Comment by kyllo | Hacker News Reader

Comment by kyllo | Hacker News Reader

Parent Full thread

People don't buy discounted items just because the price is low.

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.

"plus there's no urgency to buy the item now"

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.

You can create urgency another way. This was a really interesting summary to me.

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/ :)

The discount also tells us "you should buy this now, because if you buy it later, the price may go up."

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.

It's not a matter of "sad" or not. It's a matter of: how do you rationally evaluate the value of one crappy garment versus another? There is total information asymmetry, since you have more or less no information about the garment other than it was made in Vietnam. So you use the retail price as a signal because that's all you have.

You're running something of a fool's errand arguing this point. Of course you're right. It's sad on so many levels that retail stores are important, that fashion is important, that fads, trends, and other trivialities are important.

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.

>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.

Good point

I recently purchased a projector from amazon. I actually used the original price in my comparisons. For example, a heavily discounted projector with few reviews left me wondering the reason for the discount. Overstock? Overpriced for its actual performance? I felt much safter purchasing a projector with a relatively modest discount.

Is that box of crackers worth 4.29, which is its price when other crackers are on sale, which is half the time, or is it 2.99, its own sale price, which it is the other half of the time?

you should buy this now, because if you buy it later, the price may go up

Alternatively, "you should buy this from the clearance rack now, because it's not going to be here tomorrow"

Reply on news.ycombinator.com