Comparison shopping is worth the time

February 25, 2007|By Gregory Karp | Gregory Karp,The Morning Call

Comparison shopping is so fundamental to smarter spending of money that academics have studied why some consumers are foolish enough to accept the first price they see.

"It's amazing," said Donald Lichtenstein, a marketing professor at University of Colorado at Boulder. "Even for expensive durable goods, research shows consumers, time and again, are most likely to buy from the first merchant they visit."

If knowledge is power, then failing to comparison shop is a decision to be powerless. You're making a buying decision based on nothing. You have no reference point for whether the offered price is good or bad.

"Prices for identical goods vary, and unless you actually do some comparison shopping, you're not going to know that," Lichtenstein said. "Consumers say, `Well, I may be paying a little bit more, but I don't have time to shop around.' But if they knew the degree to which prices may vary, they would find it's well worth it."

Here are some dos and don'ts:

Don't overvalue your time.

In a 2003 study, researchers were shocked to learn that cherry-pickers - consumers who shopped multiple supermarkets to capitalize on grocery deals - weren't cheapskate fanatics. Their savings more than made up for the investment of time, said the study's authors, Stephen Hoch, a marketing professor at the Wharton School of the University of Pennsylvania, and Edward Fox, a marketing professor at Cox School of Business at Southern Methodist University.

A 2002 study at Virginia Tech University used students to comparison shop for purchases. In one case, 16 minutes of comparing prices on the same model of color television saved $100. That works out to $375 an hour. "Consumers inherently overvalue their time," Lichtenstein said.

Use the Internet.

The time to shop around can be reduced to a few minutes by using online resources.

Consumers can quickly research the type of product they should buy. Examples of shop-bot sites include Froogle.com, MySimon.com, Shopzilla.com, DealTime.com and Shopping.com.

"With the Internet now, the cost [in invested time] of getting really good price information is relatively cheap," Lichtenstein said.

Watch price guarantees.

Many retailers offer a price-matching guarantee, where they will refund 110 percent if you find the item cheaper elsewhere, for example. For some, that may be a sign the retailer actually has higher-than-average prices, Lichtenstein said.

Those merchants maintain high prices and are willing to issue refunds to those few customers who actually check other prices afterward and request a refund.

"So few consumers engage in prepurchase search for prices, what do you think it is for a postpurchase search?" Lichtenstein said. "It's nonexistent."

"In many cases, the [reference] prices are inflated or fictitious," Lichtenstein said.

Don't dismiss small savings.

Most people believe one-time savings of a few cents or a few dollars might not be worth their time to comparison shop. That's the way many people view grocery shopping. In one study Lichtenstein conducted, consumers who had just checked out could not recall prices on groceries they had bought.

yourmoney@tribune.com

Gregory Karp writes for The Morning Call in Allentown, Pa.

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