Retail Strategy Secret #5: SDD

sdd

Welcome to the fifth post in our series of “Retail Strategy Secrets”!  Here you will learn the angles, approaches, and tactics retailers are using every day to try and separate you from your hard-earned cash.  Understanding these unlocks the door to spotting great deals, and you never want to pass up a Dealicacy…

SDD

No, I didn’t mean to type “A-D-D”… although I think that consumer ADD (Attention Deficit Disorder) could make an entire future post.  SDD is far from it, and actually recognizes that customers are paying attention.  Either way, you’ll definitely want to pay attention to this post! 🙂

SDD, which stands for “Steadily Declining Discount”, is a somewhat new concept with its structural roots found in Hi-Lo pricing.  Most items at an SDD retailer are offered at average to above-average prices, and everything gets started with a big sale.  However, the difference is on the back-end: instead of the price immediately returning to standard after the sale ends, it gradually increases over time back to its original level.

For the most part, SDD exists to smooth out purchasing volume of an item over time (as well as to increase the item’s profitability).  After the initial /major sale period, another promotion on the same item or category is done – just to a lesser extent.

Consider it this way… are you more likely to buy that pair of shoes you’ve had your eyes on today when they’re on sale at 20% off, or tomorrow after the sale ends and the price goes back up to $80?  Yep – you as well as everyone else out there that knew about the sale.

Now, ask yourself the same question with this added twist: the sale on the shoes doesn’t end.  It simply moves from 20% off to “get a $10 gift card” with the purchase of those same $80 shoes.  Not as cut and dried is it?

A good example is what happens from week to week at Kohl’s.  A given item is 40% off one week and moves to maybe 20% off or buy-one-get-one (BOGO) 50% off the next week.  Note: As mentioned in our prior post about BOGO (“Why BOGO is Typically a No-Go”), BOGO 50% is equaivalent to a max discount of 33% off.  Either way, there is still incentive to buy after the big initial sale is over, and less regret from the customer for not having been aware (or simply missing) the first sale.

Here’s how to identify an SDD-style retailer:  While shopping, look around for hints that prices will go up in the future, but not significantly.  You can judge this by simply watching other items on promotion.

In the end, SDD improves branding and perception from the customer that the retailer is “on their side”.  This, in theory, increases buying behavior and general profitability over the long term.

Coming up next, we take a peek into Loyalty Pricing. Can’t wait!

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