How price-sensitive are you? Nevermind, I can infer your price sensitivity from the following question: Are you going shopping on Black Friday? If you are, you’re probably price-sensitive. If not, other things, like comfort of the shopping experience, probably matter more to you than price. Or so says GMU economist Arnold Kling:
…temporary sales are often a tool for price discrimination. If you need something now, you have to buy it whether or not it is “on sale.” But if the purchase is discretionary, you may only buy it “on sale.” The store keeps its prices high ordinarily, in order to pick up profits from the price-insensitive shoppers. The store puts items “on sale” on rare occasions, hoping to pick up profits from price-sensitive shoppers. Unfortunately, they lose profits from price-insensitive shoppers who happen to come in the day of the sale.
The beauty of holding sales on “Black Friday” is that stores know that many price-insensitive shoppers will stay away in order to “avoid the crowds.” So you can get revenue from price-sensitive shoppers without sacrificing profits from price-insensitive shoppers.
So this post is for all you price-sensitive shoppers out there. Continue reading “30 Days To Go: Black Friday Pep Talk”