Manan Khurma Aug 10, 2018 20:27 PM IST
The process of shopping in today’s world is an ever-present activity, be it a simple visit to the grocery store or a trip to a high-end clothing outlet. Companies, shops and online aggregators have always looked for ways to attract customers and encourage them to shop more often and in larger quantities. Two methods that they have used in this pursuit have showcased high success rates: sales and discounts.
Sales are an inescapable aspect of the shopping experience and is often the primary reason behind why customers even enter the store or visit online websites. Discounts are both a boon and a bane for customers with limited budgets for essential goods at grocery stores, allowing them to purchase products sold together rather than as individual purchases. However, a company boasting of ‘Flat 40% off’ on its merchandise, contrary to what customers assume, is not actually operating at a loss simply to please buyers. An analysis of the mathematical side of these offers reveals how these sales operate and condition customer behaviour.
How discounts operate
The primary goal for any store is to bring their customers into the shopping space. Once there, the intrinsic desire to spend, brought on by the large percentage of discounts shown, motivates these customers to continue shopping. Familiarizing themselves with the actual value of the products being discounted and calculating the percentages is one way through which customers can avoid falling into this trap.
Consider this: A customer enters a store that advertises a very lucrative 40 percent off to buy a single piece of clothing. However, the discount only applies if one buys 3 articles of the same kind, while a standard 15 percent discount applies for all clothing items in the store. While the large percentage may be the incentive to go through with this purchase, doing the math indicates that buying a single piece of clothing would work out to be much cheaper than buying 3 articles simply to avail the discount. For instance, if one article costs Rs 1,000 with a 15 percent discount, you pay Rs 850. Now, if we go for the 40 percent offer, we end up spending Rs 1,800, considering that 3 of the same items cost Rs 3,000. That’s more than twice of what the customer initially wished to spend!
The flipside of a larger discount
There are situations, however, where opting for the larger discount can be in the customer’s interest rather than against it. For example, a store offers two discounts on its items: A flat 50 percent off and another 40 percent off, with an additional 10 percent on variants of the same article. Here, the flat 50 percent off will always result in a higher discount than a 40 percent and the additional discount of 10 percent as the additional 10 percent will always be applied to the already discounted price, thereby lowering the overall discount obtained. Situations such as these demonstrate how evaluating percentages critically using mathematical skills can be a great advantage for customers.
Calculate before you click
Finally, customers must be aware of another aspect of sales, especially during online sales. Most stores online tend to list products at their Manufacturer’s Suggested Retail Price (MSRP) rather than the Market Retail Price (MRP), due to the intense competition in the sector combined with the slim overhead margins. Hence, the discounts that are advertised on these prices end up negating most of the losses that a company or retailer may incur, ultimately making customers pay full price for products that they believe they have obtained for a reduced price. Therefore, customers must also be aware of the actual value of products before blindly purchasing them due to their presence on sale.
The mass proliferation of sales and discounts today has demanded that customers make smart purchases rather than just engage in impulse buying. Being able to calculate these discounts quickly is, hence, an essential skill that people must possess today. The age of retail is upon us and trusting your mathematical ability is the best way to make sure you buy the right products at economical prices.
At the end of the day, sales and discount at stores, both online and offline should benefit us as a consumer. If these simple things are kept in mind, I have no doubt that you all will make the best possible purchase decisions for yourself and reap the maximum benefits from the slash in prices.
The author is founder and CEO at Cuemath.