The American consumer wants to stay with coupons

The American consumer wants to stay with coupons

Very recently we reported the fact that J.C. Penney is faced with the adverse effects of its new pricing policy and not disbursing coupons anymore. The same strategy was adapted earlier this year by handbag maker Coach when it was abstaining from issuing coupons at its factory outlet stores in an effort to simplify customer’s in-store experience and helping to increase the company’s margins

Behind all of this is the idea of a store where the price tags show the price every customer has to pay, no coupons, no “one-time” sales, no haggling appeals to most people, but in practice the customers want coupons and special sales! Even automaker General Motors started a “total confidence” program for Chevrolet cars by including a 560-day return policy and a haggle-free price. The reaction of the market was that Chevy’s share of U.S. auto sales dipped to 12.1 % in July, the lowest in over a year.

It seems that customers note important signals from pricing strategies and when companies are experimenting, it might be well that customers can get crossed and they shop elsewhere.

According to a feature in Wall Street Journal coupons do have an important advertising component and this is confirmed by research, for instance a study of the University of Viginia’s Darden Graduate School of Business, executed by Rajkumar Venkatesan and Paul Farris. Their finding is that stores do get substantial sales lift from customers who received coupon in the mail but didn’t redeem those. Prices with an ending in 99 US cents do also convey a message as was proven already in the 1990s by Rutgers University professor Robert Schindler and Thomas Kibarian when they mailed different versions of a clothing catalogue to customers, one with prices ending in 99 cents, the other with prices ending in “00” cents. Sales for the 99-cent catalogue generated eight percent more sales. However with the 99-cent deal the consumer judges the product sold and he suggests that the store sells it as lower quality. In general consumers focus on a brand beyond pricing and they value the store experiences and perceptions about quality and to change these perceptions it will take a long effort to change this attitude.

www.wsj.com


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