There is a psychological aspect to sales that even the thriftiest shoppers must learn to overcome. Here are three psychological ways that sales make a compelling case for consumers to buy, and how consumers can think about whether to buy something more logically. (The institutional sector offers an intellectual and financially rewarding alternative. Find out more in Do You Belong In Retail?)
In Pictures: 6 Ways To Save Money This Summer

  • Buy One, Get One Discounts
    "Buy one, get one" promotions, also known as BOGO deals, offer varying discounts as long as items are purchased in groups of two. The phrase seems most attractive when followed by "free," but it frequently simply applies a 50% discount to the items purchased.

    Buy one, get one discounts can be useful for products you frequently consume. However, the allure of a discount or receiving something "free" can persuade you to buy a greater quantity than you need.

    • The Real Deal: If you have to spend, then you are not getting anything for free. Aside from requiring you to spend, the discount always applies to the item of equal or lesser value. So, in order to feel like you are saving the greatest amount of money, theoretically you should pick two items that are relatively expensive and have very close prices. Even though this scenario can save you the most, it can require you to spend the most. (Find out how average investors are breaking into what was once reserved for the ultra rich, in Hedge Funds Go Retail.)

  • Setting the Limit
    Some sale prices are valid only for a limited number of items purchased. For instance, a certain brand of cookies may be on sale with the words "Limit six items per customer" underneath the sale price. Without the mention of six, buying six bags at once probably would not have crossed the average person's mind.
    • The Real Deal: Setting a limit can make customers feel as if they are not maximizing the discount unless they buy up to the limit. In this case, you should ask yourself if you really need six bags of cookies and if they were not on sale would you buy them anyway. This is particularly important when dealing with perishable food items. After all, what good is a sale if you end up buying something that spoils before you can consume it?

  • Spend This Much, Save This Many Coupons
    These coupons are frequently advertised with tag lines such as "the more money you spend, the more money you save." For example, a "spend $50 get $10 off" coupon would allow you to purchase $50 worth of products for $40, representing a 20% discount.

    Some stores offer these discounts in staggered amounts, for example, the next increment from the previous example could likely be "spend $100, get $20 off." If you spend exactly $100, then the discount is still 20%.
    • The Real Deal: The more money you spend, the more money you spend. In this case, the percentage discount maxes out at 20. The moment you cross over a $50 increment, the percentage discount actually decreases, until you reach the next increment. Reaching the next increment requires you to spend more money.

      This could be a good deal if you were originally planning to visit the store and spend at least $50. However, if the coupon was your only motivation to go to the store, then you will not save a penny. (Learn to spot a rotten investment before you get seduced by its sweet promise of profit, in Are Structured Retail Products Too Good To Be True?)

Retailers are in the business of selling. Special pricing and advertising can draw your attention and prompt you to think differently about a product, but ultimately you must decide whether to make a purchase. If you need to hold on to your money, take a proactive approach to shopping. Make a list first and try your best to stick to it, or else you may find yourself reacting to sales by filling up your cart while simultaneously emptying your wallet. (Hit the mall and shop for future investments. Find out more in Analyzing Retail Stocks.)

If you're still feeling uninformed, check out last week's business highlights in Water Cooler Finance: Auto Hope, Bubbling Oil and Obamanomics.

Related Articles
  1. Stock Analysis

    The Biggest Risks of Investing in Amazon Stock

    Find out which risks are most important to Amazon's shareholders. Learn which operational risks impact share prices and which financial risks affect investors.
  2. Stock Analysis

    How Does Work and Make Money?

    Learn how is taking on retail giants Amazon, Walmart and Costco by promising to save customers an average of 10 to 15% on over 10 million items.
  3. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  4. Investing News

    This is the Fastest-Growing Consumer Complaint

    There’s no way to guarantee that your Social Security number won’t fall into the wrong hands. Here are some ways to make yourself less of a target.
  5. Stock Analysis

    How Does Casper Work and Make Money?

    Learn how the startup Casper is delivering a good night's sleep directly to customers' homes for a fraction of the cost of the competition.
  6. Stock Analysis

    4 Catalysts That Could Propel Best Buy's Stock Forward

    Understand the current Best Buy model and why it has been failing lately. Learn about the top potential catalysts that could increase Best Buy's stock price.
  7. Markets

    Is Another Bear Market Ahead?

    With market volatility recently reaching its highest level, investors are questioning what the outlook is for U.S. stocks in 2015 and beyond.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Globl Consumer Discretionary

    Explore analysis of the iShares Global Consumer Discretionary ETF, and learn about the suitability of this fund that tracks the consumer discretionary sector.
  9. Investing Basics

    A Gluten-Free Makeover For A Supermarket Near You

    The gluten-free diet is changing the food choices of a large number of consumers, and the food industry is taking note and making the needed adjustments.
  10. Stock Analysis

    These Are the Benefits of Investing in Wal-Mart

    Understand how Wal-Mart operates and what makes it a good company despite current stock performance. Learn the top four benefits of investing in Wal-Mart.
  1. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  2. How can I invest in electronic retailing (e-tailing)?

    Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>
  3. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  4. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  5. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  6. What factors make it difficult to compare performance ratios between retail stocks?

    Companies that operate in the retail sector significantly differ in terms of their profitability and efficiency, making stock ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!