There is no such thing as a free lunch

Milton Friedman

For many retailers, 4th quarter represents up to half of their annual revenue – traditionally with focus on Christmas followed by a discounted January to empty the shelves again. Black Friday has changed all of that – originally a US phenomenon right after Thanksgiving, countries across all continents have embraced the concept, where retailers are dumping prices anywhere between 5% and 90%.

That is some discount – which is interesting because while the supply chain and production variance is costly, then +40% will not buy anything regardless of discount and +50% will only buy if discounted 50-90%. And just like classic airline loyalty programs, a major part of this would have sold anyways, so many are basically giving away money.

Now the business case is on average iffy for the retailers – but as a consumer it is great right? Well, if you are purely buying stuff, you truly need, at a truly discounted price and in a truly high quality, it is great. But is that the case? Lets look at some of the marketing tricks you should be wary about (whether you are a consumer or a retailer).

Firstly, Black Friday is all about creating scarcity – one of our most powerful psychological triggers. There is the scarcity of time (limited time offers – some accelerating this with countdown clocks or early bird offers) and the scarcity of product as many retailers offer exclusivity to certain segments or only stock a limited number of the discounted products to lure you in for a classic game of bait and switch. Either way you are likely to buy stuff you don’t really need, unless you have a clear picture of exactly what you want up front. This approach comes from a method known as committing to core priorities.

Secondly, many retailers before Black Friday hike up their prices to create an artificially large discount – make sure to check prices ideally in a price portal with historical price levels – comparing different futures tend to increase your rationality substantially. As a clue remember if the discount is relative (the percentage saved), then the amount saved is often low – and if mentioned in absolute terms (the amount saved), then the relative is often low. Be sure to read the fine print – as a discount may depend on you opening a credit line. But surely a gift card cannot go wrong? Well +5% of all gift cards are never redeemed, so it is basically free to give you a discount of 5%. All of this is designed around your limited attention span, which is further reduced with fatigue, so make sure to fuel up!

Finally, buying something that lasts and thus has lower environmental impact is of course a matter of quality, where some offers look like what you want, sounds like what you want and feel like what you want – but is reality a dumped down version of the TV that you originally dreamed of. In general, it is very difficult for people to assess the quality of a product and thus we go by simple cues. The freshness of the green section of a supermarket, the cleanliness of the car repair shop and of course price. But just as important as quality, the actual utilization is critical. +10% of all Black Friday shoppers do it out of boredom – not out of need. And bundling products for higher sales and average margin will get you stuff that you did not really need and eventually becomes waste. Confirmation bias will be in full overdrive now, so maybe assign a friend to the Devils Advocate role to help you avoid all those plastic trinkets.

Remember the Chinese proverb: “The more you own – the more it owns you”. Make my Christmas and buy only what you truly need by following the simple tricks above (commit to core priorities, compare futures, fuel up and Devils Advocate) – or if you prefer go nuts and make the retailers’ Christmas. It is all up to you – and you are rational decision maker right😉?

If you want to help more customers buy the right things from you, contact brian@behaviouralstrategygroup or +45-23103206