Hide the Discount for Cognitive Purchases

Knowing an item is at a sale price can be enough motivation for the shopper to place it into their ecommerce shopping cart even when the shopper doesn’t know what that price is. A team at Stephen F. Austin State University and The Pennsylvania State University studied the tradeoffs in a retailer using these hidden price promotions. Mystery, along with perhaps the surprise of being asked to move toward purchase blindly, could be exciting for the consumer, adding to the fun of the transaction. On the other hand, excitement could generate expectations of a large discount, which if unfulfilled, would disappoint the shopper in the retailer’s pricing practices.
     The core question: Are people more likely to purchase the item than if the sale price had been stated at the start? The researchers’ answer is that yes, they are, for cognitive purchases. These are purchases made for mostly utilitarian reasons, with a greater interest in the result of using the item than in the hedonic pleasure derived during use. As examples, the researchers give office supplies as a cognitive purchase, a vacation as a hedonic purchase, and a laptop as either cognitive or hedonic, depending on how the purchaser intends to use it.
     Hidden price promotions in ecommerce have similarity to a physical store’s tensile pricing promotions—ads which attract shoppers using an “Up to xx% off” format. In both, the person doesn’t know the actual price until making that first move—putting it into the ecommerce shopping cart or visiting the physical store.
     Consumers are, by and large, optimistic. If you advertise “Up to 40% off regular prices,” they’ll think the item they’re seeking will be one of those tagged for close to the full discount. With this tensile pricing promotion, you’ll attract almost as many shoppers as you would have if offering the 40% cut on all items.
     Similarly, shoppers exposed to a hidden price promotion have optimistic expectations. The researchers say that discount overestimation will be reduced, however, with utilitarian purchases because the shopper is depending on cognition. We all realize that retailers limit discount depths in order to stay in business.
     If you’re convinced the discount amount will please the shopper, the excitement benefits of a hidden price promotion argue for using it with all items. But if the discount amount might fall short of expectations, be cautious using a hidden price promotion with hedonic items.

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