The Sharp Cut: Who Actually Buys on Sale?

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Marketing runs on comfort blankets. The Sharp Cut cuts them up to see what’s inside. This week, with Black Friday five weeks out and someone already writing the 40% off email: the idea that a discount wins you new business.

Here’s the spine. A discount rents you this week’s sales, mostly from your own customers. When the price goes back up, the rental’s over. So every promotion has to pay for itself while it’s running.

This week:

→ Who actually buys on the deal. Ehrenberg-Bass looked across 18 categories: 77% of promo buyers had already bought the brand in their last five trips, against 81% at full price. Basically the same people, paying less.

→ How long the bump lasts. Soup and yogurt promotions faded in about two weeks, and in only 1 of 29 cases did a deal change sales for good. Then the dip, and people learning to wait for your price.

→ The math nobody runs. At 20% off with a 50% margin you need two-thirds more sales just to stand still. A German retailer celebrated a 19%-off sale that needed triple the traffic to break even.

→ Three people, three kinds of math. The store, the supplier, and the salesperson are each optimizing something different, and the brand on sale is usually renting its own buyers back.

→ What actually works. You can’t quit cold (ask JC Penney). McCain pulled promotions back slowly and moved the money into brand, and nine years later sells more chips at a higher price.

Plus the one takeaway: a discount gives the people who already buy from you a cheaper week, and you often pay for it twice.

Enjoy the show!

Stories & evidence this episode:

• Which? Black Friday investigation: https://www.which.co.uk/policy-and-insight/article/dont-believe-the-hype-most-black-friday-deals-the-same-price-or-cheaper-at-other-times-of-the-year-which-finds-a3TbD5x5KADs
• Ehrenberg-Bass / John Dawes, price promotions and buyer mix (SSRN): https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2199169
• McCain, “When the chips are down, margins matter” (IPA): https://ipa.co.uk/knowledge/case-studies/when-the-chips-are-down-margins-matter-how-a-focus-on-long-term-emotional-brand-building-reduced-price-elasticity-and-increased-profits-for-mccain
• The Evidence Line (180+ models): https://quatical.com

Chapters

00:00 What the Sharp Cut is, and this week’s comfort blanket

00:50 Black Friday five weeks out, and the Which? study

02:18 How Black Friday became Black Friday month

03:50 Hermann Simon, BMW, and who really sets price (ep 18)

04:57 Who’s actually buying on the deal (Ehrenberg-Bass)

06:10 But explain P&G: the coupon cut and the share loss

06:50 How long the bump lasts, and the margin math

07:55 The 19%-off sale that needed triple the traffic

08:40 Soup, yogurt, Coke, and learning to wait

09:15 When the coupon becomes the price (Bed Bath & Beyond)

09:50 Loss leaders, pocket price, and a rebate that expired

11:58 B2B: value sellers vs price sellers, and commission math

14:49 Why not just stop? Walmart, good vs bad market share

15:40 JC Penney cold turkey vs McCain’s slow pullback

17:20 Honest pricing, anchoring, and the law

18:32 The one takeaway: you pay for it twice

19:00 Recap and what to change on Monday

Hosts

Marc Binkley

Quatical - https://quatical.com/

LinkedIn - https://www.linkedin.com/in/marcbinkley/

Vassilis Douros

Personal Website: https://vassilisdouros.com

LinkedIn - https://www.linkedin.com/in/vassilisdouros/

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