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We freeze in front of a shop window, pause our social media feeds, follow a random link to an unfamiliar website. And for the hundred thousandth time, we realise that the reason is one word – “discount”. And even though we know that the purpose of any discount is to create interest and increase demand, we still react. We take out our wallets or bank cards and no rational argument can stop us.
The customer wants to save money and the company wants to increase profits. And these desires often converge at the point of sale. Discount marketing is a powerful tool in any marketing strategy.
How can you use sales psychology to optimise your discount marketing strategy? How can discount marketing help your business? How can you take advantage of discounts? Let’s get to the bottom of it.
The psychology of discounting
FoMo, or fear of missing out, is a relatively new psychological phenomenon. The term was coined in 2004, but has only recently become popular. 60% of shoppers typically make an impulsive FOMO purchase less than 24 hours after seeing an advertisement. Of course, you should use this carefully and consciously. After all, you want a customer who doesn’t feel that the purchase was a rash decision, an oversight and a mistake.
Discounts, even short ones, make the buyer happier. It has been experimentally proven that receiving a discount voucher when shopping online can increase levels of oxytocin (the happiness hormone) by 14%.
Discount marketing
The ancient instinct of the hunter, the prey, activates the fear of missing out on something, triggering the latent ‘need’ to buy. At this point, the consumer is often disinclined to compare competitor prices and look for other options. Grab and run.
The perceived value of a product bought at a discount is much higher, even if the product doesn’t stand out in any way among its peers. A sense of urgency and the need to act now, even if the purchase was not previously planned.
Caution! To avoid creating false expectations that will be difficult to justify over time, any discount marketing activity should not be a spontaneous decision. They should be planned in line with the overall business strategy.
Types of discount
The psychological impact and influence of a discount on the consumer is largely determined by its type. The most common and popular are
- Percentage discount (“20% off today only”)
- Calculated discount (“$5 off any item”)
- Scaled discount (“$5 off a $50 purchase, $15 off every $100”)
- Bulk discount (“save 10% when you buy 5”)
- 1+1 Discount (“buy one, get one free”)
- Free shipping
- First purchase discount
- Gift Cards
The “Rule of 100”
There are two ways to advertise discounts. Either as a percentage or in absolute terms. A $5 discount on a $50 pair of sunglasses doesn’t sound as impressive as a 10% discount on the same product. And when choosing a $1,000 laptop, a customer is more likely to respond to a $200 discount than a 20% discount, even though it’s the same thing.
“The Rule of 100 states that below 100, percentage discounts appear larger than absolute discounts. But above 100, the opposite is true. Above 100, absolute discounts look bigger than percentage discounts.
In other words, if an item costs less than $100, the percentage discount will attract more attention. However, if the item costs more than $100, the customer will perceive the absolute discount better.
Survey. Emotional pricing
To illustrate how discount marketing influences purchase decisions, Stelvel conducted a survey of 1,000 users of a shopping site. It found that consumers who wouldn’t normally make a purchase on their first visit to the site often do so because of a discount.
- 63% of shoppers will return to an abandoned basket if they receive an email offering a discount.
- 82% will add items to their basket to reach the free delivery threshold.
- 92% will simply register their email address to receive a discount.
- 45% said they would write a review if offered a discount in the future.
A discount can therefore be a decisive factor and a strong motivator for the consumer.
Stelvel Ltd advises to take your time and start small. Test different types of discounts for a few months and analyse the conversion rate in each iteration. The results may surprise you. Discount marketing in pricing psychology works on the level of emotions, which can sometimes be much stronger than logic.