Perceived bargains make us feel smart, write Dan Ariely and Jeff Kreisler in "Dollars and Sense," which has become my go-to book to prove to people how we consumers are constantly being manipulated. This is ever so true when it comes to discount shopping.
Sales, the authors write, "make us believe we're finding value where others haven't. Basically, since it is so hard for us to assess the real value of almost anything, when something is on sale ... we take the easy way out and make our decision based upon that sale price."
Look at what happened to J.C. Penney under the leadership of former chief executive Ron Johnson. In 2012, Johnson made the bold -- and what turned out to be fatal -- decision to do away with the discount dance.
You know the steps. A retailer claims it has deeply discounted an item. You believe the reduction is saving you a lot of money. You practically dance out the store, pleased with your shopping brilliance.
Johnson came up with the idea of scrapping the ruse of coupons and sales and switching to everyday low prices. No dancing experience needed. Customers left in droves. And Johnson was ousted after less than two years on the job.
Consumers felt as if a bad tango partner had dropped them to the floor.
"By eliminating the sales and ‘savings,' J.C. Penney removed an element that helped their customers feel that their decisions were the right ones," Ariely and Kreisler write. "Just looking at the sales price next to a ‘regular' price gave them some indication that they were making a smart decision. But they weren't."
So how can you figure out which deals are real?
For this month's Color of Money Book Club, pick up the December issue of Consumer Reports. Inside you'll find "When Are Sales Too Good to Be True?" by Mandy Walker. You can also find the article online. Personally, I have a subscription because I regularly consult the nonprofit organization's ratings and reviews before making a purchase.
Here's why it's important that you stop this discount dance routine.
"The need to scrutinize sales deals and be a careful shopper is more important today than it ever was, given the ease of our ‘buy with one click' shopping culture," Walker writes.
It's time you know the truth and get some insight into the sale gimmicks that are designed to get you to overspend.
"The timeless strategy of discounting is that stores hope to get us to buy impulsively rather than thoughtfully, lest we change our minds," Walker writers. "And a lot of research shows that it works."
Sales make us irrational and thus susceptible to various marketing ploys. I’m not going to give away all the reporting in the Consumer Reports' article, but I do want to point out one major deceptive practice: original price tomfoolery.
Generally, retailers have to offer a product at an "anchor price" for some reasonable period of time before claiming that it's on sale.
AdAge pointed out last year that there's been an increase in legal actions by state attorneys general relating to deceptive price anchoring.
"If the anchor price was never available to consumers, there's no real sale, and so the sale price is deceptive," Walker writes.
Overstock had to pay $6.8 million in penalties for overstating comparison prices to appear as if consumers were getting a bigger bargain. J.C. Penney and the clothing chain Justice agreed to pay $50 million and $50.8 million, respectively, to settle similar claims about their pricing practices, Walker reports.
Consumer Reports highlights other practices such as the popular "buy one, get one free" gimmick, or BOGO. The magazine also provides some useful tips to reduce the chance that you're overpaying for an item.
Here's something that I practice. I don't enable one-click buying. By slowing down the time it takes to buy something, you may rethink your purchase -- and that's a sure-fire way to save.
I’m hosting an online discussion about sneaky sales ploys at noon Eastern time on Dec. 20 at washingtonpost.com/discussions. My guest will be Margot Gilman, chief money editor at Consumer Reports.
Join me for a conversation -- and really save yourself some money.