Prices: When Discounts Annoy Your Customers

There are times when giving a discount is counterproductive because it irritates customers, especially the most loyal ones.

Wednesday, May 17, 2017

5 reasons why customers might not like a discount 
By Ariel Baños, founding economist of Fijaciondeprecios.com 

Low prices are not always the equivalent of happier customers.  Let's look at some particular cases where the effect may be exactly the opposite. 

Who would be offended if a lower price was announced? Actually, a lot of customers. Under certain conditions, a theoretically favorable measure for customers could have a totally opposite impact.  Let's look at some situations that cause this seemingly irrational customer response.

1.  The product life cycle is not respected 
Sometimes companies do not respect the life cycle or the seasonality of certain products and carry out liquidations or significant discounts sooner than expected by the market. This situation usually takes people who bought at the initial price by surprise, leaving them feeling disappointed with the company. A case like this occurred when Apple released the first version of the hit iPhone in 2007 in the United States. Only two months after the launch of this worldwide innovation - long awaited by fans of the company - Apple reduced the initial sale price by two hundred dollars, meaning that it applied a discount of 33%. Customers expressed their opposition to the price reduction on mass, considering that the product was still a novelty in the market. Cornered by the unexpected reaction, Apple had to apologize publicly for the sudden price move and give a hundred-dollar credit to everyone who had paid the initial price. From this situation, Apple generally has as policy to reduce the prices of its products only when it launches a new version, superior in benefits. 

This type of customer reaction usually occurs when companies offer liquidations in full season, irritating those customers who had already bought assuming that lower prices would only appear at the end of the season.



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