Make The Price Right

The lure of promos and discounts

by Brad and Debra Schepp
- Aug 24, 2015

Did you "attend" Amazon Prime Day on July 15? Amazon did a great job promoting it, saying it would be better even than Black Friday.

We visited the site that day, curious about the bargains and how the event was shaping up. But we didn't buy a thing. Neither did our kids.

'Discount' was the most effective tactic in the e-commerce sector. 'Below competition' and 'bundle' followed

The few gadgets we checked out were out of stock, and most weren't available via rain check, either. Plus, our college-age kids just were not that impressed by the selection. Our son said it was "a lot of hype for nothing."

To be fair, many folks took to social media to cheer about their deals. But we weren't the only ones left out in the cold.

"Consumer demand was there for Amazon Prime Day, but the deals did not deliver," TechCrunch reported.

In its official release about the event, Amazon told a different story.

"Amazon today announced it sold more units on Prime Day than the biggest Black Friday ever, and had more new members try Prime worldwide than any single day in Amazon history," the statement read. "Customers ordered 34.4 million items across Prime-eligible countries, breaking all Black Friday records with 398 items ordered per second. Prime Day was also a great savings day—members globally saved millions."

It's all about the discounts

Prime Day was all about the chance for great bargains. This opportunity always draws shoppers. But as a retailer, what are the best strategies to use—short of a huge special event—when pricing products, day in, day out?

For some expert advice we turned to market research company Software Advice, a POS system comparison site for retailers. The company recently asked retailers (including e-merchants) about their successful pricing strategies. According to spokesman Ike Jablon, 52 percent of retailers use more than 10 different pricing strategies!

"Discount" was the most effective tactic in the e-commerce sector. "Below competition" and "bundle" followed that.

And across all types of retailers (online, specialty stores, discounters, even grocery stores), the same strategies are the most popular. Discount pricing is the clear winner, used by 97 percent of respondents.

While the company found 'discount' rated as the most pricing effective strategy, that strategy can be hard to maintain

Beyond discounts

The two pricing strategies tied for second place, "bundle" and "below competition" (each used by 90 percent of retailers), are also ways of presenting value or a bargain to customers, Software Advice reports.

Using the manufacturer's suggested retail price is another popular strategy, cited by 85 percent of respondents. Retailers use this strategy "to convey the quality of a certain manufacturer and raise the perceived value of their products."

Yet online merchants are far from sold on MSRP.

"E-commerce retailers are split in their view of MSRP pricing," Jablon says. "Twenty-eight percent rate it as effective, while another 26 percent feel the opposite. For e-commerce retailers, where price comparisons are quick and easy for online customers to perform, MSRP can be a tough strategy to use."

Another top strategy, the company found, is "high-low," where most of a retailer's products are priced above market rate and rolling discounts are offered on select items to attract customers. And finally there's "price lining," where prices are set to create distinct product categories, suggesting a quality level to customers.

Software may hurt pricing

Software Advice finds that 51 percent of respondents use software to manage product pricing, showing that this technology is gaining appeal. But such software can be a mixed blessing. While the company found "discount" rated as the most pricing effective strategy, that strategy can be hard to maintain—and pricing software is partly to blame.

"Retailers should thus consider using pricing management software in conjunction with different strategies to give themselves additional leeway to maintain margins," Jablon notes.

Many small retailers push traffic to and drive sales from their e-commerce site with similar one-day events

An expert's take on Prime Day

We asked for Software Advice's take on Prime Day. Their retail researcher, Justin Guinn, says Amazon's Prime Day was a perfect example of a discount pricing strategy in the e-commerce space.

For Amazon, it probably pushed previously stagnant inventory and "incentivized" consumers to enroll in Prime.

"Apart from the news and attention it drew as a big event, these memberships may be where the real gain of Prime Day was for Amazon," he says. "Nonetheless, at its surface, it was a simple discount strategy done in a very big way."

Should you try a 'Prime Day'?

Yes, Guinn says. "Though Amazon's Prime Day blowout sale was promoted as a revolutionary event for e-commerce, many other retailers have previously had success doing similar one-day sales, he says.

"Wal-Mart, for example, launched a similar event on the same day as Amazon. These are two leaders in the retail space, so, of course, we all heard about their blowout sales. But it's not unique to them," he continues. "Many small retailers push traffic to and drive sales from their e-commerce site with similar one-day events."

In fact, one-day sales are easier for online sales, he notes.

"On the consumer side, you can browse and buy everything you want at a discounted price with only a few clicks," Guinn explains. "For retailers, you don't have to worry about stocking your floor as sales items go flying on the selves, nor do you have to spend time and money putting up in-store signage about the sale. You're also more easily able to up-sell online consumers by recommending additional products that may or may not be on sale."

So while Amazon's Prime Day may have disappointed some, we're hoping your equivalent will not!

About the Author

Brad and Debra Schepp are the authors of 20 books, including eBay PowerSeller Secrets and The Official Success Guide: Insider Tips and Strategies for Sourcing Products from the World's Largest B2B Marketplace. Their most recent book, which Deb co-authored with John Lawson, Kick Ass Social Commerce for E-preneurs: It's Not About Likes—It's About Sales, was recently named the 2015 Small Business Book of the Year in the social media category.

For further information, visit Brad and Deb's website,

Opinions expressed here may not be shared by Auctiva Corp. and/or its principals.

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