While Discounts are generally used to increase sales’ volume
by decreasing prices and creating “buzz”, I encountered an interesting way in
which discounts are used to overcharge one-time-buyers.
Usually promo codes and discounts are used to attract referral clients or
in cross-selling. In the pictures above, however, this is clearly not the case. These pictures were taken in a
Metro train in Washington DC. Since the promo
code is publicly advertised, anyone who buys a ticket can use it to get a
10% discount.
Quite interestingly, anyone can,
but not everyone will use the promo code to get the discount. This way, the
seller is overcharging some of the buyers.
Assuming you want to sell
something for $99, you can say that the price is $110 and then advertise 10%
with promo-code XYZ… The bulk of buyers will use the promo code and get 10% of $110
off ($11) discount, thus buying for $99 which was the intended sale price. There will be
other (forgetful?) buyers who will not use the promo code and pay the price of
$110.
In addition, such spoof discounts might actually increase
sales (in volume) because they generate transaction
utility. While the term transaction
utility might seem too pretentious, it actually means making the purchase
seem like a good deal.
Such pricing (marketing) techniques are specific to one time
purchases since they strongly rely on people not knowing what the right price is for the item.
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