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Sale or Clearance: Words matter, choose them carefully

Retailers use words like “sale” and “clearance” in promotion communication widely and often interchangeably. However, buyers expect deep discounts from a “clearance” and shallow discounts from a “sale”. To avoid misleading buyers or losing their customers and/or reputation, retailers can adopt the same implications for these keywords as buyers. Doing so has practical as well as ethical benefits for retailers and buyers both.

Retailers use keywords like sale and clearance in their promotions widely. These words appear in print ads, on in-store signage, and electronic ads. However, retailers are often

unaware of how buyers interpret these words. A gap between what the words mean for retailers and what they mean for buyers can impact buyer perception of the promotion and of the retailer. It can also make a buyer feel cheated. To help retailers and buyers avoid such situations, a study tries to answer the question: How do buyers and retailers interpret various promotional keywords?

The study found that buyers associate various promotional keywords with specific levels of discount. All promotional keywords convey price reductions to buyers. Still, buyers develop

specific expectations about the volume of discounts associated with each word based on their past experiences with the use of those words. For example, the word “clearance” suggests deep discounts as the buyers expect retailers to cut prices heavily to clear out remaining inventory. The word “sale”, on the other hand, suggests a shallower level of discounts.

Retailers, however, do not share the same associations with the various keywords. For instance, while retailers also associate “clearance” with discounts, the depth of discount they consider appropriate is less than what buyers expect. Moreover, retailers do not feel that they are obligated to provide deeper discounts when using the word “clearance” than when using the word “sale”. To them, clearance is just another form of a sale, while to buyers, it indicates liquidation of stock or insolvency.

The alignment/misalignment between discount expectations of retailers and buyers shapes buyers’ decision to avail of a promotion. Keywords implying deeper discounts generate

more interest in buyers towards the promotion, which encourages them to compare their expectations with the actual discount. For example, the term “super sale” might suggest discounts of 40%-50% to a buyer. If the actual discount is deeper than that (say 55%), their willingness to purchase the promoted item and/or to patronise the retailer will increase. If the discount is lower than expected (say 35%), their willingness to purchase the product and/or patronise the retailer will reduce.

The study has important insights for retailers. They can use the findings of the study to design promotion communication in line with what buyers expect. That is, they can use keywords like “clearance” and “sale” to imply the same meaning and same depth of discount that buyers would expect. For example, if customers expect a “sale” to provide discounts of 5% - 10% and a “clearance” to provide a discount of 45%+, then retailers would try to meet these expectations.

The study also has ethical implications. Not giving discounts in line with expectations

associated with the keywords “clearance” and “sale” can mislead buyers into spending more or buying products they would not otherwise buy. Therefore, ethical retailers would prefer to be transparent regarding the use of keywords and would clearly display the actual depths of discount to avoid deceiving buyers intentionally or accidentally.

Finally, the study’s findings also have relevance for public policy. Bodies responsible for

consumer protection and ethical business practices can take note of the issue and clearly define the various terms used in promotions as well as the depths of discount (or other implications) associated with each keyword. An alignment of what “sale” and “clearance” mean for retailers and customers through retailers’ practices or public policy modification will lead to a fairer marketplace and also better business and customer relationships for retailers.

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