Using discounts to boost sales can be risky since they can:
- Attract deal-seekers who are unlikely to hang around after your promotion ends.
- Habituate your customers to delay purchases until your next promotion.
- Dilute your brand by emphasising price over value.
That said, discount promotions do have their place. One obvious use is to boost sales, which essentially means trading margin for volume. And it turns out that there is a remarkably simple tactic for amplifying how much your customers spend during a discount sale: gamify the promotion.
Researchers from the University of Colorado, University of Connecticut, and Virginia Tech transformed a standard discount promotion into a game of chance by inviting customers to enter a sweepstakes competition where they could win a range of different discounts. They discovered that customers spend more after winning a discount instead of being given one of equivalent value.
It's theorised that the experience of winning a random reward (instead of receiving a predetermined one) induces a mindset of good fortune that predisposes people to spend more. Novelty and fun are also likely contributing factors since traditional discount offers are ubiquitous to the point of boring.
What about customers who don't win a discount? Obviously you could rig the competition to make sure this never happens, but it turns out that unlucky customers don't behave any differently from those who aren't given a discount. So there doesn't appear to be any downside.