When buying a product, even a little bit of price research might pay big dividends. As an example, in a previous article ("Price variations on the internet, bigger than you think" January 1, 2010), I found an electronic toothbrush being sold at $129.99 but then a quick online search of less than 3 minutes yielded the same toothbrush being sold from another reputable vendor for $99.99.
Here's another: In one eBay on-line store, buyers were bidding up the price of factory demo (i.e. used) Nikon D200 cameras. In almost every instance, they bid up the factory demos to several hundred dollars above the price of brand new D200s being sold directly through the same retailer's non-eBay online store. I called the retailer and his explanation was that some people felt they really needed to have a used camera instead of a brand new one. My explanation: people didn't do the research.
Markets aren't perfectly efficient otherwise such massive price differences would probably not exist.
Price research doesn't guarantee you'll get the best deal or that you'll always find the whopping savings. Also, at some point, the cost of additional research can outweigh the benefits - is it really worth it to spend 20 more hours to find a savings of 1 dollar? You be the judge.
However, even conducting basic price research will give you some peace of mind that you probably aren't getting the worst deal out there. Here are a few things to consider:
(1) The more money that is at stake, the more time you should spend on research. This is obvious for a high value item but people often overlook that a low cost item that you purchase many units of can be a huge amount too (e.g. a 5 cent price difference per unit x 2000 units = $100).
(2) Compare at least two (ideally more) vendors who are selling the product. The more vendors you can compare the better. If the amount of money at stake isn't trivial to you, you should definitely research the business record of the vendor you select (e.g. customer complaints, better business bureau records, etc.). How to research a vendor will be the focus of another article.
(3) Look to see if the product is sold in different markets (e.g. target customers, different physical locations, on-line vs. the internet). You may have to brainstorm a bit. A product could be priced differently depending on the market. Here's an example: 3M's Scotch Blue Painter's Tape (2" x 60 Yds) costs $10.99 when sold at Utrecht, a vendor that sells primarily to fine artists [1]. However, when the exact same tape is sold to construction workers, it costs $6.87 at Home Depot [2]. The poor artists are paying at least a 60% markup just because they are artists! I hope many of them think like construction workers.
(4) Sometimes the product is altered slightly and/or is sold under a different brand to fit into a different market even though the product is essentially the same: made by the same manufacturer with the same materials, same labor and same quality control. With these changes there may be associated changes in price also. At that point you'll have to use your own judgment if the branding or alterations are important to you. A friend of mine who was in the apparel industry told me that sometimes a manufacturer makes a whole set of identical clothes, puts one label on half of them and a different label on the other half. The first half goes to the high end stores (and is priced accordingly) and the second half goes to discount stores.
(5) If ordering on-line, by phone, or by catalog, compare the shipping and handling costs and product restocking fees (if there is a possibility you might need to return what you buy). Vendors use a wide variety of S+H formulas (e.g. value of product, weight, quantity, flat fee + weight) and because of that variety, shipping and handling costs may be different between vendors of the same product. It may be simpler to do your price comparisons on the total cost (product + shipping and handling).
Basic price research can often be done on-line - even if you eventually go to a brick and mortar store to make the purchase.
Sources: All website prices were accessed on March 2, 2010.
[1] Scotch Blue Painter's Tape at Utrecht
[2] Scotch Blue Painter's Tape at Home Depot
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