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The psychology behind promotions – WHAT types work best?

Posted: 4 September 2019

Since the first-ever coupon was distributed by Coca-Cola in 1887, promotions have become a standardized and expected part of our shopping trip. It is reported that two-thirds of consumers have made a purchase they weren't originally planning to make based solely on finding a coupon or discount. And four out of five Americans say finding a great offer or discount is on their mind throughout the entire purchase journey.  Promotions are powerful things.

In this second of five articles we look at what types of promotions work best. In our first article we looked at why promotions work, here in our second article we take a deep dive in to the different types of promotions and which create the best impact.

This article forms part of a five-part series looking at the Who, Why, What, When and Where of promotions. Read the rest of the series ‘The psychology behind promotions’ here.

The offers need to be clear and easy to understand.

What promotions work best?

Free gifts

Shoppers react more positively to offers where they receive something free than when they get something cheaper – even if it amounts to the exact same deal. In one study, researchers sold 73 percent more hand lotion when it was offered in a bonus pack than when it carried an equivalent discount.  The power of free means we perceive the value of free products higher than their actual worth.

Gifts can also be used to encourage new shoppers or cement brand loyalty with existing customers. A free gift triggers a feeling of reciprocity in customers, where they will feel an increased obligation to respond in kind and will feel an increased sense of loyalty to the brand or retailer that issued the gift.

Get not save

A promotion that uses the words ‘Get $10 off’ will usually have a bigger impact than one that uses the words ‘Save $10’. The word GET means you are achieving a gain, whereas the word SAVE means you are avoiding a loss. Our instinct as humans is to seek out pleasure, and you can see here how the words we use make a difference to how we feel. Most shoppers will seek out the promotion which will give them pleasure, rather than the one where they are avoiding the pain. For example, even if they are mathematically the exact same deal, shoppers would rather have 50 percent more of a product, than to save 33 percent on the price.

Reframe value

If you are selling something with an annual cost, breaking that total cost in to monthly amounts will make the offer more appealing to customers. $120 per year may sound quite a lot, whereas $10 per month seems more manageable. We see this a lot online with subscription services but the same applies for bricks and mortar stores offering a monthly payment scheme or a rental option.

How we present the cost is very important to how a shopper will perceive the offer. Researchers in the UK found that by changing the description of an offer from ‘a £5 fee’ to ‘a small £5 fee’, sales of the product increased by 20 percent. The inclusion of the word ‘small’ draws the customer’s focus to the value of the deal.

Short-term offers

Promotions work best when they are available for a short time only. The sense of urgency encourages shoppers to make the purchase to avoid the pain of missing out. Short-term offers also create excitement and interest around a product.

time limited offers

Now or never message is repeated multiple times - see the face-out and the garment

Use signs on the shop floor to publicize that stock is running low on a particular offer, or that time is running out. These signs will drive shoppers to snap up the offer while they can.

Exclusivity

We all like to feel special, and retailers can use this to their advantage. Offering exclusive discounts to regular customers will make those customers feel special and increase their sense of brand loyalty. They are also more likely to take up the offer if they feel special for being offered it.

Coupons

Americans have had a love affair with coupons ever since the first was distributed in 1887. The format of coupons has changed for sure – evolving from Coca-Cola’s handwritten coupons, to cutting coupons off packets and newspapers, to printing off from websites, to using QR codes and scannable coupons on smartphones. But our love for the coupon has never abated.

coca cola coupon

Believed to be the first coupon. (Full image credit below)

A study by Claremont Graduate University found a 38 percent rise in oxytocin levels for recipients of a $10 voucher, compared to those that did not receive the voucher. Their respiration rates dropped by 32 percent and they were 11 percent happier. Their heart rate decreased by five per cent, and sweat levels were 20 times lower than their non-coupon receiving peers (coupons reduce our sweat?!!).  Ultimately recipients of coupons felt more relaxed and less stressed.

With our human instinct to experience pleasure, it is clear why we seek out these opportunities. And explains why 62 per cent of us spend two or more hours every week searching the internet for promotions. The good news for retailers is these offers can help cement brand loyalty, with 91 percent of buyers that redeem coupons, saying they would visit the same retailer again.

Everything in moderation

While promotions can work to increase sales, used too much and they can stop working and actually damage your brand. When a retailer constantly offers price promotions it can lead to a boom and bust cycle, where shoppers won’t buy the products unless they are on offer. Rather than see the discount as a good deal, shoppers come to perceive that the full price is inflated to make the discount seem more generous. And constant promotions can also lead customers to question the quality of the products being sold.

Also beware of being too generous with your offers as it arouses suspicion and devalues the product. A 75 per cent saving on a product for example will get your customers’ alarm bells ringing rather than reaching for their credit cards.

large discounts

This retailer is trusted, they can be as bold as this with up to 70% discounts.

The power of the unexpected

In contrast to the above where promoting too frequently diminishes the impact of the promotions, offering unexpected discounts or offers will bring delight to customers. Known as Windfall Gains, offering benefits to customers that they weren’t expecting increases their likelihood to buy. One study found that offering unexpected coupons to shoppers in a store significantly increased their number of unplanned purchases and drove up the average spend value in-store.

Key take away

Promotions that are designed with thought are balanced and sustainable. They act as a way to drive sales while at the same time increasing brand loyalty. Retailers must be cautious not to offer too many promotions too frequently, but get the balance right and they will have a positive impact and should be an essential part of any retailer’s marketing strategy.

Utilizing tools such as Reflex sign holders helps retailers to promote their offers to customers. They serve not only to inform shopper about the promotions available but also keep the store layout fresh to keep the attention of customers. For more tips download our FREE guide ‘Maximizing sales from your existing footfall

To understand WHO promotions work for, read the third article of this series [LINK coming soon]

This article forms part of a five-part series looking at the Who, Why, What, When and Where of promotions. Read the rest of the series ‘The psychology behind promotions’:

  • The psychology behind promotions – WHY do they work?
  • The psychology behind promotions – WHAT types work best?
  • The psychology behind promotions – WHO do they work for?
  • The psychology behind promotions – WHEN do they work?
  • The psychology behind promotions – WHERE do they work?

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