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It's a sad state of affairs in American consumerism that folks are attracted more to discounts than low prices. Johnson's plan made sense: lower prices to what
by siglesias 14y ago
It's a sad state of affairs in American consumerism that folks are attracted more to discounts than low prices. Johnson's plan made sense: lower prices to what average selling prices are during promotions and cut back on promotions. Lower noise. Less discount anxiety. Too bad consumers aren't strictly speaking rational in this way (1, 2).
1)http://cl.ly/image/2y1T1L2M1s0e http://cl.ly/image/2y1T1L2M1s0e
2)http://cl.ly/image/1a3D3c1J1Z0I http://cl.ly/image/1a3D3c1J1Z0I
- pslam 14y agoIt would be sad if this were taken to be a failure of low prices vs discounts. There are plenty of other reasons why JCP is still failing. There's a lot of inertia to its existing reputation and customer base, for starters. I think the more obvious problem is they're a low-margin business at a time where being low-margin is difficult unless you're the biggest guy with the lowest operating costs.
- MatthewPhillips 14y agoI'd love to read some research on why consumers are so infatuated with discounts/sales. We've all had friends/spouses boast about buying things on sale; it doesn't make sense to me but it does to most people. I'm very curious about the psychology behind this.
- andrewcooke 14y agoi am pretty sure you'll find it described in "thinking, fast and slow" by daniel kahneman - http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374275637 http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/... (i imagine that the "fast heuristic" is to make immediate, local comparisons, which discounts favour; recognising persistently low prices means more reflection and long-term memory; people use fast heuristics rather than slow logic most of the time). it's a very good book. i just gave a friend a copy today (if anyone in santiago is looking for a spanish language copy it's sold out in all the shops but bazuca.cl still have it in stock - i guess no-one thinks of buying books there!)
- Kylekramer 14y agoI don't see what is that sad (or even American) about it. Rationally, yes, discounts are not better for consumers than low prices. But humans aren't rational creatures, and nothing done by JC Penney is going to change that. After all, isn't not accounting for customers' irrationality in your business also irrational?
- mbell 14y ago> But humans aren't rational creatures I think that is the sad part.
- nnethercote 14y agoYou're in for a sad life.
- deleted 14y ago[deleted]
- addlepate 14y agoYeah, no kidding. Rationality isn't all it's cracked up to be anyway.
- rayiner 14y agoIt's like being sad that gravity isn't weaker on earth so we can jump really high. It's silly.
- mbell 14y agoIt's not silly at all, think of how many people have done amazing things for the future of humanity on the basis of "this sucks, it should be better". Identifying deficiencies and looking for ways to improve them is the ethos of building a product. I don't see why this concept should be excluded when it comes to human rationality, which in many ways, is an extension of education, which is a huge opportunity waiting to be tapped.
- dubya 14y agoI think chasing the discounts may be part of the excitement of shopping for some people. Someone was explaining how Kohl's does things, and it is completely insane, like there is an optimal one-hour window for buying certain things when the Power Hours and Door Busters and various other promotions combine with your double Kohl's Cash to get your Docker's socks for 85% off if you give them an email address.
- Deinos 14y agoWow... that sounds like wayyyyy too much effort...
- monkeyspaw 14y agoI heartily agree, personally. But people often like games because of the hoops they have to jump through, not in spite of them. Shopping is a game to many people. You can't "win" unless you get a lower price than other people.
- sharkweek 14y agoWhile anecdotal, I can personally confirm this. my wife LOVES shopping for "the deal" -- it's all a game to her. I tease her a lot because there are countless times where she comes home with widgets that we don't immediately need, but were purchased solely because of their discount %. For her, something at a low price point to begin with appears cheap, however you take that same item and slap a high MSRP on it with a 50% discount down to that same first price point... now we're talking!
- kyllo 14y agoPeople don't buy discounted items just because the price is low. We buy discounted items because discounts tell us which items to buy. For a given product, there are usually several competing choices, and most people don't have enough time to evaluate whether each one is a good deal for the price it's offered at. So the easiest way to select is to just pick the one that's on sale--or if they're all on sale, pick the one that appears to have the biggest discount relative to the MSRP. The discount also tells us "you should buy this now, because if you buy it later, the price may go up." Without this important signal, customers don't really know which one to buy, plus there's no urgency to buy the item now, because it's always that price. So, while Johnson's approach may have "made sense," and may have worked for Apple products because their market position and product lifecycle makes discounts unnecessary, this strategy really didn't play to consumer psychology, at least in the apparel space.
- siglesias 14y agoThe discount also tells us "you should buy this now, because if you buy it later, the price may go up." But who cares if it's average or even poor value at the current discount? My thinking should be, "which item offers me the best value as priced right now"? I think what you're suggesting is that the "full price" gives customers a "hint" about how much to subjectively value the item, which is also sad because the last person I want telling me how much something should be worth is the person selling it to me.
- brodney 14y agoI recently purchased a projector from amazon. I actually used the original price in my comparisons. For example, a heavily discounted projector with few reviews left me wondering the reason for the discount. Overstock? Overpriced for its actual performance? I felt much safter purchasing a projector with a relatively modest discount.
- rhizome 14y agoIs that box of crackers worth 4.29, which is its price when other crackers are on sale, which is half the time, or is it 2.99, its own sale price, which it is the other half of the time?
- jcampbell1 14y ago> It's a sad state of affairs in American consumerism that folks are attracted more to discounts than low prices. The largest retailer in the world is Walmart, which doesn't really use discounts except to clear inventory, and advertises "always low prices". American consumerism does love low prices. The problem is that if you play that game, you compete with Walmart and lose.
- larrys 14y ago"Walmart, which doesn't really use discounts except to clear inventory, and advertises "always low prices"." Walmarts game is a bit different and they can pull it off because of their unique positioning, size and buying power. They also get you to buy things you don't need by their merchandizing. (Similar to how you go into a supermarket for one thing but end up with 10 other things.)
- andrewflnr 14y agoI think that's sort of what the GP meant by "The problem is that if you play that game, you compete with Walmart and lose."
- ams6110 14y ago[Walmart] get you to buy things you don't need by their merchandizing Interesting... how do they do that? I've always found Walmart's retail experience to be about one step above a warehouse club. I tend to go in for what I want and if it's in stock (often times not the case) I buy it and GTF out.
- muhfuhkuh 14y agoCongratulations, you are not their primary consumer: Impulse buyers who even if they have a set list of things they are going to buy end up going off-list nearly every time. They need that DVD from the bargain bin, they need that extra box of 22lr ammunition, they need that BPA-free water bottle because the one at work (also impulse bought from Walmart) is starting to crack after 3 months of use.
- deleted 14y ago[deleted]
- Shivetya 14y agoEver shop at one? The layout was really bad. Then to top that off where you found signs proclaiming the low price and such you still had other signs indicating discounts! Comparing them to Sears, Sears practically screams good deal. Its just up to you to figure out if its not. Plus Sears has Craftsman which sets it apart from other Mall retailers. Not sure what JC Penny has. The only good job I will give them is, of the few sales people I met there they at least would help me. That stood out because in Macy's I was ignored even when I asked - apparently men are not allowed to shop at the mall or certain stores.
- nlawalker 14y agoPeople are attracted to discounts because people love maximizing value. The standing-in-the-grocery-aisle, blink-of-an-eye assumption that people make is that the value of any item on sale for its original price is equal to the value of any other item on sale for its original price, meaning that items with the biggest discounts offer the best values.
- smackfu 14y agoOTOH, it's a sad state of affairs that a retail company can hire a CEO who ignores the basics of the psychology of pricing.