Let’s say that we have decided to buy a new refrigerator in the next three years (let’s assume negligible inflation for simplicity’s sake), obviously you want the best price. The correct strategy is to wait about a third of the time, one year, and reject all the refrigerators that we find for sale, but note the lowest price we see during that period. After the year, we then should purchase the refrigerator for any price lower than that. This situation is called the secretary problem. It can apply to hiring people, dating, or buying houses.
Groceries are a major cost of living for all of us. The best way to shop for groceries is what is known as “price points.” That is you establish a price you are willing to pay, for example, $0.99 for a 6 oz. can of soup, and purchase it in bulk when the price is reached and not purchase it otherwise. $0.99 is your price point for soup. Optimally, you have a set of mental prices for every kind of routine purchase.
In the case of the soup, the period of time you have to work with is the length of expiration of the soup can, which is probably about two years. So to follow the strategy, you wait about 9 months and then buy the soup after that.
Seasonality and other factors
Unfortunately, this strategy is complicated by the games that stores play. There may be a particular time of year when the product you want to buy is usually on sale. If you have a three year expiration period on the product, the strategy works well for figuring out price points, otherwise, experience will have to guide you up and down in establishing them.
Rewards Bucks
Another complication with price points is rewards like CVS ExtraBucks. In this scheme, when you buy the right amount of the right items, the retailer gives you a gift certificate for your next purchase with a relatively short expiry date. If you treat these rewards as if they were cash, you will definitely overspend, which is the whole point of the scheme.
In order to properly value your rewards and decide whether buying the initial items is worthwhile, you can start by simply comparing the items with their price points is worthwhile. Usually it isn’t.
Probably the best strategy is to figure out what you could buy with the rewards in the same visit to the retailer. You would use two transactions: one for the initial items to get the rewards, and one to spend the rewards. Then sum the price points of all the items you want to buy and compare it to the sum of the totals for both transactions.
| Item | PricePoint | Price | |
| Transaction 1 | Toothbrush | $1 | $1.00 |
| Toothpaste | $1 | $2.00 | |
| Floss | $1 | $1.50 | |
| Rewards | – | ($3.00) | |
| Transaction 2 | Can o’ Soup | $1 | $1.50 |
| Milk | $2 | $2.50 | |
| Total | $6 | $5.50 |
In this example, even though every item was purchased at or above it’s price point, the transaction still makes sense to do with the rewards dollars.
802701 A.D. 