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Bargain Prices: This Year’s Holiday Bait

Consumers may be loosening up their purse strings a tad this holiday, but bargain hunting is not out of the picture.

In fact, shoppers can expect plenty of promotions and discountsas retailers battle it out in the vital closing months of the year. Lower price-point gifts will play a role in luring customers in and guiding their purchase decisions.

“We will continue to see retailers focus on deep discounts and loss leaders,” said Ellen Davis, vice president of the National Retail Federation. “The loss leaders are there to draw customers in with the hopes of them spending more on other offerings.”

“This was a tough holiday season to plan for. The economy has been so uncertain,” Davis added, “but what retailers know is that people are still on a budget mindset, so they made sure plenty of promotions or discounts was part of the plan.”

Having overstocked in 2008 and under-stocked in 2009, retailers have long planned for extended specials as part of the holiday game plan this year as they wrestle for a still budget-conscious buyer.

At Target, the discount giant rolled out their private-label REDcard in time for holiday spenders to get an additional 5 percent off most purchases as part of their effort to provide “unique and unexpected promotions,” one company spokeswoman said.

Other major retailers, including Wal-Mart Stores and Sears Holdings , have extended Black Friday hours to get customers through their doors.

“There’s a dilution of Black Friday,” said Chris Donnelly, senior executive of Accenture’s retail practice. “Retailers sending the message that every Friday is Black Friday.”

Along with prolonged promotions, Donnelly says another strategy in presenting lower-priced items has been to break up traditionally bundled goods, for instance all-in-one bedding merchandise or 12-piece place settings.

“The dollar stores have done a great job of this,” Donnelly said, “And now it’s in a lot of retailers who are really pushing products at lower price points.”

By manipulating the packaging sizes, stores can offer each item separately at lower prices and enable shoppers to buy only what they want. That has been a winning tactic at places like Dollar Tree and Family Dollar Stores , which saw much success amid the recession.

While recent surveys show there is a slight uptick in discretionary spending, seeking out deals and discountsremains shoppers’ number one priority, Davis said. But with a little bit more wiggle room this year, consumers aren’t simply drawing a strict line on prices, but considering other factors such as product quality, saving time, customer service, and convenience as well.

Even among affordable gifts, cheap is no longer the sole selling point this year. While last season saw a migration toward $10 gifts, there is no “magic number” this year, Davis said. Instead, gifts will be bucketed into pricing tiers to help shoppers map out their budgets.

“People know how much money to spend and looking to retailers to help them make a purchasing decision,” Davis said.

Through hard-copy catalogues and Web site layouts, retailers like Target, Wal-Mart, Amazon , and Gilt.com aim to steer their consumers toward the category that best fits their personal budgets by segmenting gifts into clear price bins.

In the $10 realm, books, movies, and toys will be widely promoted by retailers in stores and online as economical gifts, but with the added hope of enticing shoppers to buy accompanying accessories and get exposure to pricier products.

For gifts that fall under $25, stores will continue to push the price message, but also convey to shoppers that while inexpensive, these products are trendy and offer value. This holiday, fashion and tech accessorieshave taken the reigns as teens and their parents seek out the latest trends. Function, but with a bit of flair, will be a focal point among shoppers.

Despite retailers’ hopes of higher spend, affordable gifts will be a highlight across department stores, discounters, and online shops as promotions and markdowns expand the array of products shoppers will be able to find at bargain prices this year. Click here for a slideshow of gifts under $25.

Questions? Comments? Email us at consumernation@cnbc.com

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