Why everyday low pricing can backfire

Every day, companies or governments wrongly make highly simplistic assumptions about what people care about. Two major US retailers, JCPenney and Macy’s, both fell foul of this misunderstanding when they tried to reduce their reliance on couponing and sales, and instead simply reduced their permanent prices. In both cases, the strategy was a commercial disaster. People didn’t want low prices - they wanted concrete savings. One possible explanation for this is that we are psychologically rivalrous, and we like to feel we are getting a better deal than other people. If everyone can pay a low price, the thrill of having won out over other people disappears; a quantifiable saving makes one feel smart, while paying the same low prices as everyone else just makes us feel like cheapskates. Another possible explanation is that a low price, unlike a discount, does not allow people any scope to write a more cheerful narrative about a purchase after the event - ‘I saved GBP33’, rather than ‘I spent GBP45’.

“I paid £45” is an expense.

“It was £78 and I got it for £45” is an achievement, apparently worthy of retelling over dinner.

Same object. Same bank balance. Better autobiography.

This is why the yellow sticker can beat the cheaper ordinary product sitting beside it. The reduced item comes with a defeated opponent: yesterday’s price. Buying becomes a small act of timing and judgement. Everyday low pricing removes the villain, leaving customers with the less flattering story that they purchased a cheap thing.

Retailers can abuse this until the crossed-out number becomes meaningless. A sofa permanently 60% off is not discounted; it has a fictional ancestor. Endless promotions train people to wait, punish full-price buyers and make urgency ordinary.

A plain low price may still need a visible receipt of the saving: comparison per use, money returned over a year, or one gloriously specific item the difference will buy. It does not need a fictional ancestor.

Give the saving a reason people can believe. End of season. Ugly packaging. Annual commitment. Last train before the fish starts making decisions of its own. A concrete trade makes the victory feel earned.

Economists see £33 preserved. Shoppers see proof they were not the mug. The receipt goes in a pocket; the story about the £33 saving is what gets carried home.