Can’t Say No To Promotional Offers?
Six months into this bizarre year — and after four months of living in an actual pandemic — we are beyond the point of debating whether or not the COVID-19 crisis will change human behavior. Yes, our behaviors have changed substantially, and no, not everything is a permanent change. But experts have come to the consensus that one behavior has seen a definite change: online shopping. As per the Adobe Analytics Digital Economy Index (June 2020), US consumers spent $73.2B in online spend in June alone, up a whopping 76.2% from last year.1
As someone who has spent nearly every penny I’ve saved from transportation on online shopping, I don’t disagree with the numbers. However, as an eternal optimist, I must add in the same breath, the experience of online shopping during a pandemic has been an opportunity for the behavioral scientist in me to learn a little more about the weird attraction we have towards “discounts”. You might argue I could have learned this by reading a few papers, but where’s the practical experience in that?
Sale! Sale! Sale!
Let’s start our journey into the world of discounts with the very anti-climactic story of JC Penney. For the longest time, JC Penney, a famous American retailer, gave out discounts like candy.2 Of course, the retailer used the age-old trick of increasing the prices of the items and then discounting them to create a sense of a bargain. But, people loved shopping there because everything was at a ‘low price’.
All was fine, until the day Ron Johnson joined as the CEO of the company in 2012. He decided the company must be fair and honest. He introduced the no-coupons, no-discounting “fair and square” pricing, removing all the lovely discount tags, instead opting to show the actual price of the product. That’s where the anti-climax happens. Instead of being grateful that a retailer was being honest with them, customers hated it. What’s the fun in shopping if you can’t hunt for a bargain? With a dramatic fall in sales, all the company could do to save itself was fire Ron Johnson and bring back the discounts. That’s right — they increased their prices and put them on discount again, and customers flocked back.
So, what subjective gain do people get from a discount that they don’t get from a low price? Turns out, it’s all in our brains!
References
- Adobe Analytics, Adobe Digital Economy Index June 2020. Retrieved from https://www.adobe.com/content/dam/www/us/en/experience-cloud/digital-insights/pdfs/adobe_analytics-digital-economy-index-2020.pdf
- https://business.time.com/2013/05/02/jc-penney-reintroduces-fake-prices-and-lots-of-coupons-too-of-course/
- Kahneman, Daniel, & Tversky, Amos. (1984). Choices, values and frames. American Psychologist, 39, 341-350.
- Meyer, J. P. (1980). Causal attribution for success and failure: A multivariate investigation of dimensionality, formation, and consequences. Journal of Personality and Social Psychology, 38(5), 704.
- Schindler, R. M. (1998). Consequences of perceiving oneself as responsible for obtaining a discount: Evidence for smart‐shopper feelings. Journal of consumer psychology, 7(4), 371-392.
- Darke, P. R., & Dahl, D. W. (2003). Fairness and discounts: The subjective value of a bargain. Journal of Consumer psychology, 13(3), 328-338.
- Image source for Happy Hour: https://pixabay.com/photos/neon-neon-font-advertisement-170182/
About the Author
Preeti Kotamarthi
Preeti Kotamarthi is the Behavioral Science Lead at Grab, the leading ride-hailing and mobile payments app in South East Asia. She has set up the behavioral practice at the company, helping product and design teams understand customer behavior and build better products. She completed her Masters in Behavioral Science from the London School of Economics and her MBA in Marketing from FMS Delhi. With more than 6 years of experience in the consumer products space, she has worked in a range of functions, from strategy and marketing to consulting for startups, including co-founding a startup in the rural space in India. Her main interest lies in popularizing behavioral design and making it a part of the product conceptualization process.
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