Match Discount Depth to Duration

Shoppers expect that, everything else being equal, a larger promotional discount will be offered for a shorter time. Researchers at University of Nevada-Reno and Clemson University saw this effect when presenting a sample of U.S. consumers a range of discounts from 5% to 50% and asking the consumers how many days they’d expect such a promotion to last. The researchers found that for a pair of jeans, the average estimated duration of a 5% discount was about thirty days, while for a 50% discount, it was about three days.
     The researchers then went on to explore the effects of violating such expectations. What if a high discount percentage is offered for an extended time? What the researchers found is that, unless there is a proper explanation for the violation, shoppers get suspicious of the retailer’s credibility and product quality, with the result that they become less likely to make a purchase from the retailer. This is true even when the perceived incongruity between discount depth and discount duration would result in a better deal for the shopper.
     But the realities of your business operations dictate that you will indeed sometimes want to violate the expectations of a clean match between promotional discount depth and discount duration. In these cases, establish a match by changing the expectations. Dissolve the suspiciousness by giving an explanation. With a large discount offered over an extended time, maybe it’s an end-of-season sale to clear out merchandise. Maybe your supplier has given you a special price break to build brand awareness, and you’re passing on that price break to your customers. With a small discount offered for only a short time, maybe it’s that you want to compensate for the minor inconvenience of shopping while you’re doing store inventory over the weekend.
     Such explanations need to make sense to the consumers as truthful justifications. Otherwise, they’ll increase suspiciousness rather than ease it. When offering the explanations face-to-face, be sensitive to verbal and nonverbal signs of disbelief. And before incorporating the explanations in ads, test out those explanations in face-to-face interactions with customers.
     The general point is to check that your pricing strategy makes sense to your customers and prospective customers. This is true not just with promotional discounts, but also with your standing prices. Give plausible explanations for price decreases so customers better accept your price increases whenever those become necessary.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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