Navigating the sales: cues to influence consumers

It seems like sales time is upon us again, although some retailers seem to be in a state of perennial discounting. I have been reading up on some of the research into how people react to sales and discounts and how retailers can use sales and discounts to their profit-boosting advantage. Unsurprisingly, that is a massive body of research, and it gives a lot of insight into not only the retail industry but also the cognitive reasoning strategies of the human mind.

One of the research papers I was reading referenced an article in the Harvard Business Review, which Oregon State University has made publicly available as a PDF here. It summarises a small sample of research findings regarding the effects of pricing on consumers, and is an easy read. The article is almost 10 years old now, so it’s interesting to think about both in terms of what is probably still true and what might have changed as the consumer landscape has evolved.

Have a read of the article and see what you think. Here are some of the findings it discusses, as well as my own thoughts about whether such findings would still hold true today:

  • If you ask an average supermarket shopper what the price of an item is after they’ve just taken the item off the shelf, less than half of the shoppers will give an accurate answer.
    I don’t find this particularly surprising for people of a particular economic position who aren’t being incredibly careful with their grocery spending – such a person is probably buying an item that they’ve bought before or is very similar to something they’ve bought before, so they probably know they can afford the price even if they don’t explicitly know what the price is. And I think once you get past perfunctory grocery shopping, people will start to know the prices of items better – if someone has just picked up a pair of jeans they intend to buy, it’s much more likely that they’ll know the price off the top of their heads, compared to if they’ve just picked up some milk or half a dozen eggs.
  • Consumers pay attention to pricing cues such as sales signs, but retailers should be careful not to put too many sales signs out – a sale that’s too extensive seems to cheapen the products under certain conditions, and people are actually less keen to buy if there’s a profusion of sale signs absolutely everywhere.
    I don’t know what contexts this is true for, because I think an established and respected department store, for example, could put a prodigious amount of sale signage out during sale time and people wouldn’t perceive the whole store as being “cheapened”. But if a store were to do that constantly, then I could certainly understand that it might have a cheapening effect in terms of people’s perceptions.
  • We seem to use prices that end in a 9 as a cue to a bargain. In one experiment using a mail order catalogue, demand for a dress was higher when it was priced at $39 than when it was priced at $34. This is possibly because some retailers at some point did use prices ending in 9 for sale items (the article doesn’t say exactly when or where or to what extent, although it does say that J.Crew and Ralph Lauren used 00-cent endings for regularly priced merchandise and 99-cent endings for sale merchandise, which as far as I know is still true of J.Crew).
    I think the price-ending-in-9 being used as a pricing cue to get the attention of consumers is something that has already been capitalised on, really, and therefore possibly isn’t true any more (or isn’t as true as it once was). I think enough retailers use prices that end in 9 for all their stock these days that consumers don’t have any sort of implicit assumption that 9 equals a bargain. I just had a quick look at the online stores for three major mid-range Australian clothes retailers and all three of them have prices that are in the format of either $xx9 or $xx9.95 for basically all full-priced items. I guess to a certain extent that little trick still works, as on a moment’s judgement $89 seems quite different from $90, and it makes it that little bit more difficult to do the mental arithmetic when buying multiple things. But I think a lot of people simply don’t have that mental association between a price ending in 9 and a sale price. Plus I think with the rise in popularity of online shopping and the possibility that people will be shopping in different currencies, fitting the price to particular formats is perhaps increasingly obsolete.
  • Retailers use signpost items, so: even if people aren’t great at knowing or guessing the prices of a lot of things, there are some items that a lot of people might be familiar with when it comes to pricing. Retailers place such items prominently and at a considerable discount, which makes people think “Oh hey, that’s pretty cheap for that item – the rest of the stuff in the store is probably cheaper than average as well, perhaps!”. And that is why supermarkets always have packs of Coke or Pepsi or whatever out the front. They often lose money on those items because they discount them so heavily to attract people into the store.
    I really hadn’t considered why there are almost always cans of drink stacked up outside a supermarket, but know that it’s pointed out, it’s kind of obvious in retrospect.

    It is incredibly interesting to consider these points from the standpoints of both retailers and consumers. As a consumer, being aware of tactics that might be employed to coax you into a purchase is empowering. However, these tactics are unlikely to remain static – as consumers grow wise to current tactics and as their access to information increases (both in terms of understanding how retailers operate and in terms of having alternative options available in an increasingly busy global marketplace), retailers will have to keep changing their game. I would be very interested to know exactly how those tactics have changed in the 10 years since that article was written – the changes have surely been drastic, and the changes in the future will probably have to be even more innovative.

12 Thoughts on “Navigating the sales: cues to influence consumers

  1. No point to this comment, but it’s interesting I remember reading back when I was in school about there being a whole psychology of odd vs even pricing. I’m not remotely eloquent so in my crude, paraphrased manner: Odd pricing tends to feel bargain/cheap like, “9.99 are you out of your mind???” Where “even” pricing is more refined or higher-end. For example: at Forever 21’s sale section prices end in .99 vs. Saks sale section ending in .50

    • Jess on June 13, 2012 at 1:44 pm said:

      Ah, that’s rather interesting – I’ll have to have a rummage through the databases to see if I can find the research that covers that. I wonder whether it’s some sort of implicit association based on something else (is there another context in which even numbers have one connotation and odd numbers have another? – I know that psychological research has shown that people generally prefer even numbers, in a variety of contexts, ostensibly because even numbers seem more “balanced”), or if people specifically learn the association from being exposed to such pricing.

  2. Interesting research! It’s actually nice to be able to read the full paper. It seems however that their observations apply more to the usual year-round time than the punctual but recurring sales season for clothes.
    For example, when they say demand falls when too many items are on sale, or that items on sale may be perceived to of a lesser quality so they need to cut the price to sell it, does it really apply during the sales season when most of the clothes collection is expected to be reduced?

    I would be curious to see what kind of price cues would work especially during the sales season, such as private invitations a few days beforehand, waiting for the second wave to discount the piece even more… Some all time classics are never on sale (some bags for example, or pairs of jeans) how do these sell during the sales season?

    Anyway, I agree with the fact that a bargain is not really a bargain if you hadn’t planned to purchase the item in the first place. In my case, the first question I ask myself when I’m about to buy something is “wait, do you need it? Would you buy it if this was the regular price during the regular season?” It makes me put back the piece on the hanger most of the times…

    • Ah this isn’t really the full paper, more of a magazine article or editorial summarising the results of papers. There’s a lot more detail in the original research (but that’s one thing I hate about articles like these – they don’t have citations and references, so I can’t locate the original research particularly easily!). I would provide full research papers if I could, but I’m just a bit wary of the copyright issues (as much as I disagree with the academic publishing system and the notion that largely tax-payer-funded research then requires expensive institutional subscriptions to access). Some articles are free to the public without subscription, though, so I’ll make sure to point out in the future if any papers I write about are freely accessible.

      I agree, the findings mentioned in the article were largely relevant to pricing cues in general, year-round, but it’s interesting to think about how the findings could be extended to more intensive sale seasons. As I said, maybe having a lot of sales signs around all the time is a bad thing, but a store could put a sale sign on everything for a period of time, such as during a sale season, and probably not change people’s perceptions of the store too much. That might especially be the case if they work to cultivate an image of prestige the rest of the time – then a lot of people would be probably even more enticed by extensive sales because they think they’ll be saving even more money on items that would otherwise be (subjectively) very expensive. It’s possibly the contrast between the non-sale and sale prices that drive people to spend more. That would also explain why online retailers allow you to shop by discount during sales – 30% off, 50% off, 70% off or whatever. I’ve always found that an interesting ploy, because personally I’m not going to buy something just because it’s 70% off, but I think a lot of people would be prompted to buy something that they might otherwise not buy, simply because the discount from the non-sale price was so significant.

      I wonder if classics that are never on sale do sell better in sale season simply because people are in the mindframe of spending money (even if they anticipate spending less because of the sales). And perhaps they feel that the savings they have made compensate for buying an item full-price. I always feel a bit lame buying a full-price item in the middle of the sales (and usually make some lame comment to the salesperson about how I’ve managed to find basically the only thing in the whole store that’s not on sale), but I imagine it might actually be quite common.

  3. ah, so true and this is something that’s endlessly fascinating to me too. it’s always a delicate balance when it comes to the siren song of sale season! though i think i’ve done well with the NAP sale this season and picked up a few excellent deals. but it’s always good to quit while you’re ahead :)

    • Over the seasons I’ve finally figured out how to deal with NAP and its siren song, haha. Items on my wishlist only go onto my “favourites” list if I’ve thought about them for a good long time and have comprehensively considered how well they would fit into my wardrobe, and then during the sale I only buy items from that favourites list (which usually doesn’t have more than 4 or 5 items, not all of which I will buy). It’s like a slow editing process that stops me from being tempted by the things that I kind of like but don’t really need (not that I really need any of it, per se, but you know). Still waiting for the international NAP’s sale myself (shipping to Australia is almost half the price of the shipping on the US site, plus I still have store credit I can use from when NAP lost that Proenza Schouler bag they were supposed to get repaired for me :|).

      • wait – is there more drama to the PS1 bag? NAP lost your bag?? sheesh. :( that’s a hard-earned store credit for sure! what will you contemplate spending it on? :)

        • Jess on June 14, 2012 at 9:09 pm said:

          Ah, the saga is briefly summarised here, but yeah, they lost my bag but refunded me in full and also gave me a £50 store credit as a token of good will because their communication was so poor throughout the whole ordeal. I’ve been keeping the credit to use in the sale because none of the items on my favourites list has gone to “low stock” status, so I’ve been willing to play the waiting game. And the incident with my bag was obviously a very unfortunate one-off kind of occurrence, so I’m not put off buying from NAP at all, for better or worse!

  4. Hippocampe on June 14, 2012 at 2:21 am said:

    It’s fun to read these academic papers, I feel like a student again, I even take notes with my fountain pen, like in good ole times, ahah.

    OK, on topic : I was under the wrong impression that sales season was department stores’ last chance to make profit out of dead stocks. After reading this paper you were so kind as digging up for our information (thanks), I understand they’re part of a global pricing strategy to “convey an overarching image of low prices” (without actually lowering all your products’ prices, of course, that would be detrimental to business), by the use of sale signs, prices that end in 9 or, more subtly, signpost items (I’ll be in the lookout for them from now on…a new game to play in stores). So discounts increase the sales of all the store’s products – non-discounted items included – by encouraging customers to flock to the stores in search of good bargains. I’m curious about the proportion of discounted items sold, compared to items sold at full price during sales season. Especially as “customers interpret sale items as leftovers from previous seasons or mistakes”. Which category yields the higher profit ?

    I’m wondering, too, about the impact of the internet on these “pricing cues”. I suppose customers are compelled to buy all their products at the same site to cut on shipping costs, as they are used to buy all products in supermarkets to gain time. They may thus be deterred from buying product A at site X and product B at site Y and compare prices of each product they intend to buy. So I guess the pricing cues are still be relevant in digital commerce.

    Hey, you didn’t mention the survey’s happy ending : that honesty about quality and price will pay in the end. Why, don’t you find this outcome uplifting ?? You, hard-core cynic ! :)

    Came across this quote, I find it appropriate for sales season :
    http://putthison.com/post/24858148908/jeeves-wooster-on-trousers

    • Unfortunately that article wasn’t really an academic paper, but I kind of wish it was because it has raised so many questions and if it was an academic paper it would be full of citations and references so I could go and look up the original research and get some answers! That’s a bugbear for me these days, whenever an article or piece of writing anywhere asserts something without referencing where the original information came from – I’m like “You can’t just say that, how do I know it’s true?!” haha. Like every time I read a fashion blog post that says “They say you wear 20% of your wardrobe 80% of the time” and my brain just screams “CITATION NEEDED!” :)

      I do wonder what stores do with stock that seriously just does not sell. There seem to be a number of different approaches, but I’m not sure how any of them truly end. Here in Australia, our more “prestigious” department store, David Jones, actually wheels out old, old stock during the sales, with the same sale stickers as during multiple previous end-of-season sales, and that sits alongside the racks of just-reduced-for-the-first-time items. (Presumably they eventually do get rid of old stock somehow, if it hasn’t sold in multiple end-of-season sales.) Another department store, Myer, doesn’t ever seem to bring out old stock for sales, and end-of-season sales only consist of items from the season that just ended. So there seem to be different approaches in terms of what major sales are used for, but I still don’t know what happens to unsold stock after that (other than it might potentially go to outlet stores).

      And yes, it would be interesting to know how much full-price stock sells during sales season. As I mentioned in another comment, it might be the case that people are in spending mode (even if they hope to spend less because it’s sale season) so maybe they still end up buying a reasonable amount of full-price stock, and perhaps the fact that they’ve saved money on various purchases makes them feel like that compensates for buying a full-priced item (that seems to be a common line of reasoning, at least judging from sentiments I’ve seen on online forums, with comments along the lines of “I saved $100 on one item, so then I felt like I could buy this other item for $100 and it was like getting it for free”).

      Haha I think I glossed over that ending about honesty paying off! Given the number of papers I’ve seen that are essentially about taking advantage of consumers (and how that has, on various occasions, led to court cases and prosecutions for unfair trading) I guess I am a tad cynical about it, true. ;)

      Ah, Jeeves and Wooster – now there are two gentlemen who know how to dress. ;)

      • Abby on June 15, 2012 at 1:14 am said:

        It drives me nuts that the “80/20 principle” is cited all over the place, especially in wardrobe discussions. Those aren’t its origins at all (I honestly forget the whole story of where it comes from, but it was a fairly narrow scope related to business), but people like it and apply it to any number of contexts.

        Regarding where clothes go to die – I worked at an “upscale” retail store for a while, and we did our best to divest ourselves of old merchandise by using mark downs. Every once in a while, a dead item at our store would be in demand at another store, so we’d ship what we had left to them. And other times, we sent large amounts to stores that were having events of some sort or another and who needed merch.

        Inventory management is a huge interesting question for me in retail. I’d come across ancient items in the backroom that could have sold months or years ago, but because of poor inventory management, they lingered.

  5. first time here and am a fan already. I love this topic being someone who loves to shop but also like not to get ripped off. initially I use to buy everything (sale, no sale, good quality, bad quality) and then I worked in the fashion merchandising industry. that experience changed my whole perception on clothes, shopping, fashion, etc. I became jaded and sort of angry with how I felt the industry was ripping everyone off. bleh, I can go on and on but I need to stay positive.

    will be checking out your previous posts! thanks~

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