The Tribune

By Simon Cooper

Res Socius

Don’t stress. This is not going to be a lecture on accounting practice. Instead, it is all about what consumers think, and what to make of it. For example, the American Marketing Association has found that customers are more turned on by getting 10 per cent more at the same price than receiving a 10 per cent discount. Whereas if you do the sums correctly you’ll figure out the opposite should be true.

The reality is that even highly numerate consumers still tend to make qualitative decisions when behind shopping trolleys. Consider these examples:

• We all believe that $699.99 is a whole lot better than $700 – or that’s at least what we affirm by our behaviour. Remember the old estate agent trick of showing the overpriced properties first? Millions are made in used car lots that same way every day.

• We don’t want to appear cheap, but we don’t want to be extravagant either. Think about it. Few people go for the most expensive dishes on steakhouse menus, but few buy cheap burgers either. The result? They buy medium-sized steaks instead, which is precisely what the owners have in mind.

• We do what we’re told to do. That’s why we buy the salads under LED lights, despite the fact they’re hardly being promoted, because the storekeeper loves us. In case you wondered why boxed advertisements are more attractive, you can stop speculating. You just did what you were told to, and noticed them.

• Food shopping makes us hungry. Alcohol makes us careless. Business lunches are provided for good reasons. So are waiters who are slow to take orders after being quick with serving drinks. Supermarket shopping is stressful, too. By the time we reach the torture tunnel ahead of checkouts, we’ll do almost anything to shut the children up.

• We hate shelling out money all the time. Fitness centres know this and arrange tempting six-month deals instead. While we may not patronise them enthusiastically after the glamor wears off, it still feels great to be a paid-up member. Clothing accounts work the same way, except this time our patronage increases exponentially.

• Warranties are a great draw-card despite the fact that you’re likely to forget where you bought the goods two years down the line, by which time you will have probably lost the till slip anyway. Yet how often do we pay that extra 10 per cent for peace of mind we’ll probably never need …

• Researchers confirm that we’re still totally obsessed by the number ‘9’. Don’t believe me? Tell me, then, what’s better value first - $169 or $170?

As consumers we have little idea of what things are truly worth. What does it really cost to build a car? Nobody’s saying as far as I know. Valuing a business for sale is simpler, though. It’s a factor of annual turnover set according to the risk the buyer is prepared to take. It is a shame so many sellers won’t understand this.

NB: Simon Cooper is a founding partner of Res Socius, a business brokerage firm and businesses for sale directory service. Res Socius is authorised by the Bahamas Investment Authority to facilitate the sale and purchase of businesses and provide consultancy services. Contact 376-1256, visit www.ressocius.com or scan the QR code below.