Stack Discounts for Thrust or Surprise

With stacked discounting, a retailer piles a second after a first. “Now take an additional 25% off the already 20% discounted price.” What are the best ways for a retailer to present stacked discounts?, asked researchers at University of Virginia and Virginia Tech.
     The answer is that it depends on whether the shopper encounters both discounts at the same time or at separate times in a way that the second discount is a surprise. The ecommerce shopper might see the first discount while browsing through the pages, and then a screen pops up reading, “An additional 25% off the discounted price for new customers!” The two discounts have been seen simultaneously. Or a consumer might have seen an ad for the 20% discounted price last week and today sees the updated offering as part of a closeout sale. The two discounts are seen sequentially.
     The studies found that with simultaneous presentation, the first percentage discount the shopper sees assumes an outsized role. If we’ve designed the announcement of the discounts in a way that we can predict which will be seen first, make that first discount the larger of the two. If we don’t know which will be seen first, it doesn’t matter which of the two discounts is larger.
     The same rule operates for surcharges as for discounts. The researchers used as an example a baker who charges $17 for a standard-sized cake, levies 10% more for a large cake, and an additional 5% for a custom design. The relative sizes of the surcharges won’t matter for price perception if all the figures are presented at once.
     With sequential presentation in which the second discount comes as a surprise to the consumer, it works differently. The second discount has more influence than the first in the shopper’s perception of how good a deal they’re getting. In this situation, it’s best if the second percentage is the larger of the two. There could be more than two steps in the stack. In Expiration Date Based Pricing, the retailer progressively lowers the price of items as the expiration date approaches.
     Whether with simultaneous or sequential discounts, shoppers may estimate the total off the original price, and that usually results in overestimation. With a 25% discount off of a previously discounted 20%, the discount from the original price is 40%, but most people judge the discount to be closer to 45%.

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

Click below for more: 
Set Price Anchors with Price Adjacencies
Dazzle Customers with Surprise Gifts
Try Out Dollar Over Percentage Discounts
Orient Shoppers to Appreciate Discounts
Externalize Surcharges in Partitioned Pricing