By Cali Owings and Patrick Springer, The Forum, Published November 28 2013
The psychology behind how deals entice shoppers
She was the 10th person in line at Best Buy, waiting for the doors to open to deals on electronics, movies and music on what some are calling Gray Thursday, an early start on Black Friday.
“We are going to buy an iPad, two laptops and two TVs,” she said, clutching an ad, with her eyes drawn toward discounts of 50 percent. “That’s the major stuff we need.”
Oatis was flanked by her sister, Aruna Hagen, near the head of a line of well-bundled deal seekers formed outside the store, stamping their feet, some sipping warm beverages from a Thermos.
For the scientifically inclined, research into the psychology of shopping and sales can provide some insight into how decision-making is affected on the highest-profile discounting day of the year.
• The first rule of thumb for most retailers is the “20 percent” rule, said Joseph Jones, a marketing professor at North Dakota State University.
If companies drop a product’s price by more than 20 percent or offer a freebie worth more than 20 percent of the product, consumers begin to question the actual value of the product.
They’re also trying to avoid the “prisoner’s dilemma,” where consumers begin to expect discounts – a dynamic J.C. Penney’s discovered when it tried to reduce the amount of discounts it offered, only to quickly backtrack on the plan when sales sagged.
Retailers eschew that rule to offer steeper discounts on Black Friday because consumers view it as a one-time thing, which limits any negative associations with products, Jones said.
• Are you drawn to Black Friday freebies or are you looking for slashed prices?
A recent University of Minnesota study found that the average shopper has difficulty comparing the value of sales promotions and will usually opt for additional free products.
When given the option of a 35 percent price discount or a 50-percent-more free “bonus pack,” shoppers will go for the extra item, even though the discount is a better deal.
Better deal or not, Kim Parisian was headed for Toys R Us in search of a “buy one, get one free” deal on Skylanders, characters in a popular game.
Parisian, who came from Winnipeg to shop in Fargo, was clutching a $20 box of chocolates and bags of items she’d just purchased at the Kmart on South University Drive.
One of her best buys: a pair of ski pants for $20, marked off 40 percent. “That’s actually a pretty good deal,” Parisian said.
• The reason you’re waiting in line to be one of the first 100 customers to receive a 32-inch flatscreen TV? The scarcity effect.
Stores publicize the number of items available to drive demand. There’s also an element of risk involved that makes the process more fun for shoppers, even if they’re not likely to receive the item.
“There’s only 10 of these,” Jones said. “Now there’s only nine of these so you better take advantage.”
Oatis, one of those in the Best Buy line waiting for the store to open, is well aware of scarcity. Last year she lined up in advance, only to lose out on the chance for a great deal on a TV, where only three or four were available at the deep discount price, she said.
• One of the biggest drivers behind Black Friday’s success? Consumer optimism.
Jones said shoppers go into Black Friday optimistic they’re going to receive the best deals available.
But various studies have found the best bargains are not necessarily found on Black Friday.
Oatis is definitely a deal hunter, but for her, Gray Thursday and Black Friday are enjoyable events. “First of all, there’s the excitement,” she said. “I love the thrill.”
• Based on stories from students, Jones said he suspects Black Friday might be popular because of its competitive nature.
“Sometimes students will come back and brag about the deals that they got,” Jones said. “It’s almost like a trophy.”
Adam Cripe, who arrived at Best Buy at 8 a.m. to claim the first spot in line, admits he’s got a competitive streak.
“I guess you could say that,” he said, waiting for his chance at a hoped-for deal on a Sony PlayStation 4 video game player. He actually wasn’t sure whether it’s marked down.
A 2011 study by two Winthrop University researchers, found that Black Friday shoppers often take a competitive approach to deal-finding that’s similar in some ways to a military campaign.
For Geri Schneider of Fargo, who stopped by Kmart, Gray Thursday was attractive because she anticipated less competition from the mob than Black Friday.
“It’s when we have time and usually it’s not so horribly busy,” she said of shopping on Thanksgiving. “It’s easier to shop.”
• Vague advertisements promising mystery savings and door buster deals hinge on “promotion uncertainty.”
Jones said mysterious promotions that get consumers in the door often pay off well for retailers. Even if the discounts aren’t as steep as shoppers imagined, they’re still in store ready to buy.
Although Cripe, who was first in line at Best Buy, wasn’t sure his hoped-for bargain on a video game player would materialize, he brimmed with optimism that he would find a good deal.
“I’m just going to go in and see what I see,” he said. “Whatever I find.”
Readers can reach Forum reporters Cali Owings at (701) 241-5599 and Patrick Springer at (701) 241-5522