Every so often I get one of those flyers in my mail from my credit card offering me “special deals” on various products. And while once upon a time, these offers were somewhat tempting, it seems that over time the offers are becoming worse and worse. Last month I was offered a generic brand of the “nicer dicer” with only one of the two blades on sale from ₪ 300 for only ₪ 45. Additionally, I was offered a set of three pots on sale from ₪ 500 for only ₪ 200.
In reality, these prices, even the sale prices, are complete rip-offs I can get the original nicer-dicer at a store in my shuk for only ₪ 15, and I can buy pretty much any three pots I want for ₪ 60 – ₪ 100, provided I am not looking for a pot made of solid gold. (As an aside, I advise strongly against the nicer dicer. I own one and can tell you first hand, any time you save cutting, plus a bunch more, will be spent cleaning all the little parts of the blades. If you have the option, get a slap-chop instead).
By telling you what the retail price is, the company can tell you that what you are getting is a real bargain, even though it is a complete rip-off. After all, the retail price rarely takes into account supply and demand and is usually some mirage dreamed up by a drunken MBA in the marketing department. By using an unrealistic retail price, companies aim gain from the uninformed consumer who does not know the true market value. The real trick is in knowing the market value of the skirt in the window, the book on the shelf, and the gadget in the electronic store while you shop.
One solution is to shop online. Once you know what you want you can check out a bunch of websites in order to get the best deal. But when you are dealing with different products that you need to purchase offline and you have no idea what you should be paying, things can get more complicated.
So how do you know when a deal is a deal? Well, you need more information. And the best way to get information is to get price quotes. And when I need price quotes, I use the rule of three.
The rule of three is that when I want to buy something and I have no idea how much I should be paying for it, I get three price quotes and then go with the cheapest (or if I am in a combative mood, bargain one of them down.) And this rule has had so many applications and saved me thousands of shekels. For example:
- When I go on vacation, I look up the prices of three cab companies in the areas. I call up all three the first couple of time I order a cab and quickly learn which is the cheapest.
- When I bought a mosquito zapper (which is a fantastic investment) I walked into three stores and asked how much the item costs. Within three minutes I learned that there are two basic types, and when to get the best deal.
- When I book a tzimmer for my vacations, I call around three comparable tzimmers and get the one with the best price.
- In my last post, I mentioned how I used the rule of three in order to secure the best pension fund.
The rule of three hold true because it is simple, relatively easy (you’re not getting 40 price quotes) and it gives you the knowledge you lack. In short, the rule of three helps you gain perspective when you are without.
As an aside, the rule of three, is a huge topic in game theory, especially when you have to reject each offer you research (imagine once you got a price quote, you cold not buy the item there.)