Price Promotions can make Customers Impatient
In this festive season, retailers and brands have used discounts extensively. Discounts or price promotions are universally loved. Customers love them because they make shopping easier. What could be easier than to compare prices and pick the one with the highest discount? Retailers love them because they push sales, attract customers, clear inventory, cause brand switching, and help price discrimination. They are a very popular marketing tool. However, price promotions have several negative consequences, which are not all immediately apparent. They can hurt a carefully constructed brand image, reduce reference prices and demotivate frontline employees. Another unexpected consequence of price promotions is impatience amongst shoppers. A study found that incidental exposure to price promotions can cause impatience in customers while performing various in-store activities.
<Read how discounts on services can demotivate frontline employees>
The reason why price promotions work is that they act as reward cues for customers. Customers see products with price promotions as high-value incentives. Reward cues lead to reward-seeking, a general motivational state in which customers display behaviour meant to get more rewards. For example, finding imported olive oil at a 50% discount may lead a customer to buy multiple bottles of olive oil or salad ingredients or pasta. Reward seeking makes customers seek instant gratification, which in turn leads to impatience.
The study found various ways in which price promotions cause impatience among customers. One of the most prominent is how customers respond to wait times, especially during the checkout process. For instance, price promotions increase customers’ willingness to pay to avoid waiting. They also lead to shorter actual wait times. And because customers exposed to price promotions are reluctant to wait, they are even willing to break a rule (e.g., using the Express Checkout Counter inappropriately) to save time.
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The study also found that impatience caused by price promotions was more pronounced for people with greater reward sensitivity. Because impatience is a result of reward-seeking caused by price promotions, it directly relates to reward sensitivity. Reward sensitivity refers to how a person’s actions are motivated by the desire to obtain a reward. In this case, the reward is the product under price promotion, and the behaviours include seeking, detecting, and availing of such promotions.
Those with high reward sensitivity display greater impatience when exposed to price promotions than those with low reward sensitivity. This means that behaviours such as being willing to pay or breaking a rule to avoid waiting are also more prominent among customers with high reward sensitivity.
Retailers can use these findings to leverage customers’ importance to maximise sales and profits. For example, a restaurant may need to turn over tables quickly and can use coupons or discounts to create impatience among customers. On the other hand, a clothing shop might want to reduce incidental exposure to price promotions to avoid generating impatience during billing, especially during crowded times like the current festival season.
Another way retailers can use impatience is by utilising its connection to impulse purchases. They can offer price promotions where they want customers to purchase on impulse, for example, in the diamond jewellery section of a jewellery store or commonly accessed areas like parking lots and checkout queues. Since due to impatience, customers sometimes make purchase decisions only based on the most easily available information; retailers can also tailor what product information is prominently displayed.
Impatience as a result of price promotions, like those promotions, can help or hurt a retailer. Therefore, retailers must understand this behavioural impact of price promotions and use it strategically to maximise sales and profit.