Black Friday, A Good Deal or Misleading Marketing?

 

 

An investigation into retailers’ discounting practices has stirred up a storm about retailers misleading buyers. While it might come as a surprise to many buyers that Black Friday deals might not be as exclusive as they appear, the furore will be instructive for all retailers as well.

 

Below, we explore this multifaceted issue in depth. There are lessons for both retailers looking to sell more product and buyers who don’t want to be duped.

 

 

 

As reported by Retail Gazette, an organization called Which conducted a study into the veracity of Black Friday offers. Using data from Black Friday 2017, the company found that products that were on offer on Black Friday could be bought more cheaply after the sale period. This was the case for up to 87% of Black Friday offers.

 

This investigation revealed that what consumers might buy on Black Friday might not be the best offer but simply a marketing gimmick. 

 

 

 

The Which investigation further revealed that big brands and retailers were taking part in this strange pricing pattern as well.

 

Brands like Amazon, Currys PC, Argos, and others, were blamed for potentially deceptive discount offers. This raises concerns that retailers are offering their products cheaper at other times than the advertised Black Friday “exclusive sale” events.

 

 

 

The Which investigation has opened a can of worms and shed light on a topic of conflict for retailers. If you are running a brick and mortar store or online store, you’ve no doubt experienced that discounts can boost short term sales. The problem happens when you advertise a discount that does not, in fact, exist.

 

  

 

While it might be alluring for retailers to run fake discounts, the results can be dire for your brand in the long run. 

 

Strong brands in retail are built on an image of trustworthiness and fair dealing with your buyers. 

 

If buyers can’t trust your brand’s pricing, you could lose brand fans.

 

 

 

Using fake discounts to prompt shoppers to buy is not a new tactic by any means. In 2013, TIME reported on US retailer JCPenney’s use of fake discounts to get store visitors to buy.

 

Buyers like to get discounts, and JCPenney’s simply raised prices so that it could then cut them and offer buyers a “discount.”

 

According to TIME, JCPenney had been using the practice for some time, with great success. JCPenney was in fact struggling because a new CEO had changed the practice in order to provide fair “everyday” prices to shoppers. 

 

These new prices proved unpopular with shoppers, who liked discounts more, leading JCPenney to resume its discounting practices.

 

 

 

As the JCPenney experience shows, even fake discounts can have a positive effect on sales. If that’s the case, the picture is more complicated for a retailer trying to decide what they are going to do.

 

A Harvard Business School research project on fake prices adds to the complexity of the picture for the ordinary retailer.

 

 

 

In 2018, a Harvard Working paper reported on research and experiments to assess the effect of fake discounts on sales. The study found that the use of fake discounts in retail environments actually drove real sales.

 

The study used data from retail stores where artificial discounts were advertised. The discounts prompted customers to buy more of those products in order to take advantage of the temporary discounts.

 

Further experiments were then held in a lab environment to find out if the effect would persist if customers knew about prior prices. The study found that if customers knew that the products had always been cheap before the discount, they did not rush to get the discounts. In other words, fake discounts were only effective if the customers had limited knowledge of the market.

 

 

 

The proven success and rather widespread use of misleading discounts presents a retailer with three basic alternative approaches.

 

Firstly, you could abandon discounts altogether and hope to build your brand on consumers’ long term trust. 

 

On the other hand, you could copy retailers, like Amazon, covered in the Which investigation which found that discounts were offered at any time, and sometimes in a misleading manner. 

 

Yet a third option is to take the middle road and only offer discounts a few times a year, but never lower prices outside of those advertised discounts.

 

The approach you take really depends on your brand and your vision for the long term. It’s best to make sure you are making a decision you can live with in the future.

 

 

 

There are many reasons why stamping out misleading discounts will be hard to do. For buyers, the issue is more personal. 

 

The average consumer hardly has all the information to be able to spot fake discounts all the time. In addition, buyers have a natural bias for discount offers, which has led to giant retail operations built around discounting strategies.

 

When shopping, buyers should get smart about gathering information and making informed buying decisions.

 

 

 

In the past, gathering product price information was difficult for the average buyer. Now, thanks to the internet and price monitoring tools, you can quickly educate yourself on prices in the market.

 

If you are buying a big ticket item, such as home furniture or new computers, you can monitor prices before you buy. You will then be able to see average prices for that item as well as which retailers are currently offering the best prices for the item. This will help you avoid the retailers advertising fake discounts which do not lower the price below what’s available in the market.

 

 

 

As the HBS study showed, there’s a strong link between propensity to buy and the offer of a discount. 

 

Buyers should therefore take this into account and understand their own buying behavior. 

 

It’s all too easy to buy something you don’t need simply because a retailer is offering a limited time sale. Plan your purchases well in advance, and skip all but the most credible sale events.

 

 

 

Misleading discount offers are quite widespread. They have been used not just by little-known retailers, but by big-name stores as well. 

 

There’s a good reason why these discounting tactics are used. They have been proven to work when it comes to driving real sales, even though the long term effect on brand reputation might be less clear. 

 

Buyers should adopt smart buying based on full information. Price monitoring tools will help in gathering prices and making informed buying decisions.