Follow Big Discounts with Smaller Discounts

One Tuesday morning, a shopper you don’t recall having seen before comes in carrying the ad announcing your deep-discount sale from the prior weekend. He says he was out of town.
     Would you grant his request to honor the sale price?
     Most retailers I ask about this say they would not.
     That makes good sense. If people miss a chance to buy merchandise you offer at a substantial discount, you’d like them to feel sorry about it. That way, they’ll stay alert for the next time you announce a sales event. You hold sales to draw traffic into your store so shoppers will buy not only the substantially discounted merchandise, but also the items you’re selling at higher profit margins. You want everybody to notice when there’s a big sale.
     Unfortunately, though, many shoppers who miss a big sale will experience regret in a way which leads them to dislike the retailer and criticize the merchandise. Maybe it’s because people blame the retailer for what was their own fault. Maybe it’s because people want to avoid reminders of the opportunity they missed.
     Studies at University of Miami and University of Kentucky uncovered two ways that a retailer can shortcut the consumer irritation about missing a big sale:

• Use what the researchers call “steadily decreasing discounting.” Before returning the item to its pre-promotion regular price, offer one or more additional discounts on the same merchandise, each discount at a progressively lower percentage than the deep discount. There was no evidence of dislike of the retailer with this technique.
• Offer customers another opportunity to purchase merchandise on sale. You still want shoppers to come into your store, so the sale should be on what the regretful shopper will find attractive. But if this follow-up sale is on merchandise different what was offered in the big sales event, the amount of the discount does not need to be nearly as deep as what was available in the big sales event.

     A recent Wall Street Journal article gives partial credit for the resurgence of profitability at department store chains like Macy’s Inc., Nordstrom Inc., and Kohl’s Corp. to the second of these methods, made possible because of the department store’s broad product range.
     The foundation of both techniques is that a customer coming in seeking a discount often is satisfied with getting less than the full percentage, as long as it is something.

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Follow a Big Sales Event with a Smaller One