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Consumers Want Discounts – Even If Faked

12/23/2013

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The majority of American shoppers think that holiday discounts advertised by retailers are faked, according to a survey conducted by British marketing consultant David Rawlings.

Rawlings’ Google survey, “Before-Christmas sales — Do you believe the discounts are genuine?” queried 1,500 American Internet users, and found that more than 70% of those polled answered “no” to that question.

This is particularly true among retailers in the Northeast with a more mature, higher earning demographic. Among those polled aged 55-64, 90% think that pre-Christmas sales are simply a persuasion tactic to get the cash registers ringing.

Apparently Rawlings did not speak to any JCPenney customers. Under former/current CEO Mike Ullman JCPenney returned to its old playbook of discounts, coupons and price-cuts.

The struggling retailer, which opened its doors early on Thanksgiving like its key rivals Macy’s and Kohl’s, reported a 10.1% jump of its November same-store sales from a year earlier, after its October sales returned to positive territory, up 0.9%, for the first time since December 2011.

It seems that there is a chunk of the American consumer population that wants discounts…even if they suspect the original price is overstated and may never have actually been a retailers’ price.

My premise is that most consumers have no idea what they’ll actually pay for something that is promoted at 25% off. They don’t have the math skill to calculate that a $40 dress at 25% off will cost them $30.

Research on the topic reveals stunning information. American’s are just plain bad at math.

Is it better to get more or pay less? If you think they’re basically the same, you’re like most consumers. And, like most consumers, you’re wrong.

When offered the possibility of 33% off a product or the same product with 33% more quantity, which would you choose?

The Economist sums up the results of a new study published in the Journal of Marketing, which reveals that most consumers view these options as essentially the same proposition. But they’re not. The discount is by far the better deal. As the Economist puts it, because most shoppers are “useless at fractions,” they don’t realize that, for instance, a “50% increase in quantity is the same as a 33% discount in price.”

Shoppers routinely bite on offers that are worse values because they do the math incorrectly, and also perhaps just because they’re infatuated with the idea of getting something extra for free. The prospect of receiving something for nothing has been demonstrated to make consumers do some pretty irrational things, including buying goods they otherwise wouldn’t have and being far more likely to order items online with free shipping, regardless of the overall expense.

It seems as if the psychology power of free may also make us worse at math. In another marketing experiment involving hand lotion in an actual store, researchers sold 73% more when it came in a bonus pack than when it was priced at a discount with the same exact unit price.

Researchers have a term for the phenomenon in which shoppers pay little attention to unit price. They call it “base-value neglect.” Neglect at your own peril.

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