Sunday, 7 April 2013

Why are garages allowed to use tenths of a penny?



Go into any modern petrol station to fill up and you will pass a board with today’s prices in pence per litre. Cunningly concealed at the end of each number is a dot and a smaller number, almost always “.9”. Thus in effect the price is always point nine of a penny per litre more than shown by the large displayed price. It has been this way for many years and we are all well used to it.

However pumps themselves usually carry a notice to the effect that the minimum purchase is 5 litres. So if you purchase 5 litres of petrol at 140.9 pence per litre how can you pay them 704.5 pence? The half penny was withdrawn years ago. If you wanted 6 litres the cost would be 745.4 pence? Again, how can you pay .4  pence? The banks won’t recognise a fraction of a penny, there is no coin smaller than one penny, so it’s an impossible price.

Of course bits of a penny will always happen with anything bought loose. Half a pound of apples at 99p per pound will create a half pence, but those traders are not advertising the price in fractions of a penny.

In the case of petrol however the companies are quite deliberately displaying and advertising a price which cannot be paid. Can it be legal to advertise and sell something at a price that doesn’t exist in the real financial world? I know of no other products that do this, so wonder why petrol companies do it? 

I also wonder if the companies realise what a public relations disaster they have created because every time we see this pricing tactic it confirms our belief that they are out to deceive us?

4 comments:

  1. They do it because we let them...

    "I also wonder if the companies realise what a public relations disaster they have created"

    As long as the profits remain high, large companies/PLC's don't give a damn what the customer thinks. Like politicians, they know too few people are prepared to kick up a stink...

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  2. This started off with shop keepers charging 1/11d or, after decimalisation, £2.99 etc which was to ensure that the shop staff rang up that amount on the tills and proffered the 1d or 1p change, thus preventing the less than honest from merely pocketing the money. petrol station also did this, but this was in the days of having attendants who actually put the petrol in the car for you and was for the same reason. The owner of a small, local, petrol station explained it to me that the majority of customers buy at least 10 litres of petrol at a time so the fraction of a penny doesn't come into the equation. However, if anyone buys less and complains about the fraction, like those who buy 5 litres for a jerrycan, he tends to either mark up or down to the nearest penny.
    Penseivat

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  3. Excellent question. To rip people off of course.

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  4. The original perpetrator of the fractionalised USP did so not to rip off people nor to feed a profit hungry monster, blinded to any eventual public relation exercises. They did it to create a USP that could justifiably be shown as to provide a product cheaper than someone else even if it wasn't significantly so.

    The key is that they reduced the price by 0.1p rather than snuck in a 0.9p increase.

    As the use became more widespread, now having reached total market saturation, the original USP is lost in the sands of time, with buyers subconsciously rounding up such fractions to obtain best price comparison.

    Not quite the conclusion some would argue but that's life I guess.

    Monk

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