1)http://cl.ly/image/2y1T1L2M1s0e 2)http://cl.ly/image/1a3D3c1J1Z0I
We buy discounted items because discounts tell us which items to buy.
For a given product, there are usually several competing choices, and most people don't have enough time to evaluate whether each one is a good deal for the price it's offered at. So the easiest way to select is to just pick the one that's on sale--or if they're all on sale, pick the one that appears to have the biggest discount relative to the MSRP.
The discount also tells us "you should buy this now, because if you buy it later, the price may go up."
Without this important signal, customers don't really know which one to buy, plus there's no urgency to buy the item now, because it's always that price.
So, while Johnson's approach may have "made sense," and may have worked for Apple products because their market position and product lifecycle makes discounts unnecessary, this strategy really didn't play to consumer psychology, at least in the apparel space.
Exactly. One of the most important concepts out there is urgency to buy. One of the reasons car dealers can't sell at fixed prices. They can't create artificial urgency as easily by making the deal "only good today". If you know you can buy the car (assuming of course no supply issues on the model you want or color features etc) in a week you don't have an impetus to get off the fence and decide.
Separately and related to this is not to make open ended offers when giving pricing if possible. Otherwise people are definitely (from my many years of experience) less likely to make a commitment. This of course varies with the product, price and other factors obviously.
There is absolutely no question that sales, coupons and discounting and specials work.
http://www.businessinsider.com/zaras-genius-business-model-2...
Here are the key paragraphs:
Zara's strategy involves stocking very little and updating collections often. Instead of other brands that only update once a season, Zara restocks with new designs twice a week, Suzy Hansen wrote.
That strategy works two ways, according to Hansen. First, it encourages customers to come back to the store often. It also means that if the shopper wants to buy something, he or she feels that they have to purchase on the spot to guarantee it won't sell out.
Obligatory XKCD on shopping patterns: http://xkcd.com/309/ :)
But who cares if it's average or even poor value at the current discount? My thinking should be, "which item offers me the best value as priced right now"? I think what you're suggesting is that the "full price" gives customers a "hint" about how much to subjectively value the item, which is also sad because the last person I want telling me how much something should be worth is the person selling it to me.
However if we accept that all of the above are inevitable, then we must accept a friction-free experience as valuable. And the poster above is pointing out that whether it's logical or not, the feeling of "I made the smart choice!" by buying the discounted option, provides this easier experience.
At a high level human choices aren't rational which is sad, but we must accept it.
I can accept that but I have to ask: who would have the time to make a deep, rational analysis of the value for everything they buy? At some point I think the quick "discount heuristic" is the more rational choice because it saves time.
On the other hand, for big ticket items (cars and houses) I'd hope people would spend a lot more time making a rational choice.
Alternatively, "you should buy this from the clearance rack now, because it's not going to be here tomorrow"
After all, isn't not accounting for customers' irrationality in your business also irrational?
And while I know that humans aren't rational creatures (in fact it was my research for a number of years), some of this can be fixed with market leadership and "training" customers to understand that they're acting against their best interest by demanding an economy in which marked prices are in fact price anchoring deceptions.
I think that is the sad part.
It's not even clear that fully rational humans would be a good thing. Great art, for instance, doesn't come from being rational. It comes from people with irrational drive and vision.
The largest retailer in the world is Walmart, which doesn't really use discounts except to clear inventory, and advertises "always low prices".
American consumerism does love low prices. The problem is that if you play that game, you compete with Walmart and lose.
Their data mining lets them know exactly what to price Household Paper Products in your zip code so that they're always lower than the surrounding competition while not leaving money on the table. They're not targeting the lowest possible price system-wide.
Walmarts game is a bit different and they can pull it off because of their unique positioning, size and buying power. They also get you to buy things you don't need by their merchandizing. (Similar to how you go into a supermarket for one thing but end up with 10 other things.)
Interesting... how do they do that? I've always found Walmart's retail experience to be about one step above a warehouse club. I tend to go in for what I want and if it's in stock (often times not the case) I buy it and GTF out.
I think the more obvious problem is they're a low-margin business at a time where being low-margin is difficult unless you're the biggest guy with the lowest operating costs.
But people often like games because of the hoops they have to jump through, not in spite of them.
Shopping is a game to many people. You can't "win" unless you get a lower price than other people.
For her, something at a low price point to begin with appears cheap, however you take that same item and slap a high MSRP on it with a 50% discount down to that same first price point... now we're talking!
I replied that I saved more than that by not buying the stuff in the first place.
She couldn't understand what I was talking about.
Comparing them to Sears, Sears practically screams good deal. Its just up to you to figure out if its not. Plus Sears has Craftsman which sets it apart from other Mall retailers. Not sure what JC Penny has.
The only good job I will give them is, of the few sales people I met there they at least would help me. That stood out because in Macy's I was ignored even when I asked - apparently men are not allowed to shop at the mall or certain stores.
it's a very good book. i just gave a friend a copy today (if anyone in santiago is looking for a spanish language copy it's sold out in all the shops but bazuca.cl still have it in stock - i guess no-one thinks of buying books there!)