Consumers inherently have a hunger for the best deal.   The recent recession and somewhat shaky recovery have only increased consumers’ price consciousness.  During the past holiday season, customers churned out deals to consumers even if it meant eroding the bottom line.

Consumers have the upper hand for various reasons:

First, consumers have more tools and access to information.   Retailers no longer get to dictate when to have a sale.  Companies like Hukkster, RetailMeNOt, Tradesy, and Shop It To Me are constantly mining and monitoring retailers for deals.

Second, consumers have certain expectations.  Consider JC Penney’s recent attempts at reducing the number of sales and discounts.  Even though the prices were lowered to an everyday low pricing strategy, the psychological shift was too much and alienated JC Penney’s core customers.

Third, there is a psychology to discounting.  Discount shoppers are less loyal and many customers love the thrill of a low-price discovery.  Price-matching policies help retailers retain loyal customers, but often they erode the bottom line. Some research shows that offering personalized discounts to targeted customers doesn’t work because it eliminates the “discovery” of the deal.

Fourth, daily deals hurt profits and rarely retain new customers.   Small retailers flocked to companies like Groupon because the daily deal site helped them attract new customers. However, these retailers quickly discovered that bringing in new customers on a deal that lost the company money didn’t bring the customer back for the full price items later.

Finally, some retailers should embrace deal sites like Hukkster, RetailMeNot, Tradesy, and Shop It To Me because these sites can provide valuable customer insights about customer shopping and search habits.  These sites can also help retailers move inventory that might be difficult to discount otherwise.

Discussion Questions:

1. Describe the discount-oriented shopper?

2. What are some of the reasons discounts are so important to consumers?

3. How do you get the best value for your purchases?

 

Source: Daphne Howland, www.retaildive.com, February 25, 2014; Ingram Publishing Business Unit Rights = McGraw-Hill Companies Asset Source= Ingram Publishing