Every store advertises sales and discounts in today's market. But how much value does a discount or clearance rack actually have?
I currently work in a store that sells luxury goods. Our clearance items are 40-60% off and, for the next few days, we give an additional 20% off. The big numbers and "Save Now" advertisements drive a lot of traffic to the store and we are liquidating a lot of old merchandise ... and still making a profit from it.
In a competitive market, prices need to match market demand. While it may only cost $2,000 to build a sports car, you can't sell it at less than the going market rate of about $20,000 without destroying your business. Demand outstrips supply and you find yourself the target of negative public relations for failing to produce what is asked of you. But, you can build the same sports car sell it at $20,000 with an advertised 30% off (selling now for $14,000). Consumers feel they're getting a great deal by shopping with you, and you still make a huge profit.
We do this so often now that I fear discounts and so-called savings (many of which are advertised the same time the product is released) have adversely affected the consumer's perception of value.
Every item in our store that does not have an advertised discount carries a "discretionary discount." This is a certain percentage we can give the customer if we feel they are not going to buy. The problem is, every customer expects a discount on every item in the store. This is not just a problem with luxury goods, though.
Many people go grocery shopping based on what discounts and sales are advertised in the weekly paper. When was the last time you made a shopping list and didn't try to find coupons for everything on the list? There are some people who even start with the coupons and make a shopping list based on the grocery store's advertised sales.
Has price and discount advertising adversely affected the value perception of consumers in your industry? What tools have you used to combat this problem?