Multiple discounts often called stackable or cumulative discounts is a common problem in retail.
A typical example is that a person comes into a shop with a discount voucher that you have issued say to a nursing home nearby for 5% off (which by the way is a very effective form of advertising in local retailing). Now he comes and to buy an item on discount in the shop at 20% off. A typical response among retailers is to say we will give you the best discount, which is 20%. Then tell the customer this is a much better deal than the 5% on the voucher.
But is it the best approach? Maybe? It saves 5%. However, I attended a webinar. There the speaker told us that you need to remember the 5% discount is what brought the customer to the shop. He then went on to say that adding many discounts was more effective than providing one discount. Then what he quoted was a rather exciting research. That in the above example, the discounts of 5% and 20%, which equal 25% were more effective than one voucher for 30% off. This is despite the fact the one discount is more. Have a chew about it.
From the comments and discussions here are some thoughts people had about it.
People react better if the discounts are in order of lowest to highest. This is because here a 5% off does not look much after a 20% discount. It looks much better to say 5% off and then 20%.
There can be problems if one discount is an amount and the other a rate. For example, if the nursing home discount is 5% off, and the item is $20 with $5 off.
If the nursing home discount is first:
The price is $20 less 5% discount less $5 = $14.
We now have $20 less $5 less 5% discount = $14.25 ( This is how our POS software works. )
Please let me know your thoughts.
