Have you ever wondered why there are deals that offer discounts as deep as 90%? Or why some websites would let you literally walk away with an item for free when you shop online? Businesses must have been benefiting from this, otherwise, they wouldn’t have issued any coupons. Coupon sites are also making money apparently, and consumers can’t be happier when they see a good deal. It’s a triple-win situation, but what’s the mechanism behind this? Who reaps the most benefit in the end?
Take this garden hose nozzle, for example, Dealgogogo offers an astounding discount of 90%, driving the price down to $7.99. All you have to do is to click here to install the Dealgogogo Chrome extension, then click “Find in Amazon”, and save 90% on this garden hose nozzle. Just in case you suspect price labelling manipulation by Dealgogogo, this garden hose nozzle really sells for $79.90 on Amazon, and if you haven’t installed the Dealgogogo Chrome extension, there would be no status bar that tells you to “save 90%” and it will be $7.99*10 you pay for this garden hose nozzle.
What it is not
Many Amazon sellers mark their prices ridiculously high and then introduce a discount which drives the prices down to a more acceptable level, in order to capture the consumers’ attention by the striking contrast between the two prices, such as this one.
There is simply no way that a screen protector like this would cost $39.95 anywhere! So the seller could mark up the price as high as he wants and then grabs the consumers’ eyes by the striking 83% discount. But this works terribly. It’s a hoax and consumers are not so stupid as to believe this.
But this is not so with this garden hose nozzle as shown above. This brand, Zlimio charges everyone $79.90, which is the real value of this nozzle, who wishes to buy it. So, why is Zlimio doing this? And how is this 90% off thing possible?
How is it possible
First, this discount offer is limited both in quantity and in time. That is to say, only part of the Zlimio garden hose nozzles are on promotion for a certain length of time, and if the all coupons designated for the nozzles have been claimed, or that Zlimio decides to cancel the promotion, consumers will have to pay the full price of $79.90 again.
Second, in this way, for Zlimio, the profits from the nozzles not on sale would more than enough cover the losses incurred from the promotion, and because Dealgogogo promoted the product to audiences it won’t otherwise have access to, Zlimio gains immense brand exposure and elevated consumer attention, which will help improve their ranking on Amazon and have easier access to consumers.
Third, for Dealgogogo, the promotion fee from Zlimio, the increased brand exposure and recognition achieved by offering breathtaking discounts like this, constitute the main benefits. What’s more, a chain reaction is engineered in which more Amazon sellers will come and promote their products on Dealgogogo for their own benefits because Dealgogogo has access to a huge number of audience. This brings even more revenue and more brand recognition for Dealgogogo in an exponential manner. And the cycle starts again.
And fourth, for consumers, well, they paid 90% less for this nozzle; what’s better than that?
No one loses because this is not a zero-sum game, but it’s commercialism that wins in the end. This model requires ever-increasing purchases on consumers’ side, an unstoppable expansion of production on manufacturers’ side, and an escalating effort of investment on Coupon websites’ side.
What’s the nature of it
A coupon is in nature an incentive, a bait. And it works in the following ways (from the sellers’ side):
1. It draws the attention of consumers by offering what they want. Consumers want to buy things cheap, but more than that, they want to know that they have gained unexpectedly, undeservingly, at the expense of someone else (sorry about the language, but this is real human nature), and a coupon does exactly those. It offers a discount from or deduction off the original price, driving the price down as well as giving the consumers a sense of having gained at the expense of the seller.
2. It induces consumers to buy more for less and therefore achieves product exposure and brand recognition, which in turn generate more future sales by the means of improved ranking on Amazon and of building customer loyalty.
3. With the technique of add-on item propaganda and a purposeful management of prices and discounts in a way that will ensure overall profit, sellers/coupon websites convince consumers that the best option for them is to buy more, even the things they don’t need, because they are cheap.
4. Consumers are not blind of course, but we no longer live in an age of simplicity, and it is almost a necessity that we buy lots of things, however little we may have need of them.
5. But there is not one conclusion for all people. Those who really need the things they buy and when they buy them, they gain enormously.