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A/B Testing Idea #117 - Explain the logic behind the promotion

Tactic_Explain the logic behind the promotion

Description

Whilst offering discounts is a great way of moving stock, you don't want your customers to be left wondering why certain products are discounted and potentially questioning the quality of the product: a discount should be presented in a positive way with a clear and obvious justification.

People don't evaluate prices based on any absolute value but rather on their perception of a value which is often shaped by how it is presented to them and the references provided for comparison.

Your discount should therefore be presented in a positive manner through giving a credible and immediately recognisable reason for it (stock clearance, older model, one-day sale, etc.) in order to encourage the customer to focus on how much saving is being made with this new price and will see it as a good deal not to be missed.

Inspired by Nick Kolenda 

Principles

  • Perceived Value Pricing (Lee & Zhao, 2014; Poundstone, 2010; Mazumdar; Raj; Sinha, 2005; Thomas; Simon; Kadiyali, 2007)
  • Reference Pricing (Tversky & Kahneman, 1974; Green & al. 1998; Ariely; Loewenstein & Prelec, 2003; Nunes & Boatwright, 2004)

The Research

Perceived Value Pricing

Perceived Value Pricing explains how our perceptions of a price and its value can be altered depending on how it is presented to us.

Reference Pricing

Reference Pricing refers to the fact that we decide what is a justifiable price to pay for a product or service by comparing it to other reference prices (such as competitors’ pricing or previous, pre-sale pricing etc.).

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