Read This Before Black Friday!
Black Friday is just around the corner and most Americans are looking forward to the marvelous deals and price promotions in malls. But don’t get too excited. A marketing expert warns these great offers may be too good to be true. Consumers need not jump onto the bandwagon to hoard products that they thought they can save on.
According to Cynthia Cryder, associate professor of marketing at Olin Business School, some great deals may be appealing for customers with assumptions they could save more when in fact, it will entice shoppers to spend more than they normally would.
Cryder said, “Price promotions that feel too good to be true are always an opportunity for consumers to take an extra moment for reflection.”
The marketing expert encouraged consumers to think twice before buying. Cryder added, “Instead of thinking about how much money they are ‘saving,’ consumers might want to stop to ask themselves: How much am I actually paying for this product, and am I willing to pay that much?”
The Wrong Perception
Cryder and co-author Andong Cheng launched a study on exploring the phenomenon of “mental discounting” and its drawbacks.
According to researchers, consumers and shoppers have a tendency to flock to malls during Black Friday with a common notion that they can buy stuff with discounted prices, thus saving more money. But this is not really what’s happening.
The researchers cited that with several price promotions, such as a receiving a gift card to spend in the future, consumers mentally deduct the gift card’s value from the initial purchase as well as from the second purchase when they use the gift card. Multiple mental deductions based on a single price promotion result in consumers’ perceptions that their costs seem lower than they actually are, and can increase spending.
“Consider a situation in which a college student purchases a $900 Macbook and receives a $100 gift card to spend in an Apple store in the future,” Cryder and Cheng wrote in the paper. “Feeling confident that she will use the gift card, the student may mentally reduce the laptop cost and think: ‘I am spending only $800 (instead of $900) on this laptop because I am receiving $100 worth of credit back in my pocket.’
“Now imagine that later, the student is back in the store purchasing a $300 iPad. At this point, she applies the $100 gift card, resulting in a final $200 charge for the iPad,” they wrote. “She may think: ‘I am spending only $200 (instead of $300) for this tablet, because my gift card covers some of the cost.’ In total, this consumer has paid $1100 for the laptop and tablet, yet, because she mentally applied the price promotion to both purchases, she may feel as if she paid substantially less.”
This is really what’s behind the scheme of price promotion among commercial industries. That is why the researchers encourage shoppers on Black Friday to pay extra attention and think twice before buying.
“These promotions create opportunities for retailers, and consumers should carefully consider these offers before taking advantage of them,” Cryder said. “Although consumers might feel like they are spending less, these offers can sometimes encourage them to spend more.”
What’s in Black Friday?
The Day After Thanksgiving (Friday) is known as Black Friday. It is considered the official start of holiday shopping season. Almost all stores come out with mega sales with the early bird special to attract consumers to their shop. People stand in line hours before the stores are opened, to grab the bargains of the year.