- Bargain Fever – How to Shop in a Discounted World
- by Mark Ellwood
- Publisher – Portfolio / Penguin
- Copyright 2013
- 235 pages
Rating (for pages 1 – 95) – 9 out of 10
After reading the case-study book, I thought that the fates owed me a good read. Fortunately, I got one with Mark Ellwood’s Bargain Fever. I started the book with low expectations; I picked up Bargain Fever during a fit of “book greed” that overtook me while I was in Dollar Tree last summer. I’m glad that I was greedy, as the first 95 pages were terrific.
Introduction (pp. 1-8)
Ellwood uses the Intro to justify his book. Noting that everyone is trying to bargain, he states that “…retailers sold 40 to 45 percent of their inventory at some kind of promotional price in 2011. Ten years earlier, they had sold just 15 to 20 percent of stock that way” (p. 4).
Chapter 1 – Your Brain on Sales (pp. 9-34)
Bargain Fever begin with a surprisingly-deep chapter on how our brains function when buying. Ellwood starts with dopamine, the brain chemical that scientists long thought came from pleasurable activities. Recently, scientists have found that our bodies maximize dopamine when we get unexpected pleasures. This is key to way that our bodies process stimuli & has a lot to do with the way merchants plan their sales.
Also, Ellwood introduces three key insights that “neuroeconomists” use to sell us more stuff –
- people get more pain from losing than they do joy from winning
- we have internal reference points that determine whether we think something is a good deal or not. (For instance, people agonized over whether it would be better to earn a) $35,000 in an office where everyone else earned $38,000 or b) $33,000 in an office where everyone else earned $30,000. Obviously, you’re better off with the $35,000, but your reference point is the other people in your office).
- transaction utility – Ellwood says that someone at line at Macy’s probably would switch lines if – by switching – the price of a shirt would go from $25 to $15. But the same person might not switch lines @ Home Depot if – by switching – the price of a lawnmower would go from $525 to $515. In both cases, the person saves $10, but “…$10 can be worth more or less, depending on the circumstance” (p. 20).
Ellwood closes this strong chapter by discussing pricing strategies and why consumers may prefer fewer choices to more choices. If I had to complain, I’d say that some of the dopamine material was a little difficult for my brain to process. (In other words, I didn’t get one of those dopamine rushes while reading it).
Chapter 2 – Couponmania (pp. 35-59)
I’m not much of a coupon clipper, but I might start after reading Chapter 2. That’s how much I “got into” this material. Ellwood delves into coupons, focusing on how the Internet has shifted the power of couponing from businesses to consumers. He starts with the TLC show Extreme Couponing, then moves to discussing a business called The Coupon Clippers in Dade City, Florida. Coupon Clippers allows people to buy coupons (for 10% of their face value).
The best part of the chapter is the material on coupon fraud (pp. 51-59). Ellwood starts by discussing a low-tech theft ring that drove around Broward County, Florida, stealing the inserts out of Sunday newspapers. Then, he moves on to a classic sting of coupon fraudsters from the greater New York City area.
In the sting, Procter & Gamble agreed to issue 25-cent coupons for a non-existent product called Breen (which was similar to P&G’s Tide Detergent). Coupons appeared in three New York City-area newspapers. According to Ellwood –
“The results were astonishing: 2.5 percent of the fake coupons were redeemed by retailers, across 2100 stores, in 40 states. This translated to seventy thousand supposed first-time trials of this magic liquid. Investigations moved quickly and twenty-six retailers were indicted by the Brooklyn DA…” (p. 59).
Chapter 3 – Purchase History (pp. 61-83)
Of the four chapters, Chapter 3 was my least favorite. Here, Ellwood details the history of “the deal.” He discusses Coca-Cola as a pioneer in couponing. The back half of the chapter is better, with discussions of K-Mart’s famous “Blue Light Special” and the creation of the outlet mall. My favorite part of the chapter was its last five pages, which discuss UK grocer Tesco’s use of customer-loyalty data to customize its promotions and improve its bottom line.
Chapter 4 – How the Other Half Saves (finished pages 85-94; chapter ends on p. 116)
Ellwood regains some of the lost momentum at the beginning of Chapter 4, which focuses on the desire for deals among wealthy fashionistas. He opens the chapter with a great blurb on how shoemaker Roger Vivier (inventor of the stiletto heel) gets rid of excess inventory in its Manhattan store. Loyal customers are invited to an otherwise-unprompted markdown sale in which the only way to tell which shoes are discounted is to look on their soles; a tiny blue sticker means 30% off and a tiny red sticker means 40%.
The next ten pages detail how high-end fashion shops get rid of “deadstock” (items that they could not sell last season). It all amounts to variations on the Roger Vivier strategy mentioned above. These merchants have come out with a way to make a negative (unsold inventory) into a positive (special deals for their best customers). Reaching out to these top customers is known as “clienteling.”
Ellwood mentions that Martha Stewart loves to attend these invitation-only sales. Also, he states that sometimes the discounted items still don’t sell, which can lead to creative solutions for how to dispose of the inventory (such as destroying it or sending it to countries that are so poor that there is no chance that anyone there could buy it, if it weren’t free).
I Like It! (So far)
So far, this is a great book – Ellwood knows his stuff and he knows how to present it in an entertaining, lively manner. (He grew up in England, and has a nice, snarky wit). I can’t wait to see what comes next.