Sales Training Atlanta Georgia

Sales Article: The Art of Discounting - Four Selling Scenarios

by Victor Antonio, BSEE, MBA

Before talking about discounting, let me first address the ‘psychology’ or mindset of the buyer and relative pricing knowledge over time:

The Regret Effect: The remorseful feeling you get when a product you desire is no longer on sale.

Discount History: The knowledge you have that a product you desire was previously discounted.

Take a look at these four sales scenarios and see if any of these strategies or insights can help you.

Scenario 1: Large Discounts

If a product has been ‘largely discounted’, let’s say by 30%, and is then priced back at 25% off the original price (i.e., 5% difference), this will decrease the person’s likelihood of buying in order to avoid the feeling of regret for not taking advantage of the original sale.

Week 1: Jacket $350 Original Price: $500 (30% off)

Week 3[1]: Jacket $475 Original Price: $500 (5% off)

Sales Implications: If you discount a product and client sees it, the client will see the discounted price as the new reference point (anchor). By putting your prices back up you will decrease the likelihood of your client buying and by default decrease your overall sales.

Scenario 2: Minimal Discounts

If a product has been ‘minimally discounted’, let’s say by 10%, and is then priced back at 5% off the original price, this will increase the person likelihood of buying.

Week 1: Jacket $450 Original Price: $500 (10% off)

Week 3: Jacket $475 Original Price: $500 (5% off)

Sales Implications: When the price is minimally discounted, the buyer will feel no remorse in buying since the discount itself is insignificant in the context of the overall price. Smaller discounts may help prompt your clients to buy from you more often.

Scenario 3: Similar Products with No Discounts

If two similar products are discounted equally this will create a ‘deferral effect’ whereby the buyer, not wanting to regret making the wrong decision, will defer making a decision altogether.

Jacket A $500

Jacket B $500

Sales Implication: Too many similar (versus dissimilar) products will prompt the buyer to defer any decision. The key to motivating the buyer to choose is by emphasizing some unique aspects of one of the products to create a ‘difference’ in appearance.

Scenario 4: Similar Product with Discount History

If Product A had been discounted by 30% and then priced back at the normal price and a similar item, Product B, has similar pricing to Product A, a person is more likely to choose Product B. Why? Since the buyer has no ‘discount history’ with Product B there will be no ‘regret effect’ in buying the product.

Week 1: Jacket A $350 Original Price: $500 (30% off)

Week 3: Jacket A $450 Original Price: $500 (5% off)

Week 3: Jacket B $450 Original Price: $500 (5% off)

Sales Implication: The only way to overcome a buyer’s reference point (i.e., original price anchor) is to add a similar product to the mix with no discount history. You may want to create a similar product with a few differences and give it a new name or add a product with some differentiating feature.

Victor Antonio, Sales Influence

Finding the Why in Buy

[1] The number of weeks (3) was chosen arbitrarily since it’s hard to determine how long a person’s memory may last. The number should be used as a generic indicator of time lapse.

Reference: Tsiros, Michael, "Releasing the Regret Lock: Consumer Response to New Alternatives after a Sale, " (2008), Journal of Consumer Research1039-1059

Copyright © 2009 by Victor Antonio. All rights reserved. This article MAY be reproduced in any form or by any means, electronic or mechanical, including photocopying, as long as the author’s name, website and email address are included as part of the article’s body. All inquiries, including information on electronic licensing, should be directed to Victor Antonio at info@victorantonio.com.