Consumers infer that they get a great deal based on the reference point (an anchor) provided by the higher, presale price

J.C. Penney stores: The retailer stopped offering coupons and weekly discounts and saw its sales fall 25 percent in 2012.

most shoppers, coupon collectors or not, want the thrill of getting a great deal, even if it’s an illusion

Penney recognized that human trait and backtracked on its pricing policy, offering coupons and running weekly sales again. And it started marking up items to immediately mark them down for the appearance of a discount

For sellers, setting and holding one price makes plain, economic sense

changing prices takes manual labor

if you have one price, you have a better feel for expected margins and gross profits, you can manage to your budgets a lot better,

having one price also leads to more stable inventories

a company that held 590 sales events: almost three-quarters of the stuff it sold was marked down 50 percent or more. customers weren’t actually paying less. The chain just kept raising the prices that customers saw on the racks, and then discounted those prices during promotions. Why keep playing a game that is expensive and troublesome for the seller and a mirage for the consumer?

Walmart is finding it hard to convert consumers to a single-price model in countries like Brazil and China

consumers are conditioned to wait for deals and sales, partly because they do not have a good sense of how much an item should be worth to them and need cues to figure that out.

Just having a generically fair or low price assumes that consumers have some context for how much items should cost. But they don’t

Consumers infer that they get a great deal based on the reference point (an anchor) provided by the higher, presale price

Without that anchor, consumers have trouble determining whether the store is actually giving them a good price.

Limited-time sales can also lure consumers into a store, which is particularly important if retailers don’t have a differentiated, high-value product

they are a tool to draw in a broader consumer base. one shopper to buy at a high price, and a more price-sensitive shopper to buy the same item at a lower one.

Simple low pricing can work if retailers take narrow profit margins

Walmart, which also offers low prices, makes up for thin margins with a high volume of customers who visit often.

Instead of having a lot of variable pricing on individual items, across all items Walmart can guarantee you’ll get the lowest price for your basket

Walmart is able to tell customers exactly how much they’re saving compared to a local supermarket

“But what am I gaining now by shopping at Penney’s, 20 percent on average? Ten percent? Penney’s couldn’t communicate that, and consumers couldn’t make an assessment about whether it was worthwhile to go there”

source:

http://www.nytimes.com/2013/04/14/business/for-penney-a-tough-lesson-in-shopper-psychology.html?pagewanted=2&_r=0&smid=tw-nytimes&partner=rss&emc=rss

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