Retailers offer discounts to offset lower consumption during a crisis. However, buyers might perceive them as profiteers if they do so. To avoid that, retailers can offer the discounts at the peak of the crisis as buyers perceive such discounts as motivated by the desire to help others. Since age, income, and political ideology also affect how buyers perceive discounts during a crisis, retailers can tailor their discount communication based on these factors.
The COVID-19 pandemic is perhaps the biggest socioeconomic crisis we have faced in
recent years. It changed the way people worked and lived. It also shook the global economy. One of its biggest impacts was a reduction in consumer spending. As people felt financial strain or had less access to shops, they concentrated expenses on essentials. Retailers have tried to boost demand by offering price discounts. However, due to the unprecedented nature of the issue, there is no information about how buyers perceive retailers’ intentions behind such crisis-time discounts. A study, therefore, investigates the question: When and whom should retailers offer price discounts during a crisis?
The study found that the timing of the discount impacts buyers’ perception of such
discounts. Buyers viewed price reductions offered at the early stage of the crisis more favourably. They believed the retailers’ desire to be helpful was more prominent as a motive behind early discounts. However, they saw profit motive as a more prominent reason in the case of discounts offered later in a crisis. Timing did not impact buyers’ perception of slow demand and changes in retailers’ prices as motives behind the discounts.
The study also found clear differences in perceptions of motives based on individual
characteristics like age, income, and political ideology. Older buyers were less likely to perceive the motives as profiteering, helping, or cost change. Younger buyers, however, were more likely to subscribe to these motives behind a discount. Buyers in higher income brackets were more likely than those in lower income brackets to see a change in demand as the motive behind price reduction. Finally, politically conservative buyers were more willing to consider profiteering, costs, and helping as motives compared to liberal buyers.
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When buyers feel favourable about retailers’ motives, they are more likely to tolerate service
failures. However, when they view retailers with suspicion, they are less likely to be persuaded. They also feel lower satisfaction, and their perception of price fairness is also lower. These impacts are seen in both online and offline retail. Ultimately, both positive and negative impressions of buyers can have both short-term and long-term impacts on retailers. So, it is important for retailers to create a favourable perception of their motives among buyers.
The study has relevant insights for retailers regarding pricing strategies during times of crisis.
First, the timing of the discount is critical. If retailers are looking to give price discounts to boost consumer demand, the best time to do that is during the peak of the crisis. They will be seen as trying to help others, and buyers will continue to view them favourably in the long term as well. To ensure that they offer discounts at the right time, retailers need to monitor the crisis situation and estimate the peak period based on the evolution of the crisis and the fall in demand.
Retailers can take advantage of the findings regarding individual characteristics in framing
their promotional communication. When communicating the discounted prices, they can consider age, income, and political ideology to design the communication. Using the right message and design based on these characteristics will allow them to communicate their motives accurately. Doing so will ensure that buyers perceive their motives as intended. Taking both the factors of time and individual characteristics into account, retailers can design a pricing strategy that will boost demand without damaging their reputation or customer-relationships.
Sometimes online retailers use permanent discounts to encourage buyers. Read on to find out how permanent discounts affect purchase incidence, purchase quantity, and spending.