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How Can You Tell If You’re Actually Getting a Good Deal?

We spoke with a Wharton professor about when it’s really worth it to whip out your credit card. 

Shoppers during a sale
Shoppers walk past sale signs.
Photo: Scott Barbour/Getty Images

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Sales have ballooned into entire consumer shopping holidays: Amazon Prime Day, Black Friday, Cyber Monday. But are these “holidays” really the best time to shop, and is there a foolproof way for customers to know that they’re actually getting a good deal?

The answers to those questions aren’t necessarily certain. More often than not, they depend on the personal preferences and perceptions of shoppers as well as any research they’ve done before whipping out their credit cards. What’s a good deal to one person won’t be to another, and that divide is something retailers are counting on, according to Barbara Kahn, a professor of marketing at the University of Pennsylvania’s Wharton School.

Racked spoke with Kahn about the best time of year to shop and how shoppers can be savvier about the purchases they make. Kahn is an expert on brand loyalty, consumer choice, and customer-relationship management. She wrote the book Global Brand Power: Leveraging Branding for Long-Term Growth and co-wrote The Grocery Revolution: The New Focus on the Consumer. Her latest book is The Shopping Revolution: How Successful Retailers Win Customers in an Era of Endless Disruption.

What makes a deal worthwhile? How can customers be sure they’re getting a good deal?

The more educated you are about regular prices, the better you can assess whether or not the promotional price is a good price. Now a lot of times at the supermarket, they might put an item at the end of the aisle, and you’re assuming that it’s a good price, but it may not be.

You don’t know for sure if it’s good price unless you actually do the research to find out if it may not necessarily be the cheapest price. A lot of times, people assume the price per unit is good when you buy an item in bulk, but, again, you have to make the comparison.

Is there a particular percentage or dollar amount that marks a good deal?

There’s been some psychological research where they show if the deal is not bigger than a certain amount, it’s too small for people to perceive it as a good deal. The rule of thumb is that there should be at least a 20 percent discount. That’s the number people think is a really good deal. It’s perception. It’s a function of what hits your radar. It really depends on the overall price. It also matters if it’s presented as a percentage rather than as an absolute (for example, $30 off). All of these things affect fairness of price and can affect what people think is a good deal.

What’s the best time of the year for deals? Are “holidays” like Black Friday/Cyber Monday and Prime Day actually the best?

Prime Day has become a day that’s good for deals, along with Black Friday. There’s also January, when there’s white sales and the end-of-season sales.

During Amazon Prime Day, hundreds of thousands of products go on sale.
Amazon Prime Day comes annually in July.
Photo: Emanuele Cremaschi/Getty Images

It seems like the really good deals come after events like Prime Day and Cyber Monday end. In January, discounts are steep. And in the late spring and summer, lots of stores have sales offering as much as 70 percent off.

That’s the leftover inventory. The problem is you are getting inventory that was misforecast. Anything like that, the end-of-season sales, you’re buying the things that didn’t sell. You’re not getting the fresh new stock. It’s a treasure hunt, and you don’t know if what you’re looking for is going to be there.

How can a shopper tell if a consumer holiday like Prime Day is the best time to make a purchase?

There are definitely some good deals, and a lot of websites, like Wirecutter, will help you sort through the genuinely good deals on Amazon Prime Day. If you do your own research, you’ll be able to evaluate. If you research the product you want, you’ll know whether or not [the sale] is a good price.

However, that’s not the way most people do it. Most people tend to shop with more urgency, like, “You have to get it now or it’s going to sell out.” People make these decisions a little less systematically and more on impulse.

How can shoppers avoid making an impulse buy?

Obviously, the best way not to buy on impulse is to have a list and see if a product falls in the price category you plan on purchasing. Impulse buying — it’s just an automatic reaction. “Oh, my god, I’ve got to do it now.” First of all, Prime Day is only 36 hours, so there’s the hype that you have to get the product before the inventory is gone, and mistakes are made.

Are brand-level sales generally better or worse than department store sales?

Retailer sales tend to happen because they misforecast the demand for an item. Frequently, the retailer sales are for that reason. A brand may put something on sale if they want to change their line. They may have different motivations. If they put something on sale, typically it’s because they want to bring in new stuff.

Do certain categories of products go on sale more often? Less often?

Anything that’s perishable [goes out of date] is going to go on sale. Anything that’s classic that you can sell over and over is less likely to go on sale unless you want to clear out inventory. In fashion, nobody wants last year’s styles.

At Costco, they haven’t changed the price for their rotisserie chicken. It’s been $4.99 forever, and it draws people in because it’s a really good deal.

Then there’s Amazon Prime Day, and the Amazon Echo. They’re offering it on sale for another reason: They’re trying to get people to join Prime. And if you think back to Black Friday, there are really deep discounts on electronics that get people all excited.

What are some common hallmarks of bad deals that seem like good deals?

A bad deal is when [the discount] is not really a good price, so you think it’s a better price than it actually is. It’s not really as discounted as it should be. That’s one definition. The other definition is you don’t really need the product; you’re just buying it because it’s on sale.

Are we in the golden age of the sale?

I don’t think we’re in the golden age of the sale per se, but I do think with all the competition, there are more and more price-sensitive customers who won’t buy unless they really think the price is right. There are a lot of notions about fair price, and people think they need less stuff and don’t want to pay more for it than they have to. I do think consumers are as price-sensitive as they’ve ever been, and price is an important variable, and therefore price discounts do attract consumers.

Are there things you should always buy full price (because they never go on sale or for another reason)?

A lot of marketers and retailers know some people are willing to pay full price and other people will only buy things on sale, but they put up some kind of barrier. Retailers typically put outlet stores far away, so people who don’t want the hassle will pay full price. But if you want shoes when they first come out, you’re not going to get them on sale. When you want to get it right now, you’re going to pay full price. Typically things that don’t go out of style, that are less perishable, are less likely to be discounted.