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The Psychology of the Sale

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mouser:
I've been thinking recently about the psychology of "sales" -- the way we shoppers respond to the idea of getting a bargain -- and what it means for software authors and companies who want to just price their products reasonably from the start, or offer them up as donationware.

Here's an article by Jonah Lehrer, whose "Frontal Cortex" blog is one of the more consistently readable and insightful science blogs on the internet:

* http://scienceblogs.com/cortex/2009/04/the_psychology_of_the_sale.php
In it he talks about the competing signals sent when things are on sale -- the very strong initial incentive a sale creates in the minds of buyers, even when they don't need a product -- followed by a more complex alteration of brand.

Advertising is an old business, but i think one of the newer aspects that is of some concern and note in the internet age is that on the web it seems that attention is king, and the difference between a company going bankrupt and having record sales (or going broke and having lots of donations) can come down simply to whether other popular sites write about your products and present them as valuable.

And my fear is that this more central role of attention and press in the internet age results in a real disadvantage to software authors in terms of offering their software at low prices or asking for donations -- i worry that an open source game that asks for donations won't get anyone writing about how it's a good idea to support the product, wheras a game that started out priced at $50 but then dropped to $10 will create a huge amount of press and attention and thus a large number of customers.

So.. are we getting to the point where companies have to do these kabuki dances on the internet where they have one normal price that they set quite high, specifically so they can offer "sales" and "discounts" to get attention?  And does this spell doom for donationware authors don't have the ability to have "sales" ("for one week only -- donate half what you normally would!")?

In fairness, free software has its own special appeal on the internet, and gets a fair amount of attention over commercial products by nature of being free -- so that does offset this problem somewhat.  However.. we still have the pernicious problem where most people would crawl over glass to pay half price for an expensive piece of software than make a tiny donation to an equally good free alternative.

mouser:
Upon reflection i think it would be fair to say that the free software/service community does have something akin to a "sale" in terms of attention -- and that's the "fundraiser" -- and i think it's fair to say that free software developers do get some attention when they have fundraisers.

40hz:
The biggest problem I have with the concept of a "sale" is that it is a sale tactic that often gets elevated to the status of a strategy by businesses that have no sales strategy.

It's also been so overused that I think most people are wary of things that are flagged with the word "sale" unless they were already in  the market for the product in question.

So from a psychological perspective, the more critical factor would be the inciting incidents and thoughts that brought the prospect "to market" in the first place. And I don't think a sale is all that effective in bringing that about any more. People have become too aware of marketing tactics.

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The other problem is that sales are usually 'repeat-limited effectives' which, in most cases, exhibit diminished returns with each subsequent use.

The first sale (or two) may spur an increase in revenue. But after that it either doesn't (bad!) - or it becomes a given (really bad!) that will stop people from shopping until they see it. Look at all the people that wait for the seasonal 'sales days' before they'll start shopping for something.

In the end a sale may even have the effect of turning a 'year round' business into a seasonal one, with the 'season' determined by when the "big annual sale" takes place.

The automotive market learned that lesson the hard way. Look how many potential Toyota customers will sit and wait nine or more months for the annual Toyotathon to take place before they even think about getting a car. There's Kabuki Theater at it's finest!

An even worse thing happened to Circuit City. They stocked up on large screen TVs, and then watched them sit in stock while potential customers played wait & see for the BIG SALE that didn't materialize until it was too late for Circuit City. CC overestimated customer interest and demand - and (more critically) the customers overestimated CC's ability to reduce it's prices.

In the end it turned into a game of who would blink first. A game which continued even into the final days of CC's store liquidation sales.

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In the end, "sales" are a tactic at best. And like all tactics, they're intrinsically manipulative - even if benignly so. They all depend on some level of surprise or customer innocence to be really effective. And that level of customer naivete is getting harder and harder to find.  Like the old western movie outlaw said: An ambush ain't no ambush if you know where the posse's waiting fer ya, Marshal. All ya gotta do is ride around em...

If businesses genuinely want to stop having to play head games and perform Kabiki dances* for their customers, all they have to do is stop playing those games in the first place.


Just my 2¢ (provided it's on sale!)  ;)
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*`@mouser -  Loved the Kabuki metaphor. :greenclp: Was that yours?

parkint:
Advertising is an old business...
--- End quote ---

It has been said that Prostitution is the Oldest Profession.
In disagreement, I proport that Advertising is the Oldest.

My evidence is the fact that even Prostitutes had to Advertise!

mouser:
 ;D

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