Why is it a 10% off sale fails to get your attention while a 50% off sale brings in consumers from the surrounding counties? The explanation can be found in the concept of just noticeable difference (JND) (also sometimes called the differential threshold). The just noticeable difference is the minimum change necessary for a person to detect it. This concept is typically applied to the five senses but it is equally valid when applied to marketing concepts such as price and quality.
The importance of JND to marketers is the challenge in determining the amount of change necessary for it to be noticed by the consumers. Any change less than the JND is wasted because it is not perceived. But jus as importantly, any change significantly larger then the JND can also be considered wasteful because you end up spending more than is necessary to elicit the necessary response (e.g., the customer’s attention). This also may end up with you irritating the customer (in the case or increasing volume to get their attention or visual excitement and color scheme).
An example of the JND can be seen in the example at the beginning of this column. The reason the 10% sale does not excite is that it is below the JND. Research has proven that the JND for price tends to be between 20 to 25%. Any sale below that will tend not to get much attention because the consumer does not believe it makes large enough difference for him/her to spend the effort to purchase. However much the 50% off sale price may attract the consumers, you will end up giving up money since it was more than enough to get their attention. In fact, going beyond the JND can actually hurt you in the long run.
How can this be? Weber’s Law indicates that the stronger the initial sensation, the greater the additional intensity that is needed to be perceived as different. If you turn your stereo system to nearly a whisper, it does not take much for you to know when the volume has been turned up. However, turn it up until the walls start shaking and it will require considerable increase in volume for the near-deaf to realize the already loud volume has become louder. Why then might 50% actually be detrimental to your business?
A retailer that earns the reputation for constantly having sales will find they must continually increase the discount to receive the same attention as before. The situation is analogous to an addict: to continue to get high, the addict must continue to increase the dosage since the body has gotten used to the previously high level and the addict must increase the dosage to create a JND and a new high. If customers start to expect 20 and 25% sales (or discounted price regularly), this become the level from which they will gauge actual sales. You must discount the from the newly established price point (which was the 20 to 25% off ). So now you have to discount 20 to 25% off the previous 20 or 25% discount or 35% or more to achieve the same level of attention as you did before. If you start from a higher base (say the 50%), and that base becomes the norm, you will have to discount from that base to get their attention. During the last few years, automotive companies have fallen into this trap: to keep sales going they have had to increase the level of rebates.
What is the moral of the story? Customers do not change their intentions unless the promotional discount is above the JND threshold. This threshold also differs from brand to brand: the threshold for name brands is lower than for store brands. Stores therefore can attract customers by offering a smaller discount on name brands than they can on store brands or private brands. A marketer is therefore wise to reframe from offering discounts that are below the differential threshold or too much above. He would also be wise in not being too predictable in offering the discounts or more than occasionally as it could affect the baseline necessary to get the consumer’s difference.
To get someone’s attention, hit them with more than a feather but a lot less than a baseball bat.