Megamart (the discount chain run by Arvind Brands) has a really weird discount policy. Usually, the discounting mechanism that clothing stores follow is progressive discounting – the more you buy the more discount you get. In fact, even Megamart was following this practice a few months back. “Buy one get 20% off; buy two and get 30% off” and so on. This kind of discounting encourages more sales per footfall, and so the discount is worth it.
Now, Megamart appears to have a similar progressive discount policy. But a little closer look and a little math reveals it’s not so progressive at all. Right now the policy is
Buy one, get 30% off
Buy two, get one free
Buy three, get two free
Now I’m wondering what they are playing at. For example, yesterday after I’d tried on a pair of trousers and liked it, the salesman said “why don’t you buy another pair? then you’ll get yet another free”. It was as if he was willing me to buy two pairs more of trousers for the price of one. But then, I quickly realized that it wasn’t just the price of another trouser I was going to pay, I would also forgo the 30% discount on the first one.
Just to rephrase Megamart’s discounting policy,
Buy one, get 30% off
Buy three, get 33% off
Buy five, get 40% off
If you look at the discounting this way, it’s hardly progressive. If you’ve gone in with an intention to buy one pair of trousers, I don’t know if there’s sufficient incentive for you to walk out with three – given the measly 3% additional discount. Also, note that, when you purchase three garments, you end up getting the cheapest free. So if the three garments you’ve bought have a high variation in prices, there is a chance that you are effectively getting less than 30% of discount on the whole!
However, I think their point is with the way they have phrased their discount policy. I don’t know how to analyse this on a behavioural framework, but I think this “get one free” bit overrides the “30% discount” bit in the consumer’s head. From Arvind’s point of view, I think this is a clever strat.
One more thing I want to mention here. Yesterday, I was trying out and trying to figure out if I wanted a second pair of? trousers. At that time, I decided that if I’m going to buy this trouser too, I’m going to ask for a separate bill. There was no way I’d buy yet another pair that I didn’t want, all to just get that additional 3% in discount. In the eventuality, I didn’t like the second pair of trousers. So I ended up buying one pair, at a nice 30% discount.