Due to recent conversations that I’ve had with clients in friends, I’ve been thinking a lot about consumer behavior surrounding discounted items. One of my clients attests the following, which I found the be pretty interesting:
The current emphasis on web coupons and social site tie ins neglects another fundamental rule of retailing: guaranteed value. We tend to buy high-priced items at discount because we perceive that we are getting a good deal. But the same psychology works in reverse sometimes. We believe we are being overcharged unless we are getting a discount. Without guaranteed value, we tend to decide to purchase at the last moment, or decide not to purchase in advance because we assume or fear the price will be too high.
In this argument, he goes on to note spending habits on airline tickets, hotel rooms, Netflix and other luxury items like those offered by Groupon. Granted, I’m giving you a snippet of this client’s argument without the full context, but the point is pretty clear. The notion of discounts genuinely changes buying habits for certain items and services. It’s absolutely true that I may decide which mode of transportation (much less which airline) to book for a family vacation. The airline industry, particularly with the emergence of discount fliers like Ryan Air and jet blue, show a pristine example of buying habits and how discounts dissuade consumers from spending money on what once was a pretty average price. However, this mentality certainly doesn’t work for all purchases. Read more