Introduction
Marketing and economics are interested in consumer behavior in retail contexts, especially discount methods. Customers’ perceptions of value and reactions to various promotions impact these behaviors. The scenario involving a discount shoe business and its pricing techniques gives an illuminating case study into these dynamics.
In the case of a discount shoe store, where all shoes cost $100 per pair, a consumer has $200 to spend on shoes (X) or all other goods (Y). The customer approached the clerk with the question, “I see that your shoes are ‘buy one, get one free—limit one free pair per customer. Will you sell me one pair for half price?” The clerk responded, “I can’t do that.” When the customer decided to leave the store, the clerk offered, “However, I am authorized to give you a 40 percent discount on any pair of shoes in the store.”
This study draws on pertinent literature to understand the underlying concepts as it analyzes the consumer’s opportunity set under various promotional offers and the strategic justification for the retailer’s discounting practices.
Consumer’s Opportunity Set with Different Deals
The opportunity set for a client with a $200 budget limit differs mainly when considering the “buy one, get one free” offer and a 50% discount on shoes priced at $100 a pair. The customer can spend $100 on two pairs of shoes with the “buy one, get one free” proposal, saving an additional $100 for other purchases (Y). The buyer could purchase two pairs for $100 each, or two pairs for $50 each with a 50% discount, freeing up another $100 for additional purchases. Interestingly, while the perceived value may vary, the opportunity set in shoe number remains unchanged between these two offers (Gordon-Hecker et al., 2020). This finding emphasizes how complicated consumer decision-making is—it goes beyond simple math.
Reason for Offering 40 Percent Discount Post-Rejection
Consumer psychology and sales techniques can be used to explain the offer of a 40% discount after the customer initially rejected the “buy one, get one free” proposal. Retailers frequently use deep discounts to keep customers from leaving empty-handed. This strategy is predicated on the knowledge that customers are more likely to be convinced by the prospect of missing out on an opportunity than by an initial offer (Zhao et al., 2021).
Prince and Baye (2013) claim that this method of changing proposals can be considered a marginal analysis application. Retailers evaluate the cost of the more considerable discount in this analysis against the added advantage of retaining a client. The forty percent off is a less alluring but strong inducement to seal the deal.
Clerk’s Unwillingness to Offer Half Price on a Single Pair
The clerk offered a “buy one, get one free” promotion, but they would not sell one pair of shoes at half price. The psychological impacts of the deal structures on the buyers could explain this. Even when the financial outcome is the same, “buy one, get one free” offers are often perceived as more beneficial than a 50% discount (Gordon-Hecker et al., 2020). This impression is associated with receiving a bonus item, which is often more appealing to customers than a straightforward price cut. Additionally, these promotions persuade clients to buy more than they intended, consistent with the store’s goal of increasing sales volume.
Conclusion
Retail marketing techniques and consumer behavior can be understood by reviewing the shoe store’s discount initiatives. Consumers still have the same possibility regarding a 50% discount and a “buy one, get one free” offer, but they view them differently. Retail marketing requires strategic thinking, as evidenced by the store’s increasing discounts and the appeal of “buy one, get one free” offers over simple price reductions. These strategies highlight how difficult it is for consumers to make decisions. Retailers can efficiently plan and implement discount strategies using this data, which is essential for understanding how consumers respond to different sales promotions.
References
Gordon‐Hecker, T., Pittarello, A., Shalvi, S., & Roskes, M. (2020). Buy-one-get-one-free deals attract more attention than percentage deals. Journal of Business Research, 111, 128–134.
Prince, J., & Baye, M. (2013). Study guide to accompany managerial economics & business strategy (8th ed.). McGraw-Hill Education.
Zhao, H., Yao, X., Liu, Z., & Qin, Y. (2021). Impact of pricing and product information on consumer buying behavior with customer satisfaction in a mediating role. Frontiers in Psychology, 12.