by Barry A. Liebling
Memo to anyone who wants to sell me anything – clearly tell me the full price immediately.
Where I live in Manhattan there are a large number of pizza parlors within short walking distance. Most serve good food at reasonable prices. There are four establishments that I go to fairly frequently because their food is superior. But one stands out from the rest and has become my favorite.
My preferred pizza parlor has a menu where the price of each item is tax included. I have good arithmetic skills and have no trouble estimating the total cost when I go to the other restaurants, but I appreciate the convenience of not having to do mental calculations when I go to this full-disclosure establishment. Incidently, the people who work at the pizza parlor do not have to figure out how much the total bill is after tax. The store policy makes each transaction more pleasant for customers and workers.
The question arises – if it is easier for everyone involved to announce the total price up-front why is the “plus tax” method the default? What prevents businesses (not just food establishments) from clearly informing customers how much things cost?
The biggest factor is undoubtedly behavioral inertia. Nearly all retail establishments display their prices as “plus tax.” It requires effort to deviate from the norm, and retailers feel that that it is safer to copy what everyone else is doing.
I am often told that the origin of the “plus tax” policy is that proprietors believe customers will imagine the product or service is less expensive. Certainly some patrons are fooled, but I doubt that most are. If the “plus tax” policy works and leads customers to erroneously perceive that something is less expansive, the merchant is deceiving its customers. The deception does not constitute fraud since the price can be calculated by the customer. However, it demonstrates that the merchant has bad intentions.
The flaunting of bad intentions is conspicuous in television commercials for direct-to-consumer merchandise. Typically, the seller’s voice quotes a price “plus shipping and handling.” The clear intention is to trick the potential customer into underestimating the cost of the product. Again, it certainly does not work on all viewers, but it may convince some to make a purchase based on a false impression. And notice, the practice of “plus shipping and handling” communicates to the most savvy customers that the vendor intends to be sneaky and is not to be trusted.
Where I live there are several cable tv and internet providers, so I have a choice of vendors. I am constantly barraged with hard copy ads that tell me I can obtain high speed internet service for a bargain low price. The price quote is in a large font, and under the price in micro-font is the phrase “when bundled with triple play, plus taxes and fees.”
Let’s unpack this sales pitch. First, if I am buying internet, plus tv, plus phone service from the same company I am not concerned with how much each component is costing me. Instead I want to know the total bill, and then I can compare it against what other companies are offering for the same package. I am aware that if I am purchasing three services the cable tv company can adjust the advertised price of the internet component to anything – and even make it appear free-of-charge. The company is really only interested in the final amount it gets from me each month. But, significantly, the company does what it can to conceal the final amount from me until after I become a customer. It is calculating that a low internet connection bid (meaningless if it has to be bundled) will entice me to switch carriers.
There is more. The cable tv company writes “plus taxes and fees,” and the implication is that the taxes and fees are not known in advance. In fact, the vendor has this information but elects not to disclose it unless asked. I have spoken to representatives of my local cable tv companies, and they were always able to tell me what the taxes and fees would be. Why do they require that I actively enquire? Yet again, a business is working under the assumption that its success will be enhanced if it makes it difficult for customers to know its prices in advance.
Here is a theory that can be tested. A company that discloses the full price of its products and services and boasts that there are no additional charges will have a competitive advantage. If a lot of companies switch to this policy the new default will be to inform customers completely about prices.
Note that my proposal is relying on the free market to bring about improved business practices. I suspect that there are many progressive leftists who would also like to see full disclosure on prices. But their modus operandi is to call for laws that would force companies to display their prices according to the preferences of government “experts.” Memo to government regulation enthusiasts – stay out of this.
*** See other entries at AlertMindPublishing.com in “Monthly Columns.” ***