Jumping the Market Fences

Retail sales may send consumers to their happy places yet they are increasingly wise to the marketer’s ways

Everyone knows that a key to customer satisfaction is to offer a good deal. Indeed, in a survey commissioned by Smith School of Business, 91 percent of Canadians say they receive “great happiness or pleasure” from a good sale or discount. Yet, at the same time, Canadians are deeply divided on whether or not they are actually getting a deal.

According to the survey, half of Canadian consumers (49 percent) believe they are saving money when a product is discounted but nearly the same fraction (45 percent) believe stores inflate the regular price in order to discount a product. [View the full infographic below]

“While the majority of consumers will be drawn to sales or discount pricing, the Internet has created an entirely new strategic consumer that companies need to be aware of,” says Yuri Levin, Smith School of Business professor and expert in dynamic pricing and revenue management. “The rise of social networking helps consumers share information and figure out pricing patterns. As businesses become more sophisticated, so too do consumers.”

Confusing Prices, Hidden Charges

Canadians feel that there are certain goods and services that end up costing more than advertised due to confusing pricing or hidden charges. Nearly two-thirds (63 percent) of Canadians believe that mobile phone plans end up costing more than the discounted price quoted. Approximately half of Canadians feel the same way about airline tickets, automobiles, TV packages, and long distance/roaming phone charges.

“Transparency of pricing is perhaps the most immediate impact of the internet and social networking,” says Levin. “Companies accustomed to practicing differential pricing now have their prices exposed either officially through their own Web sites or unofficially, through consumer networking. Customers are jumping the ‘fences’ that companies have carefully set up between market segments.”

Rise of the Strategic Consumer

The survey reveals that deal seekers are no longer focused solely on occasional big-ticket items, such as televisions and furniture, but are regularly comparison shopping on day-to-day items such as groceries and household supplies (82 percent). Furthermore, 89 percent of shoppers who receive a good sale or discount say they positively communicate it to other individuals.

 “Research has shown retailers that different customers will pay different amounts for the same or similar products,” says Levin. “At the same time, it has also shown that consumers can resent differential pricing and regardless of their desire for achieving a good deal, the influence of the discount will be lost if consumers feel deceived in the process.”

The survey was conducted using Leger’s online panel, with a sample of 1,516 Canadians. A probability sample of the same size would yield a margin of error of +/-2.5 percent 19 times out of 20.

[View the full infographic below]

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Savvy Shopper Infographic161.79 KB

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