Do you really pay more when you buy online at a discount?

A study published in a recent issue of the INFORMS journal marketing science has found evidence of a questionable practice that leads consumers to believe they are getting a discount when in fact they are paying more.

The study, Framing Price Increase as Discount: A New Manipulation of Reference Price, was authored by Sungsik Park of the University of South Carolina, Man Xie of Arizona State University, and Jinhong Xie of the University of Florida.

“Imagine shopping online for a new vacuum cleaner,” says Park. “You find a product with a retail price of $190, a list price of $250, and say ‘save $60.’ You like the great offer and you buy it. Later you talk to a friend who tells you that she bought the same product for $115 and didn’t notice any mention of the list price. You then go back online and discover that it is indeed the current list price is $115 and the list price comparison is gone. You have been scammed. How can this happen?”

What happened is that the seller introduced a short-term price increase but framed this as a discount. The seller does this by simultaneously increasing the price and adding a listing price display. Then, a few days later, the seller reduces the price and removes the listing price information.

The study authors tracked multiple product categories on Amazon over a 13-month period, primarily in 2017. They examined cases where online sellers simultaneously increased the price and introduced list price comparison.

“We found that price increases and List Price Synchronization (PILPS) are common across many product categories and sellers,” says Man Xie. “This practice entices more shoppers to buy at a higher price. It increases both profit per sale and the number of products sold.”

This raises an obvious question. Is PILPS legal?

“Current regulations to combat misleading prices focus on the truthfulness of a listing price Valuefor example, by deterring the use of fake or inflated listing prices,” says Jinhong Xie. “PILPS misleads consumers by saying the timed coordination list price display and has so far flown under the radar of regulators.”