Skip to main content
"Sale" written on wall

The Right Way to Take Advantage of Sales

Today is Amazon Prime Day. If you are unsure what that entails, the long and short of it is that Amazon has devised a way to clear space in their warehouses for the upcoming fall releases by selling off their less popular merchandise for discounted prices. To top it off, they are creating additional exclusivity around their offers by limiting them to those who are paying members of their customer program, Amazon Prime.

As someone who is prone to fall for the lure of a good discount, it is interesting to see just how skilled Amazon are at creating hype around their products with their promotional efforts, such as Prime Day. People went crazy this time last year, as the 2016 iteration of the special deals day was the company’s biggest day ever. TVs, toys and, curiously enough, Amazon’s own products like their Kindle e-readers and tablet, and the Echo, which powers their voice-based home assistant Alexa, were hot items. Amazon is, of course, happy to knock off some percentages to move additional units of their own goods, to tie customers into their ecosystem, and at the same time recruit more paying members to their loyalty program. At the same time, so many people completely misunderstand what a discount is, and the term “saving money” actually means.

A Dollar Spent is a Dollar Spent

A common phenomenon that marketers rely on to lure consumers to spend money they otherwise wouldn’t is the mental disconnect between the cost of purchase and the money saved from utilising a discount. One friend who worked at a national sporting goods store where people go haywire during sales told stories of people who had never been skiing their whole life, yet spent hundreds and hundreds of dollars on skiing equipment.

With this 30% discount, I’m saving hundreds of dollars. It’s too good an offer to pass on!” the people would exclaim in their credit card-fuelled shopping haze. This type of misguided mental accounting, a mathematical sleight of hand, is one most of us have used to justify a splurge at one point or another. The result is often buyer’s remorse, a basement or an attic filled with stuff we just couldn’t afford to pass up the chance to buy, and a significantly thinner wallet.

While most people are already aware that the reasoning behind purchases like this is, at best, misguided, we will keep falling for it until we have seen the ridiculousness of it spelt out in black and white. So let us examine the faulty reasoning, so that we expose the marketers’ trick once and for all. First of all, it is important to define the two terms up for discussion here: Spending and saving.

Sale written on all behind park bench
Don’t let promotions, advertising and reduced prices fool you into spending more money.

You spend money when you purchase an item. You save money when you have money that you do not spend. It is that simple, and do not let anyone else try to convince you otherwise. If today, you were offered to purchase a TV that used to cost $1,000 for $800, how much would you have spent and saved if you took advantage of that deal? Yes, that is a trick question. The correct answer is that you have spent $800. Did your savings account increase by taking advantage of that promotional deal? If the answer is no, you did not save any money. People take the wrong turn here because it is so easy to draw the mental connection that spending less on a particular item equals saving more. But all you have to remember is that unless the savings account increases, you have not saved any money at all.

How To Make Sales Work to Your Advantage

As we have now established, sales and promotions are all about luring you to spend money that you didn’t originally intend to part ways with, by tricking you with apparent price reductions. Even if we overlook the fact that often advertised price reductions are compared to unrealistically high prices, you typically do not increase the balance of your savings account by purchasing something at a reduced price. The honourable exception to this is if you have made a purchasing decision ahead of time, and are waiting for the right time to make the deal.

Only if you have made the decision, and already allocated a certain amount of money to that purchase, will it make sense to take advantage of a good deal. The conscious consumer will always make their buying decisions independent of any advertised price. Instead, a smart buyer will decide what price a particular item is worth to them, and then try to acquire it at or below that price. If a good deal comes up at below the already specified maximum price, nothing is better than that, because then the difference can be allocated straight to the savings account. In other words, that person has actually saved some money, by acquiring something at less than the price they had budgeted and set aside for that item.

Further, there are tools you can take advantage of that will let you track the price of a particular item over time, and across many different online retailers. These services often differ from country to country, but a quick Google search will reveal which services are the most popular in your part of the world. By taking advantage of services like these, and always reminding yourself of the fact that the only way you can save money on a purchase is if it increases the balance of your savings account, you can make sure that savvy marketers will never dupe you again during sales season.

Lars-Christian

Lars-Christian started Abovare with the goal of helping people increase their wealth and freedom, to be able to focus on the things that matter in life. With a background in business and an MSc in Economics and Business Administration, Lars-Christian believes that the core concepts of business finance are transferable to your personal finances.

4 thoughts on “The Right Way to Take Advantage of Sales

  1. Sales are so tricky! I think you can really only take advantage of them if you’re educated about what you’re buying. If you don’t understand baseline prices for the things you want to buy, the store is winning your money hand over fist with clever marketing tactics.

    1. You are so right. For me, the key is definitely to make purchasing decisions independently of sales and promotions, and then just use price tracking and see if coupons and upcoming sales can help me get a better price. But only after the decision has been made!

  2. I am happy to say that I’ve not participated in prime day even though I’m a prime member. I much rather keep the money in my pocket 🙂

    I do agree with you saying that Amazon is using this particular day to clean out their slow moving inventory.

    If you buy something you truly need, great. Take advantage. But don’t buy stuff you don’t need!

    1. As someone outside the US, I’m not even sure exactly what a Prime membership entails, so I’m not allowed to participate in great events such as these ☚ī¸ Would be lying if I said I was devastated, though! 😉

Leave a Reply

Your email address will not be published. Required fields are marked *