Prior to the domain 5NorthMarketing.com changing ownership in 2017, a wonderfully informative marketing blog lived at this address. Below is one of the archived articles from back then. Please note that the content below is not property of the current owners of 5NorthMarketing.com but, we believe, contains wonderfully written and insightful information worth sharing.
Is Saving Money the Number One Reason for Spending It?
There's a question I've been asking myself lately which is this: Is saving money the number one reason for spending it?
Think about that for a second.
Here's the question again: Is saving money the number one reason for spending it?
What does that even mean? Let's walk through a hypothetical scenario to consider this further.
Spending Money to Save Money
Imagine that you're in a store like Banana Republic looking for a new pair of pants. As you're browsing around, you come across a sale rack. It doesn't have any pants, but you'll go ahead and take a look anyway.
As you glance at the clothes, you notice a sweater that's on sale. It also happens to be 50% off. A beautiful new sweater for 50% off! How can you pass up a deal like that?
So you look at it for a second, consider how much you like it, and decide to buy it.
Forget the fact that it's May and you won't need a sweater again until November, and forget that it wasn't on your shopping list. It was on sale! It was 50% off! How could you possibly pass it up!
This is what I call spending money for the sake of saving it -- you purchase something that you may or may not have bought otherwise, only because it's on sale and enables you to "save money."
Like it or not, this is an everyday occurrence in the consumer economy we live in. We don't just buy things that we need or buy things that have been on our shopping list for two months -- we buy many things that catch our eye at the time, and often, we spend money we wouldn't spend otherwise, all in the name of saving.
Now if you own a business, this is a phenomenon you want to take advantage of.
How to Take Advantage of Your Customers' Desire to Save Money
When it comes to getting people's attention, there are only a few things that are guaranteed attention getters -- one is making or saving money and another is losing weight. There are a few more items on the list, but these are two of the biggest.
It's really true. Nearly everyone wants to lose weight, and people can rarely ignore store signs that indicate a sale. 50% off signs in a clothing store capture attention like a red cape waved by a matador.
Smart businesses realize this and know that offering discounts is one of the number one ways to get customers attention. So how can you offer discounts without giving away the farm? How do you offer discounts without losing money from marking prices down too much and too frequently?
6 Smart Ways to Offer Discounts
Here are six smart ways to offer discounts in order to take advantage of our customers' desire to save money:
- Infrequent sales: If you offer sales too frequently, customers get used to getting a deal. Instead of paying full price, they wait until they can buy at half off. Most businesses can't survive by selling everything at a 50% discount, so you don't want to condition customers to wait for sales. One company that comes to mind for giving too many discounts is a photobook-making website that offers 50%-off discounts every month. Since I know sales come out monthly, I refuse to pay full price for anything. It's also annoying and makes it confusing to know what the real value of the product is. As an alternative, a lot of clothing stores spread sales out by offering them during holidays. This is a great way to not offer discounts too frequently. Sometimes people can wait for the sales, but other times they need a product now and can't wait for the next sale date. The lesson to be learned is that you don't want to provide discounts too frequently and condition customers to only buy when there's a sale.
- Last chance prices: Another way to smartly discount is to offer a product as the last chance to buy at a particular price. Copyblogger does this quite frequently when they offer their products for sale at a current price and let people know that the cost is going up soon. In order to "save money" and "take advantage" of the current low price, customers should buy now. This accomplishes two things: 1) It doesn't condition customers to expect discounts and 2) It creates a sense of urgency that pushes some customers off of the fence who have been waiting for the right time to buy. This strategy doesn't work for every business, but when it does, it works well.
- Buy one get one free offers: Another smart discounting strategy is to offer products at a buy one get one free price. This helps to get people in the door who are looking to save money. Someone who may not have purchased a shirt otherwise can be drawn into the store for a buy-one-get-one-free sale and then end up purchasing a sweater they may not have purchased without seeing the sale sign. Another option for this is a buy-one-get-one-half-off offer. With a discount like this, businesses don't lose as much money on the second product, but they do take advantage of an attention-grabbing discount offer.
- Discounts on secondary products: Businesses such as hair salons may not want to offer discounts on haircuts every month. This would condition customers to expect discounts on the salon's most important service. Instead, salons could offer discounts on secondary products like hair gel and shampoo. Customers pay full price to get their haircut, but they get discounts on secondary products that have a high margin. Even though many customers won't end up purchasing hair products, a discount offer captures attention and gets some customers into the salon.
- Off-peak discounts: Another option is an off-peak discount. Hotels do this by charging less for off-peak dates than peak dates. It makes sense because the high demand during peak season means hotels can easily rent out all of the rooms at a higher price, but the lower demand during off-peak season means they'll have trouble filling all of the rooms. Offering discounted rates in the off-peak season helps to get customers to book rooms during these times. This displaces some of the demand from the peak season. Considering a barber shop as another example, barbers could offer a discounted rate from Monday through Friday from 10 am to 5 pm since most people come in to get their hair cut at nights and on weekends. The off-peak discount would displace some of the traffic, increasing haircuts during off-peak hours when not many people show up and decreasing the wait times during on-peak haircutting hours. This is a win/win for barber shops.