Manufacturers Suggested Retail Price, Discounts, Markups, etc.

 

I was talking to someone the other day about how the had trouble budgeting because they kept receiving emails offering them things for discounted prices.  You know the ones!  This is your last chance before the price goes up, or hey for the next 24 hours, we'll give you this product for 35% off so instead of $47, you can buy it for $17.

Since COVID, I don't think we've done much to teach discounts, mark-ups, and even sales tax.  In addition, when the topic is taught, it doesn't cover things like MSRP or Manufacturers suggested retail price or the price that manufacturers suggest the price be set at. This suggested price is about 2 to 3 times the wholesale price but stores set their own prices.

This is when stores use it to their advantage by using a little sales psychology.  When I was quite young, I asked my dad why prices ended in 9 rather than 0.  He said when the price was $9.99 rather than $10.00 so the customer would feel as if they were getting a bargain.  The same thing with stores that list the MSRP and the price the item is actually being sold for.  This makes it seem as if you are getting a bargain.  Some stores use the term Rollback to persuade you, this is a deal.

The other way is to tell. there is some sort of sale and what you want to buy is marked down a specific amount so instead of paying $52.00, it is only $39 because they've marked it down 25%.  This is the discount they take when you check out.  I don't know if the price printed on the tag is the MSRP or the price the store set but you feel good when you get the deal.    I love shopping the clearance because the discount is being applied to things that have already been discounted.  This is an area that needs clarification for many students because some think that the discounts should be added together.  In other words, if the item is marked down 50% and then reduced another %25, the kids think the item should be marked down a total of 75% rather than the last discount applied to the new price.  

On the other hand, most students are unaware that most merchandise is sold at a lower price by suppliers referred to as wholesale.  Then suppliers markup the price to the amount they sell it for.  Most of us do not know what the markup price is and that markup is not always the same.  It depends on the product.  Usually gas is only marked up some 10 to 15 cents a gallon but out of the markup they only make about 2 cents net profit. 

It is important to take time to teach students about markups, discounts, even profit and net profit so they understand these real world situations, they will end up in at some point.  It is important to know what these terms mean and their application because it is something they run into regularly.  In fact the applications and such are a bit different when in the bush.

Where I live, the stores often order products from the local Costco, have them shipped out and the markup is on top of that. I usually include information on what the markup covers such as the building, salaries, etc.  I try to include one week of this information so students are exposed to it.  Let me know what ou think, I'd love to hear.