Modifiers: 5 things that change an item's final price
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slayer23 On Who Wants to Be a Millionaire, Regis Philbin's famous catchphrase was "Is that your final answer?" You should keep the same thing in mind when buying stuff, because spending a few seconds to check could save you a substantial stash of moolah.
Not counting "used" (B-stock and refurbished) goods and store cards, here are 5 modifiers which affect the final price of what you buy, whether it's in person or on the Internet:
1. Coupons & promo codes
How easy! Surely you've heard of these — magical slips of paper that give you a spontaneous discount at the register. Or online, it's even easier (and saves trees): just paste the code into the order form at checkout.
Offline, there's no shortage of flyers being mailed to the point where it becomes overwhelming. If you don't already have a few favorite stores, focus on your options and weigh not just individual item coupons, but the overall shopping experience. (It doesn't make sense to save a few cents and be let down by unhelpful staff.) Find out if you can be apprised of specials online, since they tend to be more searchable. For example, Costco has paper coupon booklets, but they (and many Costcoholics, apparently) also post them on the web, which makes them easier to find or even setup an automatic alert for. This includes big things you're waiting for the price to drop on — such as an HDTV or fridge.
Clipping paper coupons is a time-honored art which my Mom excelled at, the details of which are beyond this article's scope. But one principle which must always be stated is: most coupons for lower-priced goods (like food) don't make much of a difference in isolation. It's in aggregate that the savings add up. However, while you can make more money, you can never make more time, so consider whether the laborious task of scouring booklets and compiling your coupons — a crimp on convenience — is worth the cost. This is highly individual and needs to meet your needs, as some people enjoy coupon-clipping as a hobby. Don't knock 'em!
Online, RetailMeNot is essential. It's user-powered, meaning many people submit promo codes and other people vote on their accuracy. Stale/expired coupons sink into the red while hot ones rise upwards. Some vendors feel threatened by this collective knowledge so they've asked RetailMeNot to exclude them, but other companies actively participate in promos. Be skeptical, however, as they may make something look better than it actually is. That's marketing for ya.
Always look out for stackable coupons. Some deals mavens have mastered combining them, such as:
- a time-unlimited $50 off +
- a one-week special which removes a further $25 +
- extra 10% off if you buy 2.
The math can get confusing, but don't let that deter you from savings, because web checkout forms usually assist with calculations.
2. Cashback
Cashback often comes in the form of: you need to sign up, then click on a special link which tracks you when you buy something. Then, after an elapsed amount of time (so the participating company can reap a net profit), you get your cash back (literally). Under this are all manner of economic and social complexities, such as partner sites receiving commission payments.
Cashback tends to be smaller amounts like 2-10% and there are many flavors — FatWallet is one of the more popular sites to have strategically turned cashbacking into a community — but there are occasional jackpots. For instance, eBay's Buy It Now thru Microsoft Live Search once rose as high as 35% (!), and while I missed out on that, the cashback amount was at a still-respectable 25% when I opted for some pricey music gear. I ended up saving myself over $600 (it took a rolling 60 days to receive all my money after the orders had taken place).
One downside of cashback programs, including the eBay-Microsoft one: at-face prices may be inflated slightly or hugely, so be careful the cashback doesn't merely reduce the price to its usual parity.
Like coupons, take advantage of compound savings whenever possible: there've been a few times where I didn't just stack coupons, there was also cashback, sweetening the deal further. And sometimes there are rebates on top of that.
3. Rebates
Rebates come in different flavors, but they all have one thing in common: motivating you to take action (buy!) when you might normally not be so interested.
MIR stands for Mail-In Rebate, another way of enticing you to buy an item with a lower final cost, but you need to wait weeks, or even months to get a check in the mail as compensation. If money is tight today, be sure to factor that in. The waiting game can be tense and rebate programs often have strict rules, such as how your claim form is filled out, and what you need to include from the original packaging — commonly both a copy of the receipt and original UPC (bar code). Let me assure you, it sucks to go through that trouble, miss out one detail, and receive a rejection letter instead of money. Some rebate programs are shady and unresponsive, so search for others who've dealt with certain companies before.
This is why I prefer instant rebates — just like a coupon, but even easier, because it's automatically applied at checkout. All you have to do is buy. Ah, consumerism.
4. Shipping
Don't be fooled by "free shipping". It sounds tasty but often isn't true, as the cost is eaten up by a premium on the item itself. This applies everywhere from Amazon to eBay to Zappos.
But it's also true some places have substantially better shipping deals than others, all costs considered. Some may spur you to buy over a certain amount, e.g., "All orders over $99 get free ground shipping". This is tied to the economy of scale, since it takes about the same time to process most orders, but if you have a more expensive order, you (or at least your money) are viewed as more valuable to the company's bottom line.
In those cases, if your order is close to the minimum for free shipping, it may make sense to buy a small, sub-$10 item (also known as a "filler") to push you over the limit. But don't force yourself to buy more than you actually need, 'cuz then you won't be saving at all.
I previously wrote, "Is it worth paying more for faster shipping?". Check it out if you'd like related info.
5. Tax
Death and taxes may be certain, but at least you have a say in controlling the eventuality of the latter — like not paying sales tax if you order from out-of-state. After writing about the Mac mini for Wise Bread, I found out PowerMax, located one state to the south in Oregon, wouldn't ding me for $75 sales tax unlike Apple's own store. Sales tax becomes even more prohibitive on expensive orders: with high-end electronics, it easily runs into the hundreds of dollars.
The point here isn't to deprive the government, but make the smartest decision based on what's legal and available. Be resourceful like MacGyver.
The most important lesson I've learned about modifiers...
is don't get excited until you see the final price. So often, I've thought "That sounds like a bargain!" but by the time I get to the register, all these additional hits, surcharges, and in the case of airlines, hidden costs have added up and stabbed me in the side.
Online, don't be afraid to do a simulation by adding items to your cart and rushing to the checkout to see what it really costs. Some stores add additional friction (whether by dumb design or accident) and require you to signup for account — in which case, if you're understandably concerned about your privacy and getting spammed, have an alternate email address on hand to test the waters.
If you're new to this, the first few times of keeping the above 5 modifiers and other elements straight can be confusing. But persist, know what you want, and get it at a better price than you originally thought possible.
What are your fave modifiers? Have a modifier that I missed? Share your knowledge with us!
Tagged: Shopping, Amazon, cashback, costco, coupon, eBay, fatwallet, modifier, powermax, promo, rebate, retailmenot, shipping, tax, Zappos
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You mention getting around the sales tax as a legal option. This is true that you do not have to pay sales tax since the selling entity was in Oregon, but Washington and other states have a Use Tax (and 22 states have a special line for it on your annual tax returns). Legally, since the item you bought was primarily for use within the State of Washington, you are obligated to pay the use tax to the State of Washington, which is equal to the sales tax in WA.
Some states have safe harbor provisions, such as Massachusetts, where paying an estimated use tax based on your income will protect you from being penalized for underpayment of your use tax, so you don't need to track every online purchase you make during the year.
If you've made out-of-state purchases and aren't paying the use tax in your home state you are breaking the law, even if it is difficult for the state to note (but beware an audit!)
Use taxes in WA: http://dor.wa.gov/content/FindTaxesAndRates/UseTax/
Great points, Torley (and Marcus). The only thing that I can think of adding, and it's really tangential, is to figure out when something is marked down fully. I used to shop at Target a lot, and I remember reading on Consumerist a couple of years ago that when something is marked down to "$X.88", you know that that is the final mark-down price.
Only applies to Target, and lots of their stuff is crap.
Payment methods often have effect on price. We've all heard the sticker price vs. the cash price. In fact, if there isn't a cash/debit savings - and it's an option - absolutely ensure you use credit. As noted here:
http://www.mccollam.com/jakeblog/2009/03/i-aint-got-no-money-honey/
Ooh! I like this analogy.
Another big modifier is interest. This can be from buying things on time from the seller or charging things to a credit card that you don't pay off at the end of the cycle. Or it can be from using a no-interest loan for something you already have the money for and earning interest on the money while you're holding it to make the payments.
You can get tax breaks for some purchases.
Another modifier is the investment potential. For example, buying a house and then getting a paying roommate (or buying anything I can rent out), buying a mower instead of paying someone to mow the grass, buying an appliance that uses less energy than the one it's replacing, and buying a tool that lets me increase my productivity.
And another sort of negative modifier can come from disorganization: the bounced check fee or the late credit card payment fee.
Another form of the cashback modifier is rewards credit cards.
And finally I'll mention the opportunity cost--what could you have been doing with the money if you weren't doing this with it.
I was going to make the same point about taxes. For a big-ticket item like a computer, the "safe harbor" provision is usually not available--in MA the threshold is any purchase over $1000. You do owe the sales tax.
Grocery store club cards/loyalty cards can definitely affect the price. Yesterday was stock-up shopping day for my family, here's some data from two stores:
Safeway: saved $22.38, 32% of total, final price $50.14
City Market saved $41.17, 21% of total, final price $154.38
Some would argue that the prices are marked up higher to begin with, but regardless, I buy at the store with the best deal (taking into account the club card discount).
Another modifier is markdowns - we bought a couple of pounds of ground beef. We got 30% off the price by using the club card, and another 30% after that because it was clearanced - it had been a few days since it was packaged and they wanted to get rid of it. We'll use some right away and freeze the rest, so it's not going to go bad - and we got it for less than half price!
@Marcus: I didn't know about the extents of that, thanks for filling in my gaps!
@Andrea: Intriguing, I didn't know that. I wonder why "88". Altho I've had favorable experiences with Target goods — I even got a little meal tray with cartoon avians going "OWL LOVE YOU" or something like that.
@Bill: Reminds me of when I was in Chinatown as a kid and wondered why many gave a 2-3% discount for paying with cash vs. credit card! (Also expected to haggle, but that's a different cultural nuance.)
@Debbie: I LIKE what you said about "opportunity cost"; something that bugs me is when I take too long (like an hour) to compare prices rigorously, but I wasted too much time for a few bucks. That hour could've been put to better use with other activities.
@Guest: Thx!
@KW: Glad you preemptively pointed out the "marked up higher...", you sound quite wise about this. I like looking for clearance items that appeal highly to me but aren't of interest to others, it's like they need a new home (even if it's only in my tummy).
Generally, there is a fee to make an electronic transaction, but, sometimes, the "cash discount" is given because the retailer is dodging their sales tax obligations.
They simply don't report the sale, and avoid paying sales tax. Unfortunately, the stereotype is that Chinese immigrants play this tax cheating game.
Also, with online sales, the use-tax dodge will be going away in the future (if you can even get it today). States will be motivated to add, and enforce their use taxes, and will create online methods of payment. Ecommerce software will come to support bookkeeping for state use taxes.
Great post!
The price isn't always the price . . .
Just a tip - I once bought a GPS unit with a $30 rebate and the rebate company never delivered the check. I phoned the rebate company and the GPS company and got the runaround. After a month or two, the money became less important and I kept after it based on the principle of the thing.
About eight months after the purchase, I snail-mailed a letter to the CEO of the company explaining the situation and within two weeks, I received the rebate check. Don't be afraid to go to the top if you're not getting serviced properly
Something else to keep in mind is that you pay sales tax on the sticker price, before any rebates. For example, if you live in a state with 5% sales tax, a $100 item with a $5 rebate will actually end up costing more than a $95 item with no rebate.