Discounts are appearing like ghosts now—you turn on the lights—and they are gone!”
Remember Flipkart’s ‘Big Billion Day’? It was a frenzy. Thousands of people logged in, their servers went down, the discounts seemed unbelievable, until one checks the list price and realize that most of them were false promises. So what are these mega offer days all about?
How do these companies achieve enough momentum to solicit people to buy things?
Not just Flipkart, but many retailers also follow this strategy. The sale takes different names: Amazon’s ‘Freedom Sale’, ‘Diwali Sale’, ‘Stock Clearance Sale’ and so on. We are all wooed by deals that say “flat 30% – 50% off”. The problem is that shoppers still use MRP and the sale prices as a reference point in order to help them figure out an item’s value. So when we find a leather jacket MRP at Rs. 8,500 and at a discount of 40%, it is hard to resist buying it for Rs. 5,100. We think we got a very good deal—never once pausing to think if anyone would actually buy that item for the original list price.
What often happens is that the product’s price is marked up before giving a discount, and then on such higher marked up price, a discount is offered, thereby actually there being no discount offered to the customer. It is very important to confirm the MRP on which the discount is being offered before making the purchase – this can be done by checking the same product in other retail or e-tail stores.
Several companies also use a pricing strategy called ‘hi—low pricing’..
As per this, a company marks items at a higher price and when it’s popularity has passed, it sells the product at a discount to customers. The customers who fall prey to this strategy are the ones who do not have a clear idea about what the products price would typically be and have a strong belief that “discount sales = low price”.
Retailers have trained customers to shop for deals. Now people won’t buy anything if there are no discounts. The common assumption that people have about discounts is that retailers stock up on goods and then discount the ones that don’t sell, losing profits. But that isn’t the case. Instead, big retailers work backward with their suppliers to set starting prices—that after all the discounts—will yield the profit margins they want. A lot of the discount is already priced into the product. This means that initially, the product will be very highly priced, when the targeted quantity is sold, the product will then be available at a discount, thereby the seller making the required profits on an overall basis.
“Just because it is on sale, it does not mean you are actually saving money!”
The one thing that is evident now is that ‘prices have lost their integrity’. Customers don’t care how much an item costs anymore -they only pay attention to the offer they are getting. You feel smart, you feel happy, and you feel special because you managed to get this offer. The stores are playing on customer’s emotions.
The rise of e-commerce has made it possible to track pricing on the web and see how much time products spend at their list prices. “Compare Hatke” (Buy Hatke) is a good platform that shows you the pricing trend of the product over the past few months. Now you can see if the offer you are getting is real or not.
In a lot of ways, the competition between the companies for customers keeps a check on the pricing. But companies are increasingly getting smarter at marketing, hence it is important to think rationally and not be swept up in the frenzy of the largely falsified ‘discounted world’.
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