Experiment with Discounts

Women’s Wear Daily is reporting how J.C. Penny Co. Inc. is moving back from the Ron Johnson changes. Discount coupons will, as in the pre-Johnson reign, be abundantly distributed.
     Coupons do attract customers, especially when closely targeted to the shopper’s purchasing predispositions. It’s true that it will spook consumers if you use overly fine targeting. A good example of that comes from, appropriately enough, Target Corporation. When Target used its pregnancy prediction model to send coupons for maternity clothing, baby clothes, and nursery furniture to a high school girl, it initially ticked off and soon afterwards tipped off her father.
     According to a 2012 New York Times feature, Target’s solution has been to accompany the pregnancy coupons with ones for unrelated products, like a lawn mower and wine glasses.
     Now, Forbes says that grocery retailer Kroger is also intentionally including in marketing mailings assorted coupons for items unrelated to what the Big Data predictive analytics guess the recipient of the coupons would want to purchase next. But the reason is different than for Target: Kroger wants to discover more about their shoppers than the Big Data predictive analytics have already determined. In the best traditions of both science and retailing, Kroger is experimenting.
     Among those discoveries is that discount coupons for brands the shopper is already buying increase the probability of subsequent purchase.
     Why would you, as a retailer, want to give a discount to a customer on a product he’s already interested in buying? One reason is that the person might not have purchased the item for a long time. The coupon accelerates the transaction.
     Another reason is that shoppers enjoy pleasant surprises. Consumer behavior researchers at University of Arizona, Arizona State University, and University of Pennsylvania found that just such a practice, used with care, can end up building your profits.
     Customers who are grateful to you will buy more from you, and nothing brings out gratitude more than finding a surprisingly low price on an item the customers had already intended to buy. They’ll buy more from you over time, and they’ll also spend more than they’d originally planned to spend during the shopping trip where they found the surprise special.
     Such discoveries from experimenting with discounts may seem obvious after the fact. But until you try out the variations and carefully analyze what happens and why, those profit-making truths can stay hidden in plain sight.

Click below for more: 
Wean Consumers Off Coupons by Force Feeding 
Accelerate Purchases with WOM 
Entertain Exceptions to Discounting Rules