Here's a really interesting story about how outlet malls have convinced people that they are getting a great deal by traveling to the middle of nowhere to shop (it's an excerpt from a book called Cheap: The High Cost of Discount Culture). Skeptical about how successful outlet malls are? According to the story, around 55 million Americans shop in at least one of the nation's roughly three hundred outlet centers every year. The total distance that Americans travel to outlet malls each year equals 440,000 trips around the world.
The excerpt notes that one of the key tactics used in outlet malls is refererence pricing. Noted somewhere on or near the product is a really high "suggested" or "retail" price along with the much lower sale price. Individuals get anchored to that higher price, and it affects their willingness to pay. The story mentions a jewelry pendant with a "suggested" price of $3,329 and a sale price of $832 - sounds like a great deal, huh? The author later found what appeared to be similar pendants on eBay for $299. Great example of psychological pricing, a new topic in the second edition of everyone's favorite managerial economics textbook.
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