The Hidden Costs of 'Discounts': How Ads Manipulate You

Discounts are highly appealing to buyers, but there is often a hidden cost. Many buyers become oblivious when offered a discount. While regulations prevent selling above the Maximum Retail Price (MRP), there’s no control over setting the MRP itself. For instance, a product might have an MRP of Rs. 1,000, but a retailer can offer a 50% discount, selling it for Rs. 500 and still make a profit. This raises the question, “What is the actual cost of the product?” If a retailer can profitably sell at a 50% discount, the true purchase price must be significantly lower.

We often discuss ‘advertisements’ and ‘reviews’, both of which are integral parts of a business’s marketing strategy. They play a crucial role in the publicity and growth of any business. In today’s market, advertisements are essential for a business to operate successfully. The purpose of advertisements is to inform the public about the business and its products. Business houses cannot envision growth without advertisements. On the other hand, a ‘review’ can be seen as a ‘short tale’ from a customer who has experienced the product, capturing the true pain or gain of its utility. To learn more about the distinction between ‘advertisement’ and ‘review’, click here.

Advertisements are often seen as a magic bullet for businesses, but they can sometimes harm customers. Misuse of advertisements can deceive and mislead consumers. This discussion focuses on how advertisements can trick general customers, who often fall into these traps willingly. Today, we’ll explore the term ‘discount’, a particularly effective tool for attracting customers.

General buyers are usually unaware or unconcerned about the hidden costs of discounts. Nowadays, discounts have become a mission for many buyers. As common buyers, we rarely question the ‘how’ and ‘why’ behind these discounts. Interestingly, the most avid followers of discounts tend to be female customers. Let’s delve into the concepts and ideas behind this phenomenon.

In the past, village market trends showed that vegetable and fish vendors charged higher prices in the morning. As the day progressed, they sold the same items at lower prices to clear their perishable goods before they spoiled. This practice, essentially offering a ‘discount,’ is vital for sales and attracting customers. It’s a necessary profit-making strategy for perishable goods and crucial for market survival. In this context, the ‘discount’ is a survival tactic for the vendor, aimed at clearing stock rather than imposing hidden costs. This strategy highlights the importance of discounts in managing perishable goods effectively.

Another aspect to consider is that people often buy ‘discounted products’ at the expense of quality, quantity, or freshness. From a general observations, the buyers of ‘discounted products’ were generally considered to be second-level buyers. There was a belief that late buyers in village markets were frugal shoppers who would compromise on quality to get a lower price.

But trends have changed now. If there is no ‘discount’, there will be less customer demand for any product. Most businesses are heavily dependent on discounts. You will find numerous examples of discounts in the market, regardless of the nature of the products, whether they are perishable or non-perishable. While the need for discounts on perishable goods is understandable, it is harder to accept for non-perishable goods. Over the years, discounts have become prevalent for both types of products. There are three possible causes for this, which we can discuss:

Old Stock Clearance: Businesses may want to clear their old stock at a lower price to recover at least the cost of production and to keep their operations in line with current styles and demand. This implies that customers buying discounted products might be purchasing old stock, which could be of inferior quality.
Lower Cost of Production: Another reason could be a lower cost of production. However, in a world where prices are constantly rising, it is hard to believe that the cost of production for any product can decrease without compromising quality. If this is the case, then customers buying discounted products might be getting items of lower quality produced at a reduced cost.
Price Doubling and Discounting: The third cause could be businesses doubling the price of a product and then offering upto 50% discount without compromising the quality or quantity. Discounts have become an obsession in consumers’ minds. To boost sales, businesses often use a trick: first, they set the price two to three times higher than the actual price, and then they offer a discount of up to 50%. Customers are happy to purchase the product without questioning it. Isn’t this a manipulation of customer psychology?

This strategy is used because customers love to receive discounts on their purchases. Advertisers can attract more customers by showing discounts while maintaining the same quality and other parameters.

Now the question arises: where does the psychology of ‘discounted product buyers’ stand? Are they intelligent in deciding to purchase any product just because it is discounted? Are they not fooling themselves by falling into this trap? When a business advertises a discount, it must be publicly displayed so people are aware of it. Can this be done without spending money on advertising? Is it possible to promote a discount without incorporating the advertisement cost into the product price? As a result, the price of the product becomes: Original Price x 2(or may be 3) + Advertisement Cost. How can we measure the smartness of buyers who agree to pay four times the original price instead of paying two?

Consider a food lover who orders food at home with a 50% discount from a restaurant advertised on a food delivery platform. He hesitates to order the same or better quality food from a nearby restaurant because of an extra delivery charge of Rs. 20. Ironically, he ends up paying Rs. 100 more for the sake of the discount. Now, examine why and how that restaurant offers a 50% discount all year round, bearing the advertisement cost continuously. Does it lose business or plan to shut down? It becomes clear when comparing the original menu price with the advertised discounted price. To be honest, while the restaurant needs to run its business, the ethics of the advertisement are questionable.

It is advisable to opt for organic advertising, which doesn’t burden businesses with extra costs or force them to charge customers more. One can choose restaurants or products based on customer reviews. In this digital age, reviews reveal the truth about a product, restaurant, or any business. Although some businesses try to manipulate customer reviews and testimonials, it is rare. Review Tale, unlike others, helps restaurants, cloud kitchens, and cafes enhance their online presence and takes personalized steps to grow their online reputation.

An in-depth study can reveal that discounts have a valid purpose in service sectors, where there is no compromise in quality for discounted products. The mission is to attract more customers. However, this doesn’t apply as well to other sectors like food items, clothing, or related products.

The Hidden Costs of ‘Discounts’: How Ads Manipulate You