Who doesn’t love a discount? For those unaware, discount pricing is a promotional pricing strategy where the original price of a product or service is reduced. Discounts can be a heavy influence on what products one buys. Let’s explore the world of discounts from all angles, both for sellers and buyers, and delve into why discounts influence us.
First, let’s examine the seller or company’s point of view and reasoning. Companies place discounts on products for multiple reasons according to Profitwell, such as “increasing traffic, moving inventory, and driving sales.” For example, a food and beverage company might need to move its products as they may soon expire. A date code provides both sellers and buyers with a transparent process. But, they may also relocate these products to the front of the store, near the checkout counter, and try to increase buying with a discount like “Buy one, get another 50% off!” This discount marketing strategy is meant to catch your eye because it’s next to where one pays and seemingly a deal. The discount may cause one to also impulse purchase, something we will delve in a moment.
Pricewell identifies three types of discounts: “seasonal, clearance, and volume.” The seasonal discount occurs during “specific seasons or for seasonal products.” Clearance discounts are used to “liquidate what’s left in stock” by offering an unusually large discount. Ever heard “everything must go?” Volume discounts encourage buyers to purchase multiple products, with an example being bundling or bulk. Companies that most often use these discount strategies are retail (clothing, beauty, sporting goods and more) and ecommerce (online sales.)
But why would companies want to make their products cheaper? For one, to appeal to their target buyers, especially first time buyers. However for companies, discounts can be a double-edged sword as they can result in increased revenue, but can also lower profitability. When pricing and volume are predictable, one can project the growth of a company. But with discounts, one must factor them into the income statement. Yet discounting creates activation energy. This means, according to Campbell, that a consumer may place less focus when thinking whether to buy a product.
Enter buyer psychology. A brief way to sum up why we can be influenced by discounts is simply psychology and especially the feeling of “scoring a good deal”. Let’s consider the perspective of the everyday person. Some people buy because “it was on sale”. Others buy on impulse. However in a recent 2021 Black Friday Survey, 75% of the North Toronto Students we surveyed did not buy on impulse during this triple discount holiday. But discounts may not always bring pleasure to consumers, for example, one may be introduced to a company’s product through a sale, but when price returns to normal, one may become disinterested.
In the end, discounts are a crucial part of the world of business, and are a primary factor of why people buy and how people sell.