Don't do discount deception

Discounts are everyday practice at storefronts across America. Every window is plastered with the sale inside, as though it’s only purpose was to announce this fact. Consumers who weren’t looking for a product may buy it when they believe it’s a steal. This is commonplace, but is it right? Two case studies:

First, a 10% men’s clothing discount at Kohl’s. A shirt which the month before was advertised at $15 is now only $13.50. The month that the discount is available, Kohl’s sells 20% more men’s clothing stock than their previous six and clear out many of last year’s fashions. They’ve benefited, even if the profit ratio was down 10%. The customer, no matter his/her characteristics, benefits from the deal too.

Second, a neighboring GAP displays a 30% off select women’s shoes. The shoes are listed at $120, down $36 from $156, but they arrived in the store that morning and were never made available at $156. GAP gets rid of a larger percentage of their new shoes because customers think they’re getting a great deal. The customer; however, never realizes that $120 was GAP’s intended price all along, and they only added the 30% sale to give the appearance of a discount.

If it’s not already obvious, the second case represents a deceptive discounting practice.

Importance

Reducing the price of goods in order to adjust supply is a savvy business practice that benefits both parties. The core purpose of the discount is not to trick the customer. When it comes to services, other purposes may be involved in discounting, such as the need to develop a network of customer referrals, but neither are discounts meant to deceive in this arena either. The change in prices corresponds to the fluid nature of supply and demand, and a refusal to use discounts in mutually beneficial ways would do harm to the market, the business and the customer (Burkett)(Wright).

Application

For a time I meticulously wrote down the price of every grocery item I purchased in order to get a firm grasp of my food expenses. I discovered an interesting phenomenon: every time one of my common items went on sale (woohoo!), when the sale was over the base price of the item had increased. Now, this wasn’t deceptive-they had sold me a 10 cent cheaper cup of yogurt from its original value–but it illuminated the multifaceted aspect of discounts.

In a similar vein, as an entrepreneur, there will certainly be times when discounts will help me regulate my business. The discounting system may even grow to be complex and tactical. But if complexity, or in the GAPS case downright lying, deceives the customer into action they would not take if they understood what was happening, I’ve abused the use of discounts. As a practical action, it will be important to specify a clear discount policy so employees and consumers can readily understand.

References