Ecommerce: Are Cash Discounts The Worst Performing Incentive?

[mandy]

“Worst incentive you can offer is a cash discount - Dr. Flint McLaughlin” ...

Dr. Flint specializes in marketing tests, so I can’t imagine he’d make this statement lightly. Here’s the rationale — it’s all about Perceived Value. When you offer a dollar discount, the benefit to the customer can never exceed the face value of the discount. You could offer a $10 discount on a $100 product or free shipping which might cost a customer $15, $20 or more (depending on what you want to charge for shipping).

Similarly, you may test a $10 rebate against a $20 gift card (which may be restricted to regular priced merchandise only). Again the perceived value is higher with the $20 face value of the card. Plus, the customer may never redeem the gift card, or redeem it and spend more than its face value. The point is, there are some incentives you can invent or inflate a value for, but a cash discount is always equal to its nominal value.

Cash discounts also devalue the product somewhat, which is why many manufacturers favor MAP (minimum advertised price) policies...

full article: http://www.getelastic.com/are-dollar-dis...ncentives/