Thomas from Ariyh - 🎓 When big discounts backfire
🎓 When big discounts backfireVery big discounts (60% off or more) reduced sales on Groupon instead of increasing them. Avoid heavy discounts when it’s difficult to verify your product’s quality before buying it.New to Ariyh? Join 8,009 evidence-based marketers for 3min practical insights 💡 from scientific research 🎓 to get better marketing results 📈 Links: Job board - Advertise on Ariyh - 1:1 Consulting Today’s insight is brought to you by… Growth Mentor What if you could tap into the experience of 340+ startup and marketing mentors? Have 1-on-1 conversations about growth, marketing, and everything in between with the world's top 3% of startup and marketing mentors. Use the code ariyh15 and get an exclusive 15% discount for Ariyh readers. 📝 IntroScientists discovered decades ago that strong discounts have a negative effect on perceptions of product quality. When a seller heavily discounts a product (e.g. 50% off), we want to understand why. The answer we usually give ourselves is the most obvious one: the product is probably bad quality or nobody wants to buy it. Unless we’re convinced otherwise (e.g. we can verify the product’s quality, or it’s a shutting-down sale). Today’s study analyzed 19,978 Groupon deals to understand at what point a discount is just too much - and hurts your sales instead of helping them. P.S.: Some supermarkets try to avoid wasting unattractive fruit and vegetables (e.g. spotted apples, curved carrots) by heavily discounting them. But 60% discounts reinforce our false belief that unattractive products are of bad quality and tend to backfire. Instead, recent research found that it’s much more effective to simply call the fruit ‘ugly’ (and use a smaller discount of 20%), boost people’s self-esteem, or anthropomorphize the veggies (i.e. put a smiley face on them so we empathize with them). Previous insight: Extraordinary warranties (100+ more insights here) Deep discounts reduce sales if product quality is uncertainImpacted metrics: Customer acquisition 📈 RecommendationAvoid deep discounts (60% off or more) if you don’t have a strong brand and it’s hard for customers to judge your product’s quality (e.g. they can’t try it in-store before buying). Relatively low discounts are usually fine in the short-term (e.g. up to 40% or similar $ amounts). 🎓 Findings
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✋ Limitations
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🔍 Study typeLab experiment and market observation (of 19,978 Groupon deals, January - March 2014). United States and Canada 📖 ResearchCao, Z., Hui, K. L., & Xu, H. (July 2018). When discounts hurt sales: The case of daily-deal markets. Information Systems Research. 🏫 AffiliationsRotterdam School of Management, Erasmus University and School of Business and Management, Hong Kong University of Science and Technology. The Netherlands and Hong Kong Remember: This is a new 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. 🔥 Featured hand-picked jobsA selection of the best marketing opportunities out there.
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Older messages
🎓 Extraordinary warranties
Tuesday, January 11, 2022
Exceptionally strong warranties (eg 10 year warranty for a sweater) are a powerful way to signal high quality for unfamiliar brands and boost purchase intentions.
🎓 Give your products space
Tuesday, December 21, 2021
The space-to-product ratio effect: use more empty space between products on display to increase their perceived value and beauty. In one of the experiments sales increased 98%.
🎓 Micro-influencers drive more sales (+ a surprise 🔥)
Tuesday, December 14, 2021
If your product is hedonic (eg fashion, high-end electronics), promoted posts from small influencers (10k to 100k followers) drive more sales than those of large ones (>1m followers).
🎓 High referral rewards = worse customers
Tuesday, December 7, 2021
Large referral rewards (eg Get $50 if you invite a friend) boost the referral rate (+750% in one experiment) but lower the average profitability of newly referred customers (-48%).
🎓 Frame your product as the ‘gift’ in a bundle
Tuesday, November 30, 2021
Frame a product as the 'free gift' in a bundle instead of the main product (eg “Buy softener and get Ariel detergent [primary product] free”). Sales were up to 78% higher in a series of
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