Getting ready for Black Friday or psychology of discounts.
Updated: Nov 7, 2019
Discounts which are not really discounted.
How to use discounts to your benefit?
This article is a simple explanation of how do online and offline businesses can grow their sales by simply applying 5 discount tricks to their pricing policy. This material is vital for every company owner but also extremely useful for any person willing to know how do companies use discounts and why it makes you buy these products.
Who doesn’t love discounts? The excitement about the Black Friday and mass shopping during the sales weeks is a prove to it. However, I was always curious to know what triggers in our brain react to it. What makes us being happy about buying or consider buying anything «cheaper» ? If you are curious as well, let’s deep into the psychological aspect of the buyer’s behavior.
According to many scientific studies, the product/service is perceived in our minds as a satisfaction and pleasure whereas its price - as a suffering and pain. The pure value of the purchase equals to pleasure minus pain. Meaning that if the pleasure is superior then the price, we are more willing to make a purchase and vice versa.
« The pure value of the purchase = pleasure - price »
Discounts is one of the ways for the company to diminish this pain. You will find below some tactics to implement in the pricing strategy, which will reduce the pain and raise the pleasure during the decision-making process.
Trigger 1. Visual presentation
There are many ways to present the pricing but it was proved that when using promotional signals even a raised price will be perceived as a decreased one. Thus, crossed prices with a new one next to it will always be a trigger to the «reduced pain» for the customer. Whereas some attributes like starts next to the price, classy labels in black and white are sending an «expensive» message to the brain.
Trigger 2. Magic figure 9
When some people say it’s magic, some people don’t believe in it at all, but facts are there: our brain is extremely sensible to the figure 9. An experiment conducted by the Massachusetts Institute of Technology showed that out of three prices (for the same product) 34$, 39$ and 44$, the second one had 23% more of success. You can find more details about this experiment here: https://www.amazon.com/dp/080909469X/ref=cm_sw_su_dp
Trigger 3 Anchoring
Anchoring is about giving higher price at the beginning and bringing it down to the actual price right after. Our brain will still retain this first option and during the decision-making process will subconsciously refer to it. For example, when Steve Jobs was presenting a new iPad, the written price on the screen was 999$, however he would announce that for the launch it would cost only 499$. Moreover, he would you a visual presentation (trigger 1) to reinforce the effect.
Trigger 4. Comparison factors
Following the example of the yearly magazine subscription explained in one of the articles of the Economist, if we have three options
• Digital version subscription 59 dollars
• Printed version subscription 125 dollars
• Printed and digital versions 125 dollars
Our brain will gladly choose… right, the third one. Seems like there is no need any more in the second one, as according to statistics no-one is really buying it. However, its role is crucial: it serves to raise the value of the third option and makes our brane believe that he is about to make a great deal.
Trigger 5. Value of the brand
This trigger is not really a trigger but a science itself. Value of your brand is measured by the extra amount of money the customer is ready to pay for your product/service. For example, a cup of coffee in Starbucks is more expensive than in (almost) any other coffee shop. The difference the customer is ready to pay for it will be the value of the brand.
Personally I prefer the last one, as discounted policies has their own hidden reefs, but we will talk more about it in the next article.