Qualify Discount Effects by Item Quality

Analyze records on the reasons for your promotional discounts along with the amounts of discounts. The more you do this, the better you’ll get at using promotions. And as part of it, you might solve some puzzles about why certain discounts of equal amounts on seemingly comparable items produce widely varying degrees of sales lift.
     The reason, according to a set of studies at Miami University, could be that consumers have different quality perceptions of the items. The researchers saw how discounts on items viewed as of high quality are substantially more effective than are discounts of equal amounts on items viewed as being of lower quality. Another way of viewing this is that a smaller discount is necessary to achieve the same sales lift on higher quality than on lower quality items. And still another angle is saying that to get the best from your promotional discounts, highlight the quality of the discounted items.
     The dimension of perceived quality also comes into play when analyzing discounts of equivalent percentage or dollar amounts on house brands versus national label brands. Researchers at Monash University explored the situation in which a retailer introduces a value version of a house brand to add to a premium version on the shelves. Here’s what happens:

• Prior to introduction of the value version, the premium version is likely to be considered by consumers to be of standard, not premium, quality. 
• After introduction of the value version, consumers’ quality assessments of the premium version increase. 
• If a premium version is introduced to an existing value version, the assessment of the value version doesn’t change noticeably. 
• The price consumers expect to pay varies directly with their perceptions of the quality. 

     On the other hand, researchers at Miami University and France’s ESSEC Business School found that addition on store shelves of a value version to a premium version of a national label product leads to lower quality ratings of the premium version. The researchers used as examples the introduction by Charmin of a lower-quality Charmin Basic product and Foster’s Beer producing a lower-quality Foster’s Grog.
     All this is a reminder to discover not only how well a promotion is working, but also why. The best promotions pull a variety of triggers. A prospective purchaser might respond to one more intensely than to another, and every prospect is more likely to purchase when there’s a bunch of triggers.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Analyze the Details About Your Markdowns
Raise Prestige of House Brand Premium Label
Uncover Why Your Advertising Works
Moderate Discounts to Project Quality