/ Money

Getting things for free is a false economy

Discount voucher

Group buying, discount voucher codes, BOGOF offers… every day we’re bombarded with endless ways to save money and get things for ‘free’ – but do they save us money? Does it really pay to get things for free?

Brits are a nation of bargain hunters. Sales, discounts, big savings and loyalty schemes have become part of our consumer culture. And as times get tougher, we love the feeling of getting something for nothing.

A new survey from Halifax shows that discount vouchers, special offers and free deals are saving the average person £1,196 a year. That comes to £51 billion a year. Welcome to the new (horrible new buzzword alert) ‘freeconomy’.

Free isn’t all it’s cracked up to be

The survey found that 90% of adults used discount routes such as money-off vouchers, with eating out, holidays and flights being the three areas where we’re most likely to use discounts.

With prices on almost all everyday essentials heading north, the call of the coupon or voucher code is louder than ever – but is this really a good thing? Getting a bargain is one thing but buying something you didn’t need in the first place, just because it’s cheap, is the most false of false economies.

Who’s getting a good deal?

Supermarkets are packed with two-for-one deals enticing you to buy everything from cereal to cat food but stuffing your trolley with non-essential extras often means wasting money and food later on.

Group buying sites are great for discounts but only if you wanted a fish pedicure, falconry lessons or laser teeth-whitening in the first place.

Then we have cashback sites such as Quidco or Topcashback. Their popularity has surged as part of the ‘freeconomy’ but you need to check carefully that you are getting the best products, especially if you’re buying financial products – saving on insurance now is a dangerous waste if you find you can’t claim when you really need to.

While over half the respondents in the survey say they are saving on restaurants, takeaways and fast food, the chances are they’d be better off eating at home and saving the money that way.

So, while bargains, discounts and cash back on things you really need are obviously great, remember ‘there’s no such thing as free lunch’ – even at Pizza Express.

Comments
Guest
Emma Bryn-Jones says:
24 August 2011

We’ve never been fans of these marketing ploys at Zero-credit because they’re carefully crafted to help you part with your cash.

Guest
UniqueOxford says:
24 August 2011

A great piece – it’s obviously enticing for people to see offers here, there and everywhere, but we know that often they are misleading, so the higher price is chosen specifically to ensure that the “offer” price is the price that they want to sell at (supermarket chains are terribly guilty of this practice). We also know that it may not be the retailer that is taking the pain – the consumer gets a deal at the expense of the supplier.

But, aside from the truth that offers often entice people to buy something they wouldn’t have bought normally, there are other ways in which the price is paid:

– by a race to the bottom that in effect becomes like deflation
– by unfairly giving advantage to the chains and multiples who can withstand these loss leaders for longer than any small independent business
– by pushing custom to discounters, people stop knowing what things are worth, or they stop being prepared to pay what something is actually worth
– and the small guys suffer, which means that the beneficiaries become the big chains and their wealthy bank shareholders in the city
– the local economy becomes a means by which money is transferred outwards and so less employment, less businesses, less opportunity.

You can grab a bargain now, but soon, you may not have income from paid work at all!

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Guest

I always only buy 2 for 1 items that I would buy anyway – So two packs of dog food simply last two weeks instead of one packet one week – and I get one week’s free.

My only problem is Sainsbury ‘free’ Nectar Bonus points that encourage one to spend more next week for say 100 extra points.- The amount one needs to spend is more than last week – So far I’ve always resisted temptation. It would be nice for the target amount to be less than this week so I could gain a few extra Nectar points – though the number required to get a reasonable reduction in the cost of a weeks shopping is horrendous.

Profile photo of frugal ways
Guest

Why do customers flock to loyalty cards?

I ask as the information is used to price goods at a premium to increase profits in any given area/demographic that they assign…. its self defeating, when stores didnt have the customer buying habit information, they had to have genuine offers to entice customers to use their stores.
The more customers use loyalty/reward cards the higher the prices for everyone

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Guest

I have a Nectar Card because a number of separate businesses I use issue Nectar points – and I can use them all as a discount on my weekly shopping.- or anything else It is not really a loyalty card.

Guest
Dave says:
25 August 2011

Richard

You may not call it a loyalty card but you are using it precisely as a loyalty card and as Nectar intended. Because you have it, you are less likely to use businesses that you can’t rack up points, and you are less likely to do your weekly shop somewhere else too. It is keeping you loyal and your words are absolute proof of that.

Of course, consumers like to think they are savvy and don’t get conned by the tricks of the trade, but that is understandable self-delusion.

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Guest

I wish everyone had your perception Dave, and the understanding of how some companies use, in my view, marketing techniques and subtle deception in pursuance of maximising their profits. I drew to the attention of Which? some time ago that these ‘offers’ merely discriminate against the elderly and single people, whilst also encouraging waste. Whilst I had no response I do notice that they do not now so readily embrace these type of ‘offers’.

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Guest

Dave
Sadly you are completely wrong in my case.

I was using the companies and shops that now issue Nactar points many years BEFORE Nectar was invented. I chose these shops over other shops because they offered cheap good items and were reliable and convenient. They STILL offer excellent value.. I would STILL use them if they didn’t issue Nectar Points – just as I did BEFORE Nectar. If another company offered better service and goods I would use them.

But my business needs are catered for by some companies that coincidently issue Nectar points – they all have excellent goods at excellent prices (I do check) and superb accurate deliveries. I use the points awarded to occasionally pay for my week’s food shopping. What do you expect me to do with them? Throw them away??.
.
I have a loyalty card for WH Smith but I never use.it – I buy my books on-line – it’s cheaper.

Frankly buying two packets of strawberries that went rotten before eating in thirty years (because I didn’t check the date) is NOT an indication I use the Nectar Card as a loyalty card. If another supermarket was local, as convenient, and had the same or better excellent products – I would use it.

I do accept that Iceland frozen veg is marginally better (we had a local one a few years ago) – but if you think I will now drive seven miles – pay £2 for parking – for a £1 packet of frozen veg – you are very much mistaken.

As I said – you are mistaken – YOU may be swayed by loyalty cards – I’m not.

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Guest

Richard – Loyalty cards work and Dave is right.

You have explained what you do, and I have shopped at Tesco since before they brought out their Clubcard since there is no alternative locally. There will be many exceptions but, in general, loyalty cards work.

Because of the number of people using loyalty cards, the shops raise their prices. The intention is that the customer believes that they are getting a discount, but the truth is that customers who don’t use a card are paying inflated prices.

Guest
dave says:
26 August 2011

I have no loyalty cards so if I am swayed by them, it is only against.

Methinks you doth protest too much – you claim you just use the points and that none of your purchasing is impacted in any way by having the card. Maybe you are incredibly resistant to the psychology that big business knows works, and yet:

“I was using the companies and shops that now issue Nactar points many years BEFORE Nectar was invented. I chose these shops over other shops because they offered cheap good items and were reliable and convenient. They STILL offer excellent value.. I would STILL use them if they didn’t issue Nectar Points – just as I did BEFORE Nectar. If another company offered better service and goods I would use them.”

And yet strangely enough, it just so happens that coincidentally the shops that offer the best service and goods for you happen to be the ones that are Nectar. How strange! What a fortunate coincidence.

“But my business needs are catered for by some companies that coincidently issue Nectar points – they all have excellent goods at excellent prices (I do check) and superb accurate deliveries.”

Wow, so time and again, it just happens that Nectar businesses are the best. What a coincidence.

“I use the points awarded to occasionally pay for my week’s food shopping. What do you expect me to do with them? Throw them away??”

No, of course not, but at least understand what is going on and that sometimes, you may be swayed to make a purchase – or buy more – precisely BEACUSE you have the Nectar points. That is how it works.
.
“I have a loyalty card for WH Smith but I never use.it – I buy my books on-line – it’s cheaper.”

So, why keep the card? Why not throw this one away? Methinks you do deceive yourself.

I don’t care about your personal situation and of course if you want to use Nectar, you have that right, but let’s not kid ourselves and somehow imagine that you are completely immune to the charms of a card that you clearly use regularly, despite claiming it has no impact whatsoever at any point on your purchasing decisions.

Yeah, right.

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Guest

Dave.

As I said – MY situation has nothing to do with loyalty – but to do with a coincidence that SOME – note the term SOME – of the businesses I choose to use also award Nectar points – A great many other shops do not do so BUT I still use them

I do not doubt that SOME – note the term SOME – people are swayed by a loyalty card – however as I explained very carefully – I an NOT one of them.

But in this case Nectar is NOT attached to a particular shop so is not a Loyalty Card – As I explained carefully – my reasons for buying or shopping at the particular shop or businesses is because I like the goods – service – quality and cheapness. <b.Not because the shop uses Nectar Cards

Frankly I don’t care what you think – you are not me – or live where I live.

This “conversation” with you is at an end.

Yeah right!!!

Guest
Dave says:
26 August 2011

lol, jeesus, a bit touchy about your disloyalty, ain’t ya!? What if I carry on the conversation because for me, it hasn’t ended, you gonna put your fingers in your ears and shout “I CAN’T HEAR YOU!”

You seem so sure you are not swayed and yet you continue to use it, and you have a SMITHS card that you don’t throw away despite protestations that you never use it.

Seems to me you are kidding yourself, in so many ways, including about exactly when the conversation ends!!

Yeah, right!

Profile photo of ggdad
Guest

The Deputy Money Editor, Nick, in his forward to this conversion uses the term, ‘but do they save us money?’. An inclusive term intended? If the debate is about principles, not personal issues, then perhaps the financial winners are the companies (why else use them). There are those in society who may feel they are gaining an advantage. I would suspect that this advantage is gained at the expense of others.
Should these companies not compete inter alia: honest pricing, good customer service.
As this conversion appears to indicate, current methods appear to be discriminatory and divisive.

Profile photo of frugal ways
Guest

Genuine value for money in todays retail world is virtually impossible to find.
“Up to” offers are poor
“Sale” prices most of the time are just an over inflated price thats been increased for a couple of weeks then “reduced” to its normal price anyway, some retailers dont even bother to have items on sale for a week before cutting the price back to its normal price and calling it a “sale”

The favourite one at the moment is the supermarket’s “two for XXX” – next time you see one just check the single item price…. I have yet to find an instance whereby the regular price hasnt magically gone up at the same time.

There are really some sharp practices out there, trading standards are doing nothing about it, just letting it happen. Without some protection, the customer hasnt got a chance.
One example for you, Lurpak butter was selling at £1 a block at two supermarkets back in January, by Easter these had increased to £1.50 (50% increase) – not because of any shortage or rise in supplier prices, but because in our area lots of people bought it.
Around the beginning of June, both supermarkets offered “2 for £2.00” – which of course took them back to their normal price if two was purchased, at the same time, the individual price increased to £1.60
Both supermarkets now have increased all the other brands of butter in price (even the always cheapest branded product) and introduced their own brand at the regular price of £1 a pack

Lurpak has now been increased in price by 60% in 8 months by two of the big four supermarkets
Currently the offer is “Buy two packs for £2.50” – a so called offer price of £1.25 per pack, which still represents a 25% increase in price in 8 months
All branded products have been increased over the past 8 months, whilst their own brand is now the same price as branded products used to be.

How can a customer do anything about this practice, as its going on all over their stores?

Where ever possible I shop local, markets etc. I can get 5 or 10 of the same product and they almost always knock off 5 to 10p per each one, local shops round total price down, give away occasional freebies and sell things off genuinely cheap to clear them.

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Guest

Sorry – most of the offers of fruit in Sainsbury are genuine – That is the saving is real – Often say oranges at two packs for a £1 is actually cheaper than the previous offer price the day or week before.

The only real trouble is if you don’t want or won’t eat the whole two packs of oranges before they go off – In all honesty the fruit is usually fresh enough to last until I eat them (except some strawberries a few weeks ago)

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Guest

We don’t have a sainsburys anywhere near us, so we cant “test” them as it were.

On fruit/veg etc, this also ties in with the “green” argument, I cannot understand why produce is grown abroad then stored (carbon emissions) then transported into europe (more carbon) then stored (more carbon) then transported to a national warehouse (yet more carbon) then distributed to supermarkets (even more carbon) – why this is not being stopped is beyond me.

I always use a local market for fruit/veg, as they have no storage room so must sell what they stock (good deals/cheaper prices) – its bought from wholesalers unwrapped (less packaging) – last alot longer than the supermarket fruit/veg around my area (fresher) – all of which means I’m exempt from supermarket’s marketing tricks, I bypass the entire section when picking up my tinned stuff

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Guest

Frugal – you may be too young to remember what it was like in the UK after the war – most fruit available was very seasonal and very limited. So if you want to just eat apples and pears for a few weeks a year – then stop the transportation by all means – Remember most of the fruit we now take for granted wouldn’t be available. – We have been “spoiled” for decades.

There are fruit and veg stalls outside my Local Sainsburys but I rarely (not never) use them because unlike Sainsburys I can’t closely examine them for freshness. Too often the fruit sold to me from stalls is not in good enough condition – unlike Sainsburys (or rather I only buy very sound fruit – except for the two packs of strawberries)

Around 30% of purchases are fresh fruit – so I use Sainsburys excellent stock most of the time – I have found Morrisons inferior.

Please don’t get me wrong – if I could find a universally better shop than Sainsburys – I’d use them – but where I live Sainsburys is best – very local – and cheap.

Guest

I would like to see most forms of multi-buy supermarket promotion banned. If a retailer can afford to sell two packs of fruit for £3 and make a profit, they can equally afford to sell one pack for £1.50, not the £1.80 – £2 typically charged. There is no economy of scale that would justify a genuine price reduction for buying more. There’s still twice the handling, twice the packaging, twice the shelf space and two items to scan and bag at the till.

And who actually ends up paying the higher price for a single item? The person living on their own, maybe an OAP or student, the person who simply cannot afford an extra £1 for two packs of fruit, or who maybe walks or uses public transport and can’t carry anything more. In other words, its a form of price discrimination against those who, in some cases, are least able to afford it.

And in environmental terms, it’s nearly double the packaging over a larger “economy” size and an incentive to buy food you don’t need – which often ends up in landfill.

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Guest

I’m finding very little difference between the economy/bumper pack sizes and the regular product and price, when compared, these days Em

Profile photo of ggdad
Guest

On the ball again Em. I wish others had your sense of realism and proportion.

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Guest

I see exactly what you mean Em – I shop for one, and find it really frustrating that bargains are tailored for people with larger families. If I’m looking at ‘special offers’ I’m far more likely to go for ‘X% off’ than ‘BOGOF’ because with BOGOF I usually won’t eat all the food before it goes off – it’s really wasteful. I wouldn’t say we should ban BOGOF, as in some instances (e.g. frozen food) it doesn’t matter if I’m buying for one or six, but I would like to see more supermarkets offering %age discounts that everyone can take advantage of, especially on things like fruit.

Guest
dlf_91 says:
31 August 2011

On BOGOF deals:

Packaging on one larger product is less than on two smaller packages bough on consecutive weeks. Geometry.

1) goods that go off – perhaps a false economy
2) goods that do not – true economy

On Loyalty cards:

By giving supermarkets your data you reduce the burden of marketing spend (by replacing it with miniscule incremental rewards for loyalty), and thus allow supermarkets to reduce margins overall. For example – if I am Sainsburys and know which customer to advertise to directly, I do not have to create huge ‘good’ deals that otherwise inflate the price of supermarket goods. Loss-leaders are paid for by additional money made by you being in the store.

Knowing who buys what reduces supermarket waste by allowing increased stock efficiency.

Knowing who buys what allows more efficient store layouts – people who buy carrots also buy marjoram – put them next to each other.

Guest
Dave says:
31 August 2011

What a complete load of tosh, dlf_91!

BOGOF – generally forces people into buying two of something because they think they are getting a bargain, but either the supplier takes the hit or the supermarket has earlier overpriced the products in order to ensure that BOGOF is not at a loss.

As for loyalty cards, your words of wisdom would be true except…

Businesses are forever seeking new customers and are forever ferociously competing to retain their current customers. They DO indeed love the ability to target their marketing so they can persuade customers to make purchases that they otherwise would not have, but it is clearly complete rubbish to claim that they somehow reduce their letterbox drops, posters, mailings, catalogues etc on the basis that they have some customers, even many, with a loyalty card. Indeed, it is precisely because they can target their marketing that they do MORE of it. Go into Sainsburys right now and you will see hundreds of offers, plastered all over the store.

As for stock, this is controlled by the store management system and doesn’t interlink with loyalty cards – it is worthless for stock control to know that Mrs Miggins buys carrots and potatoes, what matters is what Sainsburys in [insert town here] has been selling last week, month, year etc

What they do use the loyalty data for aside from relentless marketing (which at Sainsburys include specific time-limited vouchers for products for your next shop as you pay for one shop) is to see what products they should entice you with to go round the whole store. Knowing that carrots and marjoram should go together is less important than making sure all their customers go along every aisle and are enticed by the BOGOF and other deals.

Seriously, if you think loyalty cards are a way of supermarkets being more efficient and environmentally friendly, you need a basic business course!

Profile photo of ggdad
Guest

Excellent reply Dave.
When I read dlf_9′,s post I had a feeling that perhaps he had a vested interest in this matter. It just didn’t ring true !

Guest
dlf_91 says:
2 September 2011

Curious reply Dave.. and ggad it doesn’t take vested interest to think loyalty cards are useful

On BOGOF deals – no-one ever denied that it is a device to make you buy more than you need at any one time.

Argument is rather: is this a false economy? I.e. if BOGOF ceases to be a device used, will people be better off in general? The answer is highly dependent on a couple of factors.. but I feel as though this debate has been exhausted at this point..

The point about suppliers being forced to take the hit or supermarkets overpricing everything else is interesting.. it’s as if you think that supermarkets don’t have a marketing budget (we know of course, that BOGOF deals are a marketing technique I assume?) and that they wouldn’t simply spend the budget elsewhere.. are you calling for an end to marketing as a way of reducing prices? It’s quite a radical idea, and I’ve heard people call for this before – let the message be spread by word of mouth, by viral spread of quality rumours..

Go on then Dave, let’s hear the solution to customer acquisition without marketing

Guest

Ummm, somehow think you missed the point being made. (Its that business course you really need to go on!)

BOGOF is not done as part of the marketing budget, it forms part of the procurement budget and generally the big chains operate a system (which has been exposed in the national press numerous times so this really shouldn’t be news to you) whereby they force the supplier to take the hit. To some extent, the same as/reverse of where they get suppliers to pay to have their goods featured in certain high profile spots. (Again, just do some reading if this is news to you) You seem to think the marketing team allocate some of their budget to be spent subsidising BOGOF deals, which is just simply not the case.

The marketing promotions may use BOGOF deals in their marketing materials as one way of enticing customers but the marketing budget pays for the materials and distribution of materials etc. not the BOGOF deal itself.

Am I calling for an end to marketing? Not that I have read, though feel free to misinterpret if it makes you feel better, though personally I think a world where customers did choose businesses based on word of mouth might be rather more pleasant! (Though as Tesco employ people to be in the community praising them, even that route is laden with danger!)

What I DO indeed call to an end for is inaccurate/misleading/harmful marketing, all of which are common practice amongst the chains (and no doubt others as well). Whilst the modern world is such that one wouldn’t expect the creatives to reign in their 4colour appetites, I think there is a good case to be made that consumers are often misled by dodgy marketing. This whole discussion has good examples of exactly that. Personally, I wish consumers were more savvy but I think there is also a responsibility for the major chains not to crap on suppliers, and find as many underhand ways as they can to get customers. Not all marketing is a con, but some of it definitely is.

I mean, are you saying customer acquisition should allow for any technique?

Profile photo of ggdad
Guest

As my boss said over 60 years ago, “Make the customer think they are getting something for nothing and you’re on a winner.” This was in a small village situation.
I guess nothing has changed, except that technology has made the process simpler, both nationally and globally.

Guest
Emma Bryn-Jones says:
25 August 2011

Worth reading this about the surveillance potential of loyalty cards.

plenty of other references, often long and academic, but worth the time if you look

Guest
Rose says:
25 August 2011

I’d rather just pay a reasonable price for things and be done with it! The time we all waste having to shop around for the best deal and print off, then carry around with us, online or emailed vouchers/coupons to get money off or extra points is huge – such a waste of our lives! Unfortunately, many of us have to do it because the “normal” price seems to me to always be hugely inflated and we just wouldn’t be able to afford to do our normal shopping and go out for basic pizza/similar meals occasionally if we had to pay the full price.
I can just about remember the days when we had leisure time, which we spent with family and friends …….

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Guest

Wavechange

I don’t doubt that some – maybe many – are swayed by Loyalty Cards – but As I made plain to Dave – I am not one of them – But that is EXACTLY what he charged me of being in his first post.reply without knowing anything of my personal habits, He is sadly mistaken.

The reason I gather the Nectar Points is because some of the shops and businesses I regularly use because of superior goods, service and cost, issue them . What am I expected to do – throw them away?? These points pay for a week’s shopping every three months or so – I object to a person who doesn’t know me or my habits TELLING me .something completely untrue – and then continues to argue about it.

If the shops I used did or didn’t issue points it would make no difference – like Rose – I do not want to waste my time shopping simply to save a penny occasionally – particularly as I have already done so over the years and made my choices well before Loyalty Cards or Nectar Cards were ever invented.

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Guest

I am sorry if I offended you by agreeing with Dave. Even if this does not apply in your case, I don’t think there is any doubt that Nectar cards encourage people to buy from retailers that participate in the scheme.

Guest
Stuart says:
30 August 2011

Doesn’t Which? engage itself in apathy marketing with its 3 issues for £2 etc ?