I’m an entrepreneurial twenty three year old, part of the team at we are social, a conversation agency based in London.
On this site, I blog mainly about communication, design, technology and the arts, and their impact on society. I also write the Skype blog.
Framing effects and discount frenzy.
In one of many posts on the subject of the Threshers 40% discount coupon, Hugh Macleod asks:
The deal was only offering a savings of approximately 10% more than their everyday, normal Buy-Two-Get-One-Free deal, yet some sort of tipping point was reached which made sales go utterly, utterly crazy. Why do you think that was?
It’s an interesting question for any behavioural economist, and indeed for any marketing professional. What’s the nudge which sends the snowball over the brow of the hill? Would the demand have been quite so great had Threshers merely offered people an extra 10% off? Probably not.
Economists call these phenomena framing effects — changes in the way something is described, despite no change in the substance of the thing, can have a dramatic effect on behaviour.
So, when Threshers are effectively offering an extra 10% off their existing offer, labelling it instead as a 40% discount has a huge impact on demand — why?
Of course, this is no real surprise to those in the advertising industry or any kind of sales role, but I think there’s a fairly simple answer to Hugh’s question: magnitude.
10% discounts aren’t anything out of the ordinary, whereas 40% discounts are.
The overwhelming response to the voucher leak was triggered by the percentage value on the flyer, and it’s a common enough sales tactic. When upselling, add to the price in small increments; when discounting, give people a big headline figure. I don’t think we need to look for subtlety here.
advertising, behavioural economics, Blog, discounts, economics, framing effects, marketing, off sales, prospect theory, retail, Stormhoek, Threshers, UK, viral marketing, vouchers
I’m an entrepreneurial twenty three year old, part of the team at we are social, a conversation agency based in London.
On this site, I blog mainly about communication, design, technology and the arts, and their impact on society. I also write the Skype blog.
Good point, but 40% off is nothing new for Thresher’s. They did the same promo last year, without any kind of result worth talking about.
A lot of how well a story spreads is in the telling.
Intriguing — I wasn’t aware of last year’s promotion.
If only Threshers had released vouchers with some form of tracking code on them, they could do some segmentation; trying to piece together the distribution modes and networks is likely to be pretty difficult at this stage.
I suppose they could ask people at point of sale where they got the voucher from, but it’s probably a bit late for that now, too.
Why don’t people go crazy for the 1/2 priced wine deals available at every major grocery chain in the land?
I wonder whether the fact that the 40% off applied to any wine and champagne made a difference — promotions are rarely that universal, are they?