Why Consumers Don't Seem to Care About Discounts

NEW YORK (MainStreet) — According to fresh figures from the Stanford Graduate School of Business, retailers are lowering prices by “as much as 20% to 30%,” but consumers aren’t exactly lining up to take advantage.

What’s up with that? Stanford marketing professor Stephan Seiler has a theory — and it points to consumers being either inattentive or unaware great promotions are out there.

Seiler tracked 100,000 supermarket “shopping trips” in the U.K., looking for tendencies by consumers to take advantage of retail promotional deals — in this case, for laundry detergent. He found that 70% of the time, shoppers took a pass on deeply discounted deals on detergent, even on products and brands they said they liked.

"It might be the case that the supermarket has a promotion two weeks after you bought the detergent, and you can't be bothered to store a second pack, so you wait until you run out," Seiler explains. "I tried to disentangle that type of story from one in which people might have bought it, and the only reason they didn't is they weren't made aware that a promotion was going on."

U.K. consumers were especially likely to pass up discounts on smaller shopping trips where only a few items were needed. If shoppers don’t walk down an aisle where promotional items are deeply discounted, they’re not going to notice money-saving deals they otherwise may want to know about, Seiler says.

Seiler also notes that consumers like to buy large volume sizes, on which they can expect to grab volume discounts of 8% on average. But the typical promotional deal can shave 20% to 30% off an item’s price tag, even though consumers shrug their shoulders and pass up on such deals.

"If people are really price-sensitive, and they really like the lower price from the larger sizes, then I should also see massive reactions to promotions," Seiler says. But his research doesn’t show a big push to promotional discounts. Instead, consumers like to buy bigger-volume items so they don’t have to take “frequent” trips to the grocery store.

Avoiding deep discounts doesn’t seem like a natural trait of retail consumers, but that’s exactly what Seiler found in his research.

The U.S. economy grew by 2.5% in the first quarter of 2013, according to the U.S. Commerce Department, thanks to an uptick in manufacturing and stronger numbers from the U.S. agricultural sector. In addition, consumers dipped into their wallets and pocketbooks and hiked spending by 3.2% for the quarter.

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