DISCOUNTING, INCENTIVES & THE HUNT FOR BIN LADEN

DISCOUNTING, INCENTIVES & THE HUNT FOR BIN LADEN

  Howard Saunders   Feb 01, 2016   Brand, discount, incentives, Retail, sales, shopping, Uncategorized   0 Comment

I read recently that in the hunt for Osama Bin Laden the US Government offered a reward of twenty five million dollars, to the good people of Pakistan and Afghanistan, for information as to his whereabouts. There were no takers. After months of debate in Congress they finally came up with a solution: to double the reward to fifty million dollars. There were still no takers. It’s clear the US Government needs a lesson in how incentives work.

A thousand years ago, when I was a freckle-faced newbie at my first London design agency, I remember meeting with our in-house copywriter to discuss a client promotion we were working on. Ivan was a gentle and avuncular chain smoker and his rich, filterless Camel voice explained to me that a jackpot of say, one hundred thousand pounds would attract fifty thousand entries, but that a prize of a red convertible sports car (worth less than a quarter of that) could expect to attract twice as many entries. Experience had taught him that incentives are much more powerful when they are tangible, when they light up our imaginations. Numbers alone are never as effective.

Consider the scam emails that offer vast sums of money following the death of someone with a similar family name. If the bait was say, a riverside house overlooking the Niger, then maybe, just maybe, it would be more believable that Uncle Adebambo had bequeathed it as he lay on his death bed. Instead they persist with offers of multi millions of dollars, making it ever more improbable and preposterous. (Perhaps there’s a consultancy role for me here?)



Just as incentives need not be large to shift behaviour then the same is true for disincentives. Over-charge me by one dollar for a bottle of water and I’ll go elsewhere. The hotel mini-bar industry, for example, is a great lesson in how to ensure all your customers leave feeling ripped off. It’s become a cultural joke that we’d have to be crazy drunk before we dared reach into the damn thing. And we mostly are, of course.

Incentivising is a psychological game and discounting, whilst seemingly straightforward, is actually a highly nuanced area. For instance, ‘Buy One, Get One Free’ may work brilliantly for washing powder or baked beans but in fashion it looks like barrel scraping. Two shirts for the price of one suggests these aren’t the shirts you should be wearing. In this post-crash, post-apocalypse climate we want THE product (shirt, coffee, car) not A. We want our shirts to feel special. As we slip it on we need to know that we made the right choice, that we are a truly discerning customer who wears THE shirt, not just any old shirt. We even look for that special THE reassurance when we choose our morning coffee for god’s sake. Most of us are much less vain and demanding when it comes to baked beans.


Accessibility versus inaccessibility is a game of ‘push me, pull you’ to achieve the right balance. Retailers spend millions trying to get us to choose their product over a competitor’s. They invest in flagship stores and window displays to outshine their neighbours. They spend hundreds of thousands of dollars on advertising campaigns to build product awareness and promotions to encourage us to shop with them; they line their walls with beautifully lit displays…and yet the truth is that the more accessible something is, the less we want it. Just imagine that Louis Vuitton strikes a deal with Walmart and starts selling its iconic handbags half price at the checkout. (I know this parallel universe isn’t easy to slip into, but there are brands that have done worse) For the first week or so they would shift an awful lot of handbags, but sooner or later we’d realise that we don’t desire them like we once did and within a matter of a few weeks Louis Vuitton, and all it stood for, would be finished. They’re exactly the same, beautiful bags, remember, but now they are completely drained of the value and respect we projected onto them.

That’s because a product is so much more than just a product. Buy it from a glamorous flagship on a sunny Saturday and it’s imbued with flagship flavour forever. Buy it from a dodgy geezer off the back of a truck on a wet Wednesday in Hull and that too will stay attached to it (even if you do feel savvy that you knew where to find the truck). Every time you open the wardrobe it will remind you of how it came into your life. No one else will know of course and so now it also carries with it an air of deceit!


Discounting too is similarly paradoxical, alluring though it is to both customer and retailer, it can do serious, long term but invisible damage to a brand. When I see something reduced by 50% I instantly feel I want it half as much as I did previously. Even if it was something I’d had my eye on, the thrill of the discount must be offset against the disappointment that it has become that much more accessible. And if it’s a luxury item then it raises lots of questions such as ‘What’s wrong with it? Why can’t they sell it? How much was the original mark up?’ etc etc. In an instant, the unattainable has become attainable, the dream has evaporated and therefore, the product is devalued. It’s like Groucho’s ‘I don’t want to belong to any club that will accept people like me’ conundrum. Tricky things customers.

If brands have achieved anything by investing in the meaning and cache that transforms their products into desirable non-commodities, then surely a sale has to puncture that, temporarily at least. Aspiration, certainly in luxury goods, is a brand’s very essence. To erode that, even gently, is to erode the nucleus of its structure.

That is not to say a sale, a short and finite period of discounting, is not a respectable way of driving sales. Limiting the damage in customers’ minds is the key. End of season sales make perfect sense but sale posters that perennially plaster the windows of furniture stores, for example, simply destroy any credibility that the products were ever meant to be full price. Equally, at sale time customers get into ‘sale mode’ and won’t even consider a store that refuses to join the party. So it does make sense for luxury or premium brands to join the fun… so long as it’s carefully managed in a considered and contained way. And just like the ridiculous multi million dollar offers the email scammers make, discounts of 70% and 80% appear just as ludicrous. It’s advertising that they’re either going bust or have been ripping us off previously; neither of which are particularly strategic messages.

Customers (that’s us by the way) aren’t stupid. We can smell desperation and death within a hundred yards of a shop window and no one wants either of those as a brand value. Talking of which I just popped into see how Hollister on Fifth Avenue was looking these days. Oh dear god!

So, the next time the US Government considers putting a multi million dollar bounty on the head of an international terrorist, maybe it should offer a bright red, convertible Mustang instead.


About Howard Saunders

Howard has worked in retail design for over twenty five years. As a former Creative Director of Fitch, based in London, he was responsible for retail design and branding and for creating multi-disciplinary teams of architects, graphic designers, product designers and copywriters and making them work together! As an independent consultant Howard has worked closely with Marks & Spencer, Waitrose and Westfield, for over a decade, helping them develop new store designs and keeping them informed of the latest retail innovations and shifts in customer expectations. His work with Westfield, for example, culminated in the creation of the artisan Great Eastern Market at Westfield Stratford, Europe’s largest shopping centre, which opened in 2011 on London’s Olympic Park. Now based in New York, Howard’s current clients include CBRE, Claire’s Accessories, Consumer Goods Forum, Ebay, Johnson & Johnson, L’Occitane, Magento, Mothercare, Permira and Westfield World Trade Center. As an international speaker Howard’s talks are big, visual journeys across the world of retail. Provocative, challenging, brutally honest, evidence based and thoroughly entertaining.

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