I recall a conversation more than 20 years ago I had with a men's clothing buyer for the department store where I began my marketing career. We were discussing different approaches for promoting sales on men's suits. What was more effective: 50% off or advertising the specific price point that reflected a 50% savings? If I recall correctly, the buyer opted to use the percentage discount as the method for framing the promotional price.
Fast forward to today, and the same questions are being asked. In this tight economy, what are the magic words that will prompt consumers to loosen their purse strings and buy? A recently released report by Information Resources Inc. suggests consumers are motivated to scour retailers' sales offerings in the quest for deep discounts. Furthermore, frequent discounting by retailers has left consumers longing for more, more in terms of deeper discounts. Retailers are responding by stretching the upper limits of their price discounts. Claims of "save 50%" are increasingly being replaced with claims of discounts of 70-80%. In other words, the wow factor of a 50% off sale has been diminished by overuse; deeper discounts are needed to create the desired impact.
Going back to the original question: what's the best way to frame a discount? It appears the answer is promote the percentage savings, but unless it is an eye-popping figure, consumers may sit on the sidelines and wait for a better deal to come along.
Link: The New York Times - "Never Mind What it Costs. Can I Get 70% Off?"
Labels: Consumer Behavior, Pricing, Retailing