Price reductions and promotional deals (coupons, multiple-item promos like giving bookmarks and other freebies) are generally accompanied by the use of some point-of-purchase materials. Therefore, the relative impact of each is sometimes not clear. Nonetheless, there is ample evidence that in-store price reductions affect brand decisions. The general pattern observed in the United States, Japan, and Germany, is a sharp increase in sales when the price is first reduced; followed by a return to near-normal sales over time or after the price reductions end.
Sales increases in response to price reduction come from four sources.
First, current brand users may buy ahead of their anticipated needs (stock piling). Stock piling often leads to increase consumption of the brand, since it is readily available.
Second, users of competing brands may switch to the reduced price brand. These new brand buyers may or may not become repeat buyers of the brand.
Third, non product category buyers may buy the brand because it is now the superior value to the substitute product or to "doing without".
Fourth, consumers who do not normally shop at the store may come in to buy the brand.
High quality brands tend to benefit more than brands from lower quality tiers when prices are reduced (and to suffer less when prices are raised). Like brands, households respond to price reductions and deals differently. Younger and less educated consumers tend to be somewhat more responsive to deals. Consumers also differ in their psychological proneness to respond to deals across product categories.
Consumers judge store quality and image in part based on the number and nature of reduced price items in the store. Therefore, retailers need to carefully consider their sale price policies in light of both the sales of the discounted items and the impact these discounts have on the store image.
In addition, 'large baskets shoppers'- those who purchase a large number of items at one time- prefer everyday low prices in which all items in the store have relatively low prices but few are reduced beyond that level ('on sale'), to stores with somewhat higher standard prices with many sale items.
Are custom bookmarks from an online bookmark printing retailer priced at $24.95 plus $5.00 shipping and handling a better or worse deal than the same custom bookmarks priced at $29.95 with shipping and handling free? Consumers tend to perceive the former to be a better deal than the latter. Research has shown that partitioned prices (the first scenario above) produced greater demand; and a lower recalled total cost than the combined price (the second scenario). This varies with the size of the secondary charge and the reason for it. In many cases, this discounting of the secondary charged might be quite logical.
In the example, a consumer might reason that the $5.00 for shipping is no more than it would cost to visit a store to buy a similar shirt and therefore is not comparatively relevant. The implications are clearly that retailers should partition prices whenever there is a sound logical reason to do so unless the outlet is striving for a very high quality (and thus high price) image.
These thoughts, samples and scenarios can be your guide in making sound decisions before purchasing certain products and services. For businesses, these can be your guide in knowing how your customers decide. With this, you can make winning strategies that will make it easier for your business to soar in the market industry.
Author Resource:
Troy Duff works as a businessman and currently runs a printing company that offers custom bookmarks , banners, magazines, flyers, door hangers, catalogs, table tents, presentation folders, bookmarks , custom printer and other printed ads.
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