No idea how it is for you, but when I shop I don't really look at the price tags. Usually I buy what I need and that's it.
Simone Caljouw, founder of Promology, is probably not that kind of shopper. She had a study carried out which showed that in the laundry detergent category, a discount that halves the price is no longer the exception. The share of such offers on detergent went from 38 percent in 2022 to 77 percent now.
That is one category, but it shows where the budget goes, especially in times of economic uncertainty: to promotions.
How half price became normal
Of course, nobody ever decided this. Every promotion stood on its own, and somewhere along the way the reference price turned into a throwaway number that no consumer still believes is the real price.
The promotion drives volume, lifts the price image and holds on to market share. It is a race to the bottom that is hard to stop. Being the first to step on the promotional brakes is hard, says Caljouw.
Carl Mela, who researched promotions, points to an effect that directly shapes the people who decide on them. Sales figures come with instant satisfaction. The volume chart keeps pace with the ambition of the brand manager, who works with a promotion horizon of one year.
What the customer learns in the meantime
Kamel Jedidi, Carl Mela and Sunil Gupta followed purchases in one category for eight years. In the short term, promotions brought sales. In the long term, they cost sales. For the brands in that study, price promotions were without exception loss-making. Advertising did the opposite: it built the brand.
A study by Ashok Lalwani, Jessie Wang and David Silvera (2021) explains how that works. Those who often see discounts adjust their reference price: the customer learns what the real price is. A brand that rarely runs promotions is afterwards rated higher on quality.
What are you building?
Every promotion builds something. You build a brand with what customers remember about you, and a habit with what they learn to expect. We wrote earlier about how to avoid being compared on price. With the Black Friday period ahead, it may be a good moment to look at which of the two you are building.
Anyone who halves the price every month should not be surprised that the customer takes half price as normal.
