How Holiday Shopping Promotions Work

Laveta Brigham

Editorial Independence We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money. Shopping for sales can feel like […]

We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

Shopping for sales can feel like a treasure hunt. But some of the best deals are often hiding in plain sight — and marketers don’t want you to know about them.

Saving money this holiday season is top-of-mind for many because of the COVID-19 recession. And shopping is a bit different this year, too. Foot traffic at retail stores is down year-over-year, though online sales are up 78% and expected to climb through the end of December, according to the Wall Street Journal. 

We asked four marketing and behavioral finance experts to share the insider secrets of the retail industry, plus tips for saving money this holiday season — so take note. And in this mad rush to buy gifts, don’t forget to take a breath and make sure you’re getting the best price you can get. 

1. Emotions Override Reason When It Comes to Shopping

Price isn’t just a number. In the most narrow sense, price is a reflection of the costs to produce an item or service. But it’s so much more than that. Oftentimes, “price signals to a shopper both value and quality,” says Craig Elston, global chief strategy officer at The Integer Group, a retail marketing agency. 

“People generally don’t know how much it costs to make something and the margin associated with it,” says Elston, pointing to the booming cannabidiol (CBD) industry as an example. “Consumers want quality but don’t yet know enough to be able to discern quality, so price plays a proxy to signal that a product is of a high quality.”

Therefore, discounting a product — whether it be a 4K TV or a pack of paper towels — can suggest you’re getting a good deal, even if you’re not.

“We make a lot of our decisions emotionally, before we ever consciously think we made the decision,” says Rob Stephens, founder of financial consultancy CFO Perspective and behavioral finance instructor at Gonzaga University. Discounts can often serve as justification for a decision that’s already been made. “Emotionally, we’re committed to the purchase, so the good deal is the rational conscious part of us saying, ‘I can go along with that.’”

2. People Love Deals More Than Low Prices

Why are some stores always running sales? Bed, Bath & Beyond, for example, has become known for its large blue 20% off storewide coupons. And its customers understand that, despite the coupon expiration dates, many cashiers will still accept them at the register.

Other stores, like GAP and Macy’s, seem to always have ongoing sales. It’s meant to entice consumers who love a good deal even more than a good price. But is it sustainable? “It’s not a healthy thing to do, frankly,” says Christopher Toy, CEO of MarketerHire, a recruiting platform for marketing professionals. “After a while, when you receive an email every day from J.Crew announcing a 15% off sale, you become accustomed to the idea that there will always be a sale, and the urgency brands try to generate is lost,” Toy says.

Joon Park, cultural strategist at sparks & honey, a cultural consultancy, says this race-to-the-bottom occurred on a mass scale during the 2008 recession. “When too many players in the market start to price themselves lower, there is this prisoner’s dilemma where there’s a race to lower your prices to incentivize consumers, but it ultimately destroys your financial models,” Park says.

Companies want to wean people off constant deals, but the process can be tricky. “Once you use discounting and couponing to attract people who love the thrill of the hunt, when you break from that, it’s kind of like taking someone off their drug,” Stephens says. 

Stephens points to the example of JCPenney. In 2012, the new CEO, Ron Johnson, decided to get rid of the retailer’s frequent discounting and marketed the sale prices as “everyday” low pricing. JCPenney sales plummeted by over $4 billion as a result, as Johnson had underestimated how undifferentiated the brand’s merchandise was compared to that of its competitors or his previous employer, Apple. Customers were drawn in by coupons and the promise of a good deal, so when those were taken away, they shopped elsewhere. The pricing strategy was reversed a year later, and Johnson was out.

3. Stores Don’t Want You to Cash In Your Rebate

Rebates are price reductions and refunds you redeem after you’ve purchased a product. These are most common with home appliances and electronics, and they’re usually advertised at point of purchase to help drive the sale. To redeem the rebate, you’re often required to physically mail a receipt to the corporate office of the product manufacturer, and you’ll receive a check for the discount. Companies make more when you don’t redeem that rebate, and they factor the expected low redemption rate into their profitability analyses.

The most common reason why people don’t redeem them? “They’re lazy,” Stephens says. “At that point, you may feel like you’ve already made the purchase and filling out the rebate may feel like a bunch of work that’s not worth the money, even though the rebate might have been used as justification at the time to make the purchase.”

Pro Tip

Many credit cards and banks offer exclusive cash back deals for retailers. Check to see if you’re eligible for any of these discounts, which you’ll have to manually opt into.

Holiday Shopping Tips

1. Put Items in Shopping Cart … and Then Wait

In the game of shopping, waiting can pay off. “If you see a thing you like [online], you should add it to your cart and give it a day or two,” Toy says. “The brand knows it’s in there, and they will try to convince you to buy it.”

Park agrees with this strategy: “There’s a lot of incentives brands use to finalize that transaction.” Park says getting a free shipping or 10% off deal in your email as a result of abandoning your online shopping cart is a common way that retailers try to win you over.

2. Download Money-Saving Apps

Many retailers, such as Target, CVS, and Amazon, have their own apps that give you special discounts upon signup or exclusive coupons not offered anywhere else. You can also download third-party coupon-clipping apps like Ibotta, Honey, RetailMeNot, and Rakuten, which let you earn discounts or cashback on groceries and everyday purchases, both online and in-person. “These [apps] allow shoppers to save their coupons on their smart devices so they are with them wherever they’re shopping,” Elston says.

Some of these services are available as free browser plugins, which can scour the internet for available discount codes and offer cashback deals when activating the plugin. Just know that, in exchange for the discount, you’re opting for the company to collect your browsing and purchasing data while on the website for them to package the data and remarket to you (or sell the anonymized audience data to other companies for advertising).

3. Unsave Your Credit Card on Retailer Sites

If you’re an overspender or you’re on a tight budget, then the allure of holiday sales can eat into your wallet and rack up high credit card bills for you to deal with in the new year. 

One way to counteract this? Remove your credit card information and shipping address from retailer sites. Turn off one-click purchasing. Log out of your account entirely. “Paying for something always has a pain component emotionally,” Stephens says. “The more tangible and tactile the process is — the more we have to put dollar bills down or handwrite a check — it makes the cost more real.”

Online shopping, electronic payments, and other contactless transactions are designed to be frictionless — but those features benefit the retailer more than they benefit you. The payment doesn’t feel as real as pulling out cash or swiping a credit card, so you’re more likely to part with your money. This is only exacerbated by social distancing during the pandemic, which has necessitated the expansion of this technology. 

“Make it so you have to enter your name and your shipping info and your credit card each time, to really think through the purchase and if it’s worth it,” Stephens says. “Anything that slows you down and makes the pain of paying a little more difficult helps you not to overspend.”

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