Supermarket chicanery

8 Apr

Supermarkets have come to play a central role in our urban lives, having supplanted the once traditional corner shops and independent retailers who existed among our formerly tight knit communities. The economics of capitalism foretold of this development with the increasingly industrial sized operations of all forms of economic activity delivering such bounty from its propitious grand scales.

 

http://en.wikipedia.org/wiki/Economies_of_scale

 

Supermarkets were thus foretold as a necessary outcome of forward momentum, the realisation of innovation and the quest for ever greater efficiencies. Alas the social ramifications of these corporate behemoths is not without its downside, since the bottom line of profit maximisation is not always to be reconciled with the social good. There is now an ever growing body of critics ready to articulate the unhappy anomie that is seen in the wake of the supermarkets, such as the damage to the small scale intimate hubs of the neighbourhood, the liquidation of the shopkeeper, the butcher, the grocer and the baker and the valuable social capital that this entailed, in favour of the impersonal and single minded pursuit of market dominance.

 

Supermarkets have pursued their dominance with an impressive array of controversial ploys, inherited from the tried and tested playbook of corporate psychology. The sophistry of corporate esoterica has been well attested to in recent years, from the excellent insights provided by documentary film maker Adam Curtis (The Century of the Self 2002) to fictionalised accounts of the burgeoning 1960s advertising industry of Madison Avenue courtesy of television series Mad Men.

 

http://en.wikipedia.org/wiki/Adam_Curtis

 

http://en.wikipedia.org/wiki/The_Century_of_the_Self

 

http://www.bbc.co.uk/blogs/adamcurtis/posts/madison_avenue

 

Applied psychology – customer manipulation

Psychologists have long been in the pay of corporations who are eager to put to work any knowledge of our cognitive processes that can be exploited to the purpose of getting their consumers to part with their cash and bolster profit margins. Aside from the nature and sourcing of the physical commodities in question and their eventual realisation as a monetary transaction, prices themselves are seldom straightforward as an expression of individual unit cost.

 

Retailers have introduced several complexities that make for fluctuating and variable costs, so that particular items are no longer uniformly priced across the spectrum, but may vary with time of place and may more controversially introduce discriminatory pricing for different types of customers, such as single household versus family. Supermarkets have introduced offers in the form of ‘Buy one get one free’ (BOGOF) and ‘3 for 2’

 

http://www.telegraph.co.uk/news/uknews/2263645/Food-waste-Why-supermarkets-will-never-say-bogof-to-buy-one-get-one-free.html

 

http://www.telegraph.co.uk/finance/personalfinance/consumertips/9720777/Say-Bogof-to-supermarkets-dodgy-deals.html

 

The weekly grip website below alludes to how BOGOFs have evolved as a means for supermarkets to ‘game’ price regulations concerning sales. Such sleight of hand and duplicitous practice are second nature to the marketeers, able to promote the bountiful joys of 3 for 2’s as a boon to larger families, whilst the obvious slights against the single person who is unhappy to modify their consumption habits to fit in with this social engineering, is palpably ignored. Plus there is the associated well established problem of food waste with regards to perishable products, where these discriminatory tariffs are pushed most aggressively.

 

http://www.weeklygripe.co.uk/a818.asp

 

I’ve long thought that it is precisely at this level of practice, regarding the ideological kernel or paradigm for the genius of capitalism whereby we are hoodwinked into supporting what would otherwise be unacceptable. What appears as a passing marketing ruse in the blink of an eye has gone on to capture and stifle the imaginary possibilities. These techniques are repeated ad nauseam thus pre-empting any likelihood for dissonance. It requires more critical systemic evaluations to challenge the jolly blustering of sales strategies.

 

 

http://en.wikipedia.org/wiki/Psychological_pricing

The psychological pricing theory is based on one or more of the following hypotheses:

  • Judgments of numerical differences are anchored on left-most digits, a behavioral phenomenon referred to as the left-digit anchoring effect (see Thomas and Morwitz 2005). This hypothesis suggests that people perceive the difference between 1.99 and 3.00 to be closer to 2.01 than to 1.01 because their judgments are anchored on the left-most digit.
  • Consumers ignore the least significant digits rather than do the proper rounding. Even though the cents are seen and not totally ignored, they may subconsciously be partially ignored. Keith Coulter, Associate Professor of Marketing at the Graduate School of Management, Clark University suggests that this effect may be enhanced when the cents are printed smaller (for example, $1999).[2]
  • Fractional prices suggest to consumers that goods are marked at the lowest possible price.
  • When items are listed in a way that is segregated into price bands (such as an online real estate search), price ending is used to keep an item in a lower band, to be seen by more potential purchasers.

The theory of psychological pricing is controversial. Some studies show that buyers, even young children, have a very sophisticated understanding of true cost and relative value and that, to the limits of the accuracy of the test, they behave rationally. Other researchers claim that this ignores the non-rational nature of the phenomenon and that acceptance of the theory requires belief in a subconscious level of thought processes, a belief that economic models tend to deny or ignore. Research using results from modern scanner data is mixed.

Now that many customers are used to odd pricing, some restaurants and high-end retailers psychologically-price in even numbers in an attempt to reinforce their brand image of quality and sophistication.

http://www.sciencedaily.com/releases/2005/06/050607030351.htm

 

http://www.psychologytoday.com/blog/mind-games/201306/the-left-digit-effect-why-game-prices-end-in-99

…the relatively slow moving, rational part of your brain catches up…  and recognizes that a penny’s difference means nothing, but the snap judgment has already been made and perceptions of price are now subtly biased. As with most cognitive biases, we’re especially susceptible to the left digit effect when the rational part of our minds are busy or tired.

Bulk pricing strategies are therefore introduced to play to the homo economicus mind-set, flattering our marginal propensity to purchase this or that item because of its supposed benevolent intent – Buy two, get two free: On the surface it sounds eminently reasonable, who would not want to be gifted with no strings attached. But appearances can be deceptive. If there are discounts to be had, why can’t they be transparently rendered at individual unit cost, rather than the bulk buy ploy? Could it be that that following on from B2,G2F, the aggregate 4 unit purchase might be closer to the normative price when a little mental conversion gives us the new effective costing at individual unit level. Subject to a little bit of obfuscation in this pricing gambit and hey presto, the customer is hoodwinked into thinking they are being gifted when in fact they are being gamed by sophisticated stratagems.

 

http://www.theguardian.com/lifeandstyle/2014/feb/14/i-hate-shopping-food-supermarket

 

Some of these sleight of hands sound like they have been lifted straight out of the Government’s Nudge Unit! These refer to a batch of initiatives designed to micro-manage certain aspects of behaviour towards benevolent outcomes.

 

https://www.gov.uk/government/organisations/behavioural-insights-team

 

The following mission statement is to be found on the current website as of March 2014.

What we do

The Behavioural Insights Team, often called the ‘Nudge Unit’, applies insights from academic research in behavioural economics and psychology to public policy and services.

In addition to working with almost every government department, we work with local authorities, charities, NGOs, private sector partners and foreign government, developing proposals and testing them empirically across the full spectrum of government policy.

Responsibilities

We are responsible for:

  • encouraging and supporting people to make better choices for themselves
  • considering the application of behavioural science to policy design and delivery
  • advancing behavioural science in public policy
  • championing scientific methodology to bring greater rigour to policy evaluation

The Nudge Unit are using the by now well established body of retail practices that have been built up over the last few decades, essentially applied psychology. In supermarket terms, this might represent itself as strategic placement of healthy foods at certain flashpoints, placing lower calorie and low fat items on prominent front shelving and so on. However this limited paternalism is likely to run contrary to the supermarket’s penchant for running in exactly the opposite direction, given the by now notorious product placement of high calorie, sugary foods in close proximity to the checkout, in order to cash in on the notorious pester power of young children.

 

Governments of the day are typically caught in the bind between appeasing private sector prerogatives, the imperative to maximise profitability and then managing the consequences of the fallout, the various externalities to market failure that are visited on the rest of society such as rising obesity rates and poor diets and general impoverishment. So the micro-managed gestures towards the idea of a higher social good are likely to be lost in the overall dominance of capitalist prerequisites that operate solely to the criteria of expansion and maintaining overall dominance.

 

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