items are the anchor point, suggesting to consumers that other items inside will also be cheap.
- A classic retailing trick is to locate the milk and bread at the very back of the store (often at either end) to encourage short-term shoppers to walk right through the shop and be tempted to buy other, more expensive products along the way.
- The word "special" can play off your subconscious and can make us think that something is really good. The word can also kick off what is known as the "scarcity effect" – if you see something special then it won't be around for very long.
Choice's tips for shoppers
1. Avoid big supermarkets if you only want a few items - it takes more effort to get in and out, and as a result you may feel the need to stock up once you're in there.
2. Shop alone - people who shop as a couple tend to put more in their trolley, as each person will have their own idea about what should be purchased.
3. Eat before you shop - don't shop when you're hungry as it's a sure-fire way to end up with a trolley full of unnecessary purchases
4. Take a list - people who shop with a list tend to spend less.
5. Pay with cash rather than a credit card because it makes the purchase more real - research shows that pain receptors in the brain are activated during a cash purchase.
6. At the checkout, keep an eye on how much you're being charged for sale items – if it scans at a higher price than the ticketed amount, you should get it for free because of the Scanning Code of Practice for Supermarkets. Coles, Woolworths, Bi-Lo and Franklins are all signatories.
7. Use unit pricing to compare value for money, as bulk buying is not necessarily always the cheapest option.
You can get more shopping tips and consumer warnings from Choice on Checkout TV on ABC TV every Thursday at 8pm
