To make full use of your retail point of sales system, nothing brings customers into the stores quite like deep discounts, right? After all, promotions like Black Friday are known for door-buster deals, BOGO, or 50 percent off on a second item after buying the first at full price. These promotions certainly paid off this past year, as the average shopper spent over $335 per person in post-Turkey Day deal hunting, according to data compiled by the National Retail Federation.
But is it possible that discount-related promotions are exercises in futility? In other words, are they targeting the right people, prompting them to buy when they wouldn't if products were at full price? A recent study suggests retailers may be missing the mark by lowering prices unnecessarily.
Poll: Buyers often unmoved by lowering prices
More than half - 52 percent - of the sales promotions retailers use on a regular basis are directed to customers who are uninfluenced by price, based on newly released findings from retail analytics firm Revionics. In other words, a majority of the discount promotions retailers use to entice customers to buy are being recognized, but the people doing the purchasing often already made up their minds.
The retail industry is in the midst of a transition period, as owners adjust to customer preferences that have resulted in an increase in e-commerce traffic but a dip in brick-and-mortar purchases. Holidays - particularly the nationally recognized ones - often serve as retail gold, with customers expected to spend $18.2 billion for Easter, based on estimates from the NRF. Nearly 28 percent of shoppers plan on buying online.
Nearly 28 percent of shoppers plan on buying online.
Aiming to earn buyers' patronage, retailers will often lower their price points during holiday events. But as polling from the NRF suggests, they may not necessarily have to, as 1 in 5 respondents said shopping online or in-store was one of the ways they always take part in Easter festivities.
"We continue to see consumers across ages, genders, regions and disposable incomes participate in this holiday," said Phil Rist, vice president of strategy at Proper Insights.
It isn't just Americans who frequently buy regardless of what products or services are priced at. The same is true for customers in other industrialized nations, as the Revionics poll included responses from shoppers in the U.K., Germany, Brazil and France.
Deep discounts may be promoted needlessly.
Budget buyers easily misidentified
This isn't to suggest that BOGO, free shipping or other incentives don't have their place. Few would deny that they've never bought something when blockbuster discounts were advertised. But the manner in which promotions are strategized and balanced can be easily miscalculated. This includes those instances when retailers raise prices on items due to supply and demand or to improve margins. For example, when going into a purchase with a particular price point in mind that turns out to be higher, 60 percent of respondents in the poll said they'd do something else in order to buy at their desired price, like waiting it out until the cost lowers or seeking an alternative seller.
"Today's shoppers worldwide are incredibly savvy and discerning," said Cheryl Sullivan, Revionics chief marketing and strategy officer. "Retailers who want to effectively reach their customers with meaningful prices and promotions must embrace a science-based approach now if they want to remain relevant and competitive."
Examining polling data can also prove prophetic in determining what promotions work. For instance, data from the National Retail Federation suggests the effectiveness of sale promotions may be a function of what customers are shopping for. Sixty percent of grocery shoppers said coupons influenced what they wound up purchasing in supermarket aisles. Coupons can also pay off for those who enjoy dining out, as 37 percent indicated coupons played a role.
What customers hear on the street among friends, family and co-workers about a particular business can also prove pivotal, especially for restaurateurs. At more than 37 percent, over one-third of respondents in the NRF poll said word-of-mouth most affected where they went out for breakfast, lunch or dinner.
Perhaps more than anything else, though, today's customers like and have come to expect variety. And retailers can scratch this itch by investing in integrated payment systems. Studies have shown that when businesses give their customers a menagerie of purchase methods, they're not only more likely to buy, but spend more.