Have list prices lost luster?

Big percentage sales — though they sound great — often lose their luster after a buyer does a little comparison shopping.

Is that deal really a great deal or just the perception of a great deal? A new study finds that consumers often choose a more expensive option — just because the discount sounds better.

Higher discounts may be higher prices in disguise

According to Larry Compeau, a professor at Clarkson University who is an expert on pricing strategies, “Everyone expects a deal on the web. Nobody wants to pay retail. Some sellers are now willing to deceive consumers to make the sale,” he told the New York Times.

Retailers today have to do more and more to catch and keep customers’ attention. But the problem comes in when retailers, in an effort to gain attention or solicit a sale, actually manipulate the price of a consumer item to in an effort to proclaim the biggest deal out there.

However, this practice is not without consequence.

A few years ago, Overstock. com was the focus of a lawsuit brought about by a California court due to its pricing strategies — and was subsequently fined a whopping $6.8 million.

In its defense, Overstock said it was using “standard industry practices” to come up with its “list” or “original” prices.

Though the FTC declined to comment on this case, David C. Vladeck, the former director of the FTC’s Bureau of Consumer Protection said, “If you’re selling $15 pens for $7.50, but everybody else is also selling the pens for $7.50, then saying the list price is $15 is a lie.”

New study on sneaky pricing

The Wall Street Journal recently ran a story that featured commentary from Dr. Akshay Rao, a marketing professor at the University of Minnesota, who has found that consumers often make a simple mistake when it comes to comparing prices. For example, is a 33 percent discount the same as getting 33 percent more for your money?

Not exactly.

In his analysis, he found that if a gallon of, say, ice cream costs $9, then a 33 percent discount would save you $3, making the price $6, or $2 per 1/3 gallon. But if you received 33 percent more ice cream for $9, you be getting 1 1/3 gallons of ice cream — at a cost of $2.25 per 1/3 gallon. So, the 33 percent discount is a better deal than getting 33 percent more for the same price.

You should always do the math when comparing pricing.

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