As the season of festivities draws closer, deals and discounts are here for a grab yet again with many e-tailers and retailers joining the fray. The bona fides of the discounts are debated over as ever. That said, discounts continue to be the big draw for festival sales (e.g. Amazon Great Indian Festival Sale / Flipkart Big Billion Day sale). Pricing and discounts also form the topic of insightful conversations among management experts and management students pursuing an Online MBA/full-time MBA.
Why Does Discount Matter?
Discounts are a popular tactic to grab attention and drive sales. It also helps to motivate the customers to try a new product and prevent them from trying out a competitor’s product. Every sales-oriented company employs discounts in one form or another because price remains a crucial attraction. Discount announcement draws the attention of the potential and even the cold customers. When customers discover that they can save money on your product, they may even switch.
Are the Discounts Real?
A common complaint about the discount is that sellers manipulate the prices. The price of a product is proportionately jacked up to offset the discount deficits. The limited-time offers (e.g. midnight discounts by e-commerce) hardly give time to make price comparisons. But when the going gets tough (e.g. stockpile up) the only way to get things going is a real price cut (e.g. clearance sale). But many a time even such offers become promotional drives to sell full-priced items due to increased footfall / log-ins.
Emotional and Utility Appeal
Discounts appeal in different ways. During holidays, travel agencies announce vacation packages to exotic locations (like Europe or Thailand) with price cuts. Lured by the discount, if you decide to travel, it is an emotional appeal. On the other, if you are an NRI who visits home on annual leave and fly with the least-priced airline, it is a utilitarian appeal. The former is impulsive and the latter is sensible. In travel deals with high percentage discounts, even a conversant person overlooks that the discount applies only to the base fare and the taxes and other add-ons are fully chargeable. Hence the pay-out is much higher.
One Goal, Many Paths
Brands are aware that customers, inherently, are price sensitive and look for the best bargain. At the same time, too many discount offers cause contempt. This prompts them to invent innovative ways to extend the benefits (the list is not exhaustive):
- Buy One, Get One Free (variants included) (Watch for buying items that you may not really need)
- Convert into EMIs-0% interest (Hidden costs like MRP sales or EMI processing fee charges)
- Cash Discount on New car purchase (Merging other benefits like exchange bonus, corporate bonus)
- Online Flash Sales: (For limited items for a limited period. Usually very high website traffic)
- Cash Back: (Tempts to overspend to become eligible)
Winding Up
A discount is a deduction from the usual cost of something. Businesses offer this deduction in different forms. Though there may be catches, discounts do not fool the customers always. For, all the information is available at the click of a mouse. A smart customer demarcates a real bargain from the delusive ones.
Discussion Question
Do you feel that discounts fleece the customers? Why?
Source Article
https://www.tbsnews.net/features/panorama/are-discounts-really-discounts-306316
https://www.levenue.com/blog/the-negative-effect-of-discounts
Frequently Asked Questions:
1. Do online MBA students learn about discounts as a strategy?
Ans: Yes, Discounts are a crucial marketing strategy used by businesses to drive sales, retain customers, and gain a competitive edge. Understanding how discounts work, their impact on consumer behaviour, and the business’s bottom line is essential for management students.
2. How can MBA students apply discount strategies in business management?
Ans: Understanding discount tactics allows MBA students to strategize effectively for marketing, pricing, and sales decisions, ensuring that discounts drive growth without eroding profitability or brand value.
3. How do businesses use discounts to increase footfall or website traffic?
Ans: Limited-time offers and flash sales create urgency and attract large crowds or online traffic, even if not all items are discounted. This increased activity can lead to full-priced items being sold along with discounted products.
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