Discounts work better for “guilty pleasures”

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📝 Intro

You manage a big homeware store that sells many types of products ranging from pleasurable, feel-good items like scented candles to functional items like buckets and ladders. 

You've noticed that when you run discounts for home scents or decorations, the sales increase dramatically. But they increase much less when you run the same discounts for your functional home goods like cleaning supplies. 

Here’s what happens, according to science.

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Price promotions are more effective for pleasurable (e.g. cosmetics) vs functional products (e.g. superglue) 

Topics: Promotions
For: B2C
Research date: May 2016
Universities: Columbia University, Tsinghua University

📈 Recommendation

Use price discounts (e.g. $10 off) when promoting fun and pleasurable products (e.g. candy, perfume).

Focus your messaging on the product’s pleasurable benefits (e.g. taste, beauty) to boost the price promotion’s effectiveness.

For functional and practical products (e.g. bin bags) quantity promotions (e.g. “Buy 5, get 50% off”) work better. 

🎓 Findings 

• Price promotions are more effective when a product is or seems to be pleasurable or fun (e.g. chocolate, art, board games). 

• Across 12 experiments in a variety of product categories (consumer electronics, movie DVDs, chocolate bars, magazines) and promotions (coupons, discounts, rebates), researchers found that people were:

  • 139.7% (2.4x) more likely to buy a Godiva chocolate bar with “50% off” if they saw it as a snack for their pleasure (vs. an energy source for a hiking exercise).

  • 52% more likely to buy a city guide magazine when it was framed as pleasurable (vs. when not framed as pleasurable), with a 50% off coupon. 

  • 53.3% more likely to buy headphones when they were to be used for pleasurable (music, movies) vs functional purposes (to study a foreign language).

• The effect weakens if people:

  • Buy the pleasurable product to gift it to others

  • Consciously think about the reasons to buy or not buy 

  • Keep their purchase private, because they feel less need to justify it (e.g. eating out with friends vs ordering food delivery)

  • Encounter a quantity-based discount (“Buy 5, get 50% off”), which is instead effective for functional products

🧠 Why it works 

• We feel the need to justify our decisions. 

• Pleasurable purchases (e.g. chocolate, movies, vacations) come from our desire for fun, which feels harder to justify than functional products that are clearly necessary (e.g. office supplies, medicine)

• Certain situations or actions (e.g.resisting an earlier impulse purchase, making healthy choices, or working hard) can give us some sense of “right to indulge” and make us more likely to make those pleasurable purchases. 

• Similarly, price promotions can motivate and justify our pleasurable purchases and “guilty pleasures” (e.g. “What a good price! Makes it worth it just this once.”).

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✋ Limitations

• Experiments were run with students in hypothetical purchase decision scenarios. Although the experiments were many and well run, the study did not measure the effect in the field (e.g. in a real store).

• It is unclear if the effect would apply to luxury products. When buying luxury, exclusivity, and prestige are the justification for the purchase. Price promotions might backfire by weakening perceived status.

🏢 Companies using this 

• Most companies seem to use price discounts indiscriminately no matter the product type.

• For example:

  • Cadbury correctly gave a 50% discount on Cadbury Boost Chocolate Bar

  • LookFantastic, a cosmetics retailer, correctly offered a 40% discount on an Armani Diamonds perfume

  • Amazon incorrectly gave $2 on a collection of post-its, while a 3x2 deal would have likely worked better

Ice cream sale on WoolWorths. The discounted price motivation should work well for these indulgent products.

⚡ Steps to implement

• Use price promotions (e.g. 50% off) instead of quantity promotions (e.g. Buy 10 pack for 50% off) for pleasurable, enjoyable, or emotional products. 

• In promotional messaging, focus on pleasurable characteristics (e.g. sensual, exciting, fun).

• Use bundle and quantity offers for functional products and loyalty programs. It will help to increase customer lifetime value.

• Try bundling a functional product with a pleasurable one (e.g. kitchen blender and glassware set; textbook and a sweatshirt) and frame the discount as savings on the pleasurable item. This is likely to boost bundle sales (e.g. sweatshirt and a textbook).

🔍 Study type

Lab experiments

📖 Research

The effects of promotions on hedonic versus utilitarian purchases. Journal of Consumer Psychology (May 2016)

🏫 Researchers

• Ran Kivetz. Columbia University. Columbia Business School

• Yuhuang Zheng. Tsinghua University

Remember: This is a scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.

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