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Price Discounts Impact Guest Experience

What are the odds that discounting your price is going to lead to a positive customer experience? It’ll be interesting to see whether your reactions to the following discount scenarios are similar to mine or whether I’m an outlier.

One-Time-Purchase Discounts

I need a tool to effect a home repair. Since the need for this repair only occurs once every few years the tool isn’t likely to wear out so I’m only going to purchase it once. I find the tool on sale, what’s my reaction?

I’m happy to have saved money on something I’d rather not have had to buy. As long as the tool performs as expected, I’m happy. Will the fact that it’s on sale cause me to buy more tools? No. Will the discount bring me back to that store? No. I visited the store because it’s convenient to my home. Besides, I didn’t know the tool was on sale when I went there.

Customer experience: The discount enhanced my experience, but didn’t benefit the seller.

Repeat-Purchase Discounts

Those of you who are regular readers will recall my roiling about grocery stores discounting oatmeal when the first cold snap hits, but I don’t believe I’ve ever shared my reaction.

I’ll buy a month’s supply of the oatmeal at the sale price anticipating that the discounted price will continue throughout the season, but hedging my bet. If my expectation is met, I’m happy. I get what I want at a lower price – even though I’d have paid the higher price.

My joy continues as long as the oatmeal remains on sale. If the store stops discounting my brand of oatmeal, I buy only a week’s supply and resent having to pay the higher price. My satisfaction turns to dissatisfaction because I feel that I’m overpaying even though I’d have happily paid the higher price earlier.

Do these price discounts endear me to the store or the brand? No. Will I continue to visit the store? Yes, it’s convenient and the people are friendly. Will I continue to buy the oatmeal? Yes, because it’s what I enjoy. Will I be happy about my purchase? No.

Will I buy more oatmeal as a result of the discount? No. In fact, the discounts makes planning my food budget more difficult. I purchase more oatmeal when it’s on sale, less when it isn’t, but never more than I’ll eat during the season.

Customer experience: Periodically discounting products or services that are purchased regularly turns customer satisfaction into dissatisfaction.

Dynamic Pricing Discounts

The airlines were one of the first to employ dynamic pricing – a pricing methodology that is designed to fill seats in less popular flights. This approach to pricing is also being used to fill seats at sporting events and celebrity tours.

While there are plenty of reasons for despising air travel – delays, missed connections, lost luggage, undisclosed additional fees and security measures – we want to focus our discussion on the impact price discounts have.

Personally, I resent the work this pricing ‘strategy’ creates for me. I’d prefer to go online with my favorite airline, find the flight that fits my schedule and feel comfortable knowing that the price isn’t going to suddenly drop.

Besides subjecting me to additional work, I resent discovering that I paid 3 or 4 times what someone else paid for their tickets simply because I chose the wrong time to buy.

Customer experience: For those getting the lowest-priced fares, they’re happy. For the majority of us, we feel that we’ve been hoodwinked despite putting forth effort to avoid that result – not happy.

Seasonal Discounts

It’s early spring and my favorite carpet cleaning company is offering a discount on its service. I avail myself of the discount, then discover that:

  • They’re running late.
  • They’re experiencing equipment problems.
  • Their staff is inexperienced and fatigued.

The joy of getting a lower price is rapidly displaced by resentment over having my schedule disrupted and the sloppy workmanship that accompanies workers’ failed attempts to get back on schedule.

Customer experience: Not happy.

As cold weather approached I realized that I needed a new winter coat. I was at the mall at the time – a perfect time to buy a new coat – except I knew that the stores would be discounting heavily as the season progressed.

This ‘knowledge’ leaves me with an unpleasant choice. Do I buy now knowing that I’d be overpaying or do I wait, monitor prices on the coat I want and make a special trip to the mall (I’m not someone who enjoys shopping so I’m not there often) when the price is reasonable?

Customer experience: I’m not happy with either choice. If I knew that the price wouldn’t change I would have happily made the purchase when I was already at the mall and enjoyed the purchase I made.

Rewards Discounts

Loyalty or ‘rewards’ programs are really discounts in disguise. The theory is that the seller is rewarding customers with a gift. What they’re really doing is lowering the perceived value of their offerings by discounting.

A restaurant that my wife and I frequent often, out of convenience more than the quality of the food, offers a rewards program that originally provided a 10% discount. Our reaction? Why don’t they simply lower the price by 10% and save themselves and us the nuisance of tracking all this data?

Since the program’s inception, the restaurant owners decided that a 10% discount was too high and have adjusted the discount to 8.33%. Apparently we’re not as appreciated as we once were.

Besides instituting a ‘rewards’ program, they’ve made their portions smaller and raised prices. They’ve muddied the perception of the value of their menu items so much that most customers with whom we’ve spoken feel that the food is overpriced.

Customer experience: Rewards discounts tend to slow service, complicate the buying decision and, when found not to work as the seller had hoped, require additional adjustments to pricing which further confuse customers and leave them dissatisfied with their purchases.

I’d love to hear your stories. Please share them in a comment.

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I'm the author of the book Pricing For Profit. I help people break the bonds of industry pricing and get paid for the value they provide.

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