Discounting to clear out merchandise that's past its prime is one thing. And it's part of running a successful store. Sales are important, too. Constant deep discounting like we saw this past holiday season? Not so much according to the 2009 Dollars & Consumer Sense Study by Yankelovich, Inc. The study found that discounting prices deeply during a recession is a mistake that can damage brands in the long run. After you read this post, revisit the one from March 26, titled, "It's about the experience, stupid."
http://kizerandbender.blogspot.com/2009/03/its-about-experience-stupid.html
Although price is a starting point – products and services must fit into consumers' budgets – consumers have negative reactions when brands discount their products and services in response to the recession, according to the Dollars & Consumer Sense 2009 study, conducted in January 2009.
In contrast, when consumers were asked what they assume when a brand does not lower its prices during economic times like these, 64 percent reported that they assume that "the product is extremely popular," and 64 percent assume that "the product is already a good value."
"Lowering prices during a recession clearly raises suspicions among consumers," explains J. Walker Smith, Ph.D., president of the Yankelovich MONITOR(R) and Executive Vice Chairman of The Futures Company. "Drastic price cuts like those seen during the past holiday season create a double-barreled risk for brands. First, such price cuts generally fail to generate enough business to pay for themselves, although clearing inventory is of some value. Second, they create long-term difficulties in terms of consumer expectations."
Those "deflationary expectations" cause consumers to postpone purchases because, when they see that a price is reduced, they anticipate that prices will come down even further. "These expectations of deflation are difficult to break and can keep a category mired in unreasonably low prices for years," Smith notes. About half to 60 percent of the study respondents think that when companies lower prices, it means that prices will go down further if they wait long enough. And roughly 50 to 70 percent think that brands that do not lower prices will have to do so eventually.
About the Study
The Dollars & Consumer Sense 2009 study was an RDD telephone survey conducted in January 2009 among 1,002 adults ages 18+. The margin of error at the 95% confidence level is +/-3.1%.
The study was conducted by The Futures Company, a leading consumer-trends research company that was formed in 2008 by the merger of Yankelovich, Inc., of
Source: PRNEWSWIRE.COM
