How Discounts Affect Consumer Thinking

By Akul Ranjan. Edited by Arjun Chandrasekar.


20% off. 50%off. 70% off. Everybody loves discounts, the number one tactic all retailers, private sellers, and business people alike implement. Discounts are a critical asset to the business, and offer many more advantages than simply just attracting more and more customers.

Customer Attraction 

The main and most well-known reason for discounts is customer attraction. Businesses use discounts to grab customers and provide a first impression of the customer gaining more value by accepting the business’s service or product. Discounts hook customers onto a deal with the prospect of saving more money. This applies to both new and returning customers who take an immediate interest in receiving more “bang for a buck”. This value proposition gives customers positive feedback and sentiment regarding the business’s service/product and leads them to promote the business to their friends and family – word-of-mouth advertisement. This is the most essential form of advertisement a business can employ and is crucial to growth and positive customer feedback. Word of mouth gives customers a trust/reliability factor as well. 

Free Up Storage

Large in-person retailers such as Costco and Walmart spend large amounts of energy and money storing products, which oftentimes do not sell well and take up space and money for no gain to the establishment. Discounts can help these businesses get rid of the under-demand products, by decreasing the price through a discount that attracts customers and helps get rid of excess and unwanted stock. This can turn a bad investment into a profitable or even a break-even investment, by simply using discounts to increase demand to make up for the excess supply.

Cash Only Discounts

Some businesses can employ discounts when a customer pays with cash, rather than credit or debit cards which charge a transaction and processing fee on every business-customer transaction. By using cash discounts to encourage customers to pay with cash, businesses can save money on those numerous transaction fees which accumulate to a considerable sum through all the transactions a business goes through. 

Types Of Discounts 

Changing up discounts can positively affect their effectiveness, by offering particular sales on certain weekdays and the most common tactic – holiday sales. Amazon, Best Buy, Walmart, etc see huge sales growth in Q4 due to the Black Friday, Christman, and Thanksgiving discounts they provide. Customers who know these discounts come at these times of the year are then prepared and anticipating to get ready to make the most of the once-a-year discount opportunities. 

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