Monday, June 3, 2024

Upsell the Discounted Purchase

A $50 price break on items in a merchandise category draws shoppers. Once the shoppers arrive, we almost always prefer that they purchase the higher-priced alternative in that category covered by the discount. A tactic for giving a nudge toward this is offering the price break as non-integrated rather than integrated.
     The definitions of integrated and non-integrated were developed by researchers at University of Hong Kong, Hong Kong Baptist University, Chinese University of Hong Kong, and Shanghai University for use in their studies which demonstrated the value of the tactic. An integrated price reduction is a discount shown directly on the price statement for each applicable item, as in the format “$179.99 each regular price. Now $129.99. Save $50.” A non-integrated price reduction is presented in a form separate from the item’s price information, such as via a coupon with a promo code to get $50 off the regular purchase price of applicable items.
     The researchers find that, compared to the situation with an integrated discount, shoppers are less likely to be thinking about the final prices of the item when using the non-integrated discount. The result is that the difference in prices between a lower-priced, less desirable item and higher-priced, more desirable item is psychologically smaller. The difference between regular prices of $22.99 and $40.99, each to be discounted by $10 with a promo code, feels smaller than does the difference between the discounted prices of $11.99 and $39.99 as shown on the price tags. A feeling of smaller additional financial outlay to upgrade achieves the objective of nudging the shopper toward purchasing the higher-priced alternative.
     Studies at Tilburg University and Macquarie University address the same objective when a retailer is using a multiple quantity discount: What difference does it make whether you say, “Buy two, get 20% off on both,” or “Buy two, get 40% off on the lower-priced item”?
     Overall purchase rates were about the same with either. Yet the two alternatives did result in different ways of selecting the items to purchase. For the “40% off on the lower-priced item,” shoppers tended to select a more expensive second item than under the “20% off on both.” Helping this along is that 40% looks larger than 20%, even though the 40% applies to only one of the pair. Shoppers want to maximize the return from the 40% discount, so they’re more open to a higher price point.

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