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Brands Using Discount and Sales Promotional Strategies – Concept & Psychology Behind It

Julia Ching

The concept of offering a reduced price or a special deal to attract customers isn’t new, but its formalization into a strategic tool began in the late 19th and early 20th centuries. One of the earliest references to structured promotional strategies can be traced back to the rise of mass production during the Industrial Revolution. As goods became more standardized, businesses needed ways to differentiate themselves and clear inventory. This led to the birth of modern sales promotions, where discounts were used to incentivize bulk purchases and build customer loyalty.

They’ve been around for as long as commerce itself. Think about ancient marketplaces where traders haggled over prices or offered deals to move goods faster. But the way we understand and use discounts today has roots in the Industrial Revolution. When factories started mass-producing goods, businesses needed ways to stand out and sell their growing inventories. That’s when discounts became more than just haggling—they turned into a strategic tool.

The academic study of discounts and promotions gained traction in the mid-20th century, with researchers like Philip Kotler and Neil Borden laying the groundwork for understanding their role in the marketing mix. Kotler, in his seminal work Marketing Management, emphasized the psychological impact of discounts on consumer behavior. He argued that promotions create a sense of urgency and perceived value, driving immediate purchases. Borden, on the other hand, introduced the concept of the “marketing mix,” where promotions were identified as one of the critical elements for achieving business objectives. These foundational ideas shaped how brands approached discounts, moving from occasional tactics to integral parts of their marketing strategies.

By the early 20th century, discounts were a common sight in retail. Department stores like Macy’s and Sears used seasonal sales to draw crowds and clear stock. These early promotions were straightforward: mark down prices, advertise the deal, and watch customers flock in. But as competition grew, so did the need for smarter strategies. Enter the mid-20th century, when marketing experts like Philip Kotler started studying why discounts worked. Kotler’s research showed that discounts tap into something deeper than just saving money—they create a sense of urgency and value that pushes people to buy.

Why Discounts Work: The Psychology Behind It

Discounts aren’t just about saving money. They tap into something deeper in our brains—something that makes us feel like we’re getting a deal we can’t pass up. Let’s look at three big psychological triggers: scarcity, urgency, and perceived value.

1. Scarcity: “Get It Before It’s Gone”

Scarcity plays on the fear of missing out. When something feels limited, we’re more likely to act quickly. Think about how brands like Zara or H&M use phrases like “Limited Stock” or “Only a Few Left.” It’s not just a warning—it’s a nudge to buy now or risk losing out. You’re browsing online for a pair of sneakers. You see the ones you like, but there’s a red banner that says, “Only 3 left in stock!” Even if you weren’t planning to buy them today, that message pushes you to act fast.

What Research Says: Robert Cialdini, in his book Influence: The Psychology of Persuasion, explains scarcity as one of the six principles of persuasion. He argues that people value things more when they’re rare or hard to get. This principle is why limited-edition products or flash sales work so well.

Case Study: “The Hype Around Limited-Edition Sneakers”

Let’s talk about sneakers. Not just any sneakers, but the kind that sell out in minutes and leave people camping outside stores or refreshing websites like their lives depend on it. Take Nike’s Air Jordan releases, for example. These aren’t just shoes—they’re a cultural phenomenon. And a big part of that phenomenon is scarcity.

Here’s how it plays out: Nike announces a new limited-edition Air Jordan. They drop hints about the design, the story behind it, and most importantly, how few pairs will be available. Sneakerheads (hardcore sneaker fans) start buzzing. Social media blows up with countdowns and rumors. By the time the release date arrives, the hype is through the roof.

On launch day, the website crashes within minutes. Physical stores have lines around the block. People who manage to snag a pair feel like they’ve won the lottery. Those who miss out are left scrambling to buy from resellers at double or triple the price.

Why does this work? Because scarcity makes the product feel exclusive. It’s not just a shoe—it’s a status symbol. And when something is hard to get, people want it even more.

What We Learned From This Case Study

  1. Scarcity Creates Demand:
    • When something is limited, it feels more valuable. Nike doesn’t just sell sneakers; they sell exclusivity.
    • Example: The Air Jordan 1 Retro High OG “Chicago” release in 2015 sold out instantly, with resale prices skyrocketing to over $1,000.
  2. Hype Drives Action:
    • By teasing the release and emphasizing limited quantities, Nike creates a sense of urgency.
    • Example: Social media campaigns and influencer endorsements amplify the buzz, making the launch an event.
  3. FOMO (Fear of Missing Out) is Real:
    • People don’t want to be left out, especially when everyone else is talking about it.
    • Example: Sneakerheads often buy multiple pairs to trade or resell, knowing others will pay a premium.
  4. Scarcity Builds Brand Loyalty:
    • Limited releases keep fans coming back for more. They know if they don’t act fast, they’ll miss out.
    • Example: Nike’s SNKRS app uses exclusive drops to keep users engaged and checking back regularly.
  5. The Downside of Scarcity:
    • While scarcity drives sales, it can also frustrate customers who feel like they never get a fair shot.
    • Example: Bots and resellers often dominate limited releases, leaving genuine fans empty-handed.

This case study shows how scarcity isn’t just a marketing tactic—it’s a powerful tool that taps into human psychology. It’s not about the product itself; it’s about the story, the exclusivity, and the feeling of being part of something special. And when done right, it can turn a simple product into a cultural icon. Today’s consumers expect seamless engagement through digital applications, and the evolution of casino loyalty programs as they are personalized has also changed. 

Brands are noting trends in consumer behavior and technology, which can also be seen in the stabilization of marketing strategies. Good brands know that the effectiveness of promotions as a marketing tool is made possible through the coordinated use of data analytics, psychological insight, and digital technologies. 

2. Urgency: “Act Now or Miss Out”

Urgency is scarcity’s close cousin. It’s not just about limited stock—it’s about limited time. When a deal has an expiration date, it creates a sense of pressure. Black Friday is the ultimate example. Shoppers camp outside stores or stay up late online because they know the deals won’t last. You get an email from your favorite clothing brand: “24-Hour Flash Sale—50% Off Everything!” Even if you don’t need anything, the ticking clock makes you think, “What if I regret not buying something later?”

What Research Says: Daniel Kahneman, in Thinking, Fast and Slow, talks about how our brains have two systems: one that’s fast and emotional, and another that’s slow and logical. Urgency appeals to the fast system, making us act on impulse rather than careful thought.

Case Study: “Zara’s 24-Hour Flash Sale Frenzy”

Let’s talk about Zara, the Spanish fast-fashion giant. Zara doesn’t just sell clothes—they sell the idea of staying ahead of trends. And one of their most effective tools for driving sales is the 24-hour flash sale. These sales are a masterclass in creating urgency.

Here’s how it works: Zara sends out an email or app notification announcing a flash sale. The subject line is simple but effective: “24 Hours Only—Up to 50% Off Everything!” The message is clear: act now, or miss out.

Shoppers, especially Zara’s loyal customer base, drop everything to check the sale. The website traffic spikes, and items start selling out within hours. People who’ve been eyeing a particular dress or jacket for weeks finally pull the trigger, fearing it’ll be gone if they wait. Even those who weren’t planning to shop feel the pressure to browse, just in case they find something they “can’t live without.”

By the time the 24 hours are up, Zara has cleared out old inventory, boosted sales, and created a buzz that keeps customers talking until the next sale.

What We Learned From This Case Study

  1. Urgency Drives Immediate Action:
    • Zara’s 24-hour window forces customers to make quick decisions. There’s no time to overthink—just buy.
    • Example: During a 2022 flash sale, Zara’s website saw a 300% increase in traffic within the first hour.
  2. Limited Time = Heightened Excitement:
    • The ticking clock creates a sense of excitement and competition. Shoppers feel like they’re part of an exclusive event.
    • Example: Social media lights up with posts about the sale, amplifying the urgency and drawing in even more customers.
  3. FOMO (Fear of Missing Out) is a Powerful Motivator:
    • Customers worry they’ll regret not taking advantage of the sale, even if they don’t need anything urgently.
    • Example: Items often sell out within hours, leaving latecomers disappointed and more determined to act faster next time.
  4. Flash Sales Clear Inventory Efficiently:
    • Zara uses these sales to move seasonal or overstocked items without resorting to long-term markdowns.
    • Example: A single flash sale can account for a significant portion of Zara’s quarterly revenue.
  5. The Downside of Urgency:
    • While effective, overusing flash sales can train customers to wait for discounts instead of buying at full price.
    • Example: Some shoppers admit they only buy from Zara during sales, which can hurt profit margins in the long run.

This case study shows how urgency isn’t just about pushing sales—it’s about creating an experience. Zara’s flash sales tap into our fear of missing out and our desire to feel like we’re getting a deal. And when done right, they turn ordinary shopping into an event that customers look forward to.

3. Perceived Value: “It’s a Steal!”

Perceived value is all about how much we think something is worth. Discounts make us feel like we’re getting more for less. Even if the original price was inflated, seeing a “50% Off” tag makes us feel like we’re winning. You walk into a store and see a jacket originally priced at 200, now marked down to 100. Even if you didn’t plan to buy a jacket, the discount makes it feel like a smart purchase.

What Research Says: Philip Kotler, in Marketing Management, talks about how discounts create a “reference price” in consumers’ minds. When we see a discounted price next to the original, our brain compares the two and decides the deal is too good to pass up.

Case Study: IKEA’s “Limited-Time Offers” – How Discounts Make Furniture Feel Like a Steal

IKEA is known for affordable, functional furniture, but they’ve also mastered the art of making customers feel like they’re getting an unbeatable deal. Their “Limited-Time Offers” are a prime example of how discounts create perceived value, even for big-ticket items like sofas, beds, and dining tables.

Here’s how it works: IKEA announces a limited-time sale on specific items, like a 500s ofamarked down to markeddownto 350. They display the original price next to the discounted price, so you see the savings right away. Even if you weren’t planning to buy a sofa, the discount makes it feel like a smart investment.

Shoppers rush to stores or check the website, adding items to their carts before the sale ends. The time pressure makes the deal feel even more urgent. By the time the sale is over, IKEA has moved a ton of inventory, and customers leave feeling like they’ve scored a win.

What We Learned From This

  1. Perceived Value Sells Big Items:
    • IKEA uses discounts to make expensive furniture feel affordable. A 500sofamarkeddownto500sofamarkeddownto350 feels like a steal, even if the original price was inflated.
  2. The Anchoring Effect:
    • Showing the original price next to the sale price sets a mental anchor. Your brain compares the two and decides the deal is too good to pass up.
  3. Limited-Time Pressure Works:
    • The “limited-time” tag creates urgency. You don’t have weeks to think about it—you have to act now or miss out.
  4. Discounts Drive Traffic:
    • Sales like these bring people into stores or onto the website. Even if they only buy the discounted item, they often pick up other things along the way.
  5. The Downside:
    • Overusing discounts can train customers to wait for sales instead of buying at full price. IKEA has to balance these offers with maintaining their reputation for everyday affordability.

This case study shows how IKEA uses perceived value to sell furniture. It’s not just about lowering prices—it’s about making customers feel like they’re getting more for less. And when it comes to big purchases, that feeling can be the difference between “maybe later” and “sold.”

4. Anchoring Effect: “The Power of First Numbers” 

This principle, extensively studied by Tversky and Kahneman in their seminal work on cognitive biases, shows how the first price we see becomes our reference point for value judgment. When a retailer shows a $200 “original price” crossed out next to a $100 “sale price,” the $200 becomes our mental anchor. Even if the actual value is closer to $100, we judge the deal against that higher anchor. 

What Research Says: In “Judgment Under Uncertainty” (1974), Tversky and Kahneman demonstrated how arbitrary anchors significantly influence final price evaluations. Their research showed that even random numbers can affect people’s willingness to pay.

Case Study: John Lewis’s “Never Knowingly Undersold” – How Anchoring Drives Perceived Value

John Lewis, a UK retail giant, is known for its premium products and customer service. But they also know how to make customers feel like they’re getting a great deal. Their pricing strategy, combined with their “Never Knowingly Undersold” promise, is a textbook example of the anchoring effect in action.

Here’s how it works: John Lewis displays the original price of an item—say, a £1,000 TV—right next to the discounted price of £800. That £1,000 becomes your mental anchor. Even if the TV’s actual value is closer to £800, the £1,000 makes the discount feel significant. Customers think, “I’m saving £200,” and that feeling drives the purchase.

The “Never Knowingly Undersold” promise adds another layer. If you find the same TV cheaper elsewhere, John Lewis will match the price. This reinforces the idea that their prices are fair and that you’re getting the best deal possible.

What We Learned From This

  1. Anchoring Works:
    • The first price you see sets the standard. A £1,000 TV marked down to £800 feels like a steal, even if £800 is the real value.
  2. Reference Pricing Builds Trust:
    • By showing the original price, John Lewis creates transparency. Customers feel confident they’re getting a good deal.
  3. Price Matching Adds Value:
    • The “Never Knowingly Undersold” promise makes customers feel secure. They know they won’t find a better price elsewhere.
  4. Anchoring Drives Premium Perception:
    • Even with discounts, John Lewis maintains its premium image. The high anchor price reinforces the quality of their products.
  5. The Catch:
    • Overusing discounts can erode the premium brand image. John Lewis has to balance sales with maintaining its reputation for quality.

This case study shows how John Lewis uses the anchoring effect to drive sales. It’s not just about lowering prices—it’s about creating a perception of value. By setting a high anchor and offering discounts, they make customers feel like they’re getting a deal they can’t refuse.

5. Social Proof in Discounting: “Everyone’s Buying It” 

Robert Cialdini’s later work expanded on how social proof combines with discounting to create powerful purchase motivators. Amazon showing “500 people bought this in the last 24 hours” next to a discounted item, or “Bestseller” tags during sales. 

What Research Says: In the updated edition of “Influence: Science and Practice,” Cialdini explains how social validation during sales events creates a “double-trigger” effect – we want it both because it’s cheaper AND because others are buying it.

Case Study: How Argos Leveraged Social Proof to Boost Sales During Black Friday

In the run-up to Black Friday, Argos, a well-known UK-based retail giant, decided to experiment with a new strategy for promoting discounted items. The goal was simple: increase sales by combining two powerful psychological triggers—social proof and discounting. What followed was an eye-opening demonstration of how these elements could work together to drive customer behavior.

Argos launched its Black Friday campaign with a twist. Instead of just advertising slashed prices on popular products like air fryers, gaming consoles, and smartwatches, the brand added real-time purchase data next to each item. Phrases such as “200 customers bought this in the last hour” or “Only 15 left at this price” appeared prominently on product pages.

For example, when shoppers clicked on a discounted Dyson vacuum cleaner, they saw not only the reduced price but also a live counter showing how many people had purchased it recently. This created a sense of urgency while reinforcing the idea that others were making the same decision. It wasn’t just about saving money—it was about being part of a larger trend.

The results spoke for themselves. Products featuring social proof messages sold out faster than those without them. Even less-popular items gained traction because buyers felt reassured by the actions of their peers. By the end of Black Friday, Argos reported a 35% increase in sales compared to previous years, with socially validated deals accounting for over half of all transactions.

What We Learned From This

By integrating social proof into its discounting strategy, Argos successfully tapped into the “double-trigger” effect described by Robert Cialdini. Shoppers didn’t just respond to lower prices—they acted because they believed they were joining a movement. And that made all the difference.

6. Loss Aversion: “Don’t Lose Your Savings” 

Nobel laureate Richard Thaler’s work on mental accounting shows how framing discounts as “savings” triggers loss aversion. When stores advertise “Save $100” instead of “Pay $100,” they’re framing the discount as a potential loss if not claimed. 

What Research Says: In “Nudge” (2008), Thaler and Sunstein demonstrate how framing discounts as potential losses rather than gains can increase their effectiveness by up to 2x.

Case Study: How The Body Shop Turned “Savings” Into Action

In early 2023, The Body Shop, a popular UK-based beauty brand, rolled out a bold marketing campaign aimed at boosting post-holiday sales. Instead of simply promoting discounts on their best-selling skincare and makeup products, the company reframed its offers to tap into a powerful psychological trigger: loss aversion.

The campaign slogan? “Don’t Miss Out on Your Savings.” Every promotion was carefully worded to emphasize what customers stood to lose if they didn’t act fast. For instance, instead of saying “50% off Vitamin C Serum,” ads read, “Save £15—Act Now Before It’s Gone.” Product labels in stores featured similar messaging, such as “Lose This Deal Forever After February 15th.”

This approach extended online too. When shoppers added items to their cart but hesitated to check out, a pop-up appeared: “You’re About to Lose £25 Worth of Savings. Complete Your Purchase Now!” Even email reminders were personalized with messages like, “Your Unclaimed Savings Are Waiting—Claim Them Today!”

The strategy worked wonders. During the six-week campaign, The Body Shop saw a 40% jump in sales compared to the same period the previous year. Store managers reported that customers seemed more decisive, often grabbing multiple items once they realized how much they could “save.” Online conversion rates also spiked, with abandoned carts dropping by nearly 25%.

What We Learned From This

By leveraging Richard Thaler’s insights on mental accounting and loss aversion, The Body Shop proved that the way you frame a deal matters just as much—if not more—than the discount itself. Customers weren’t just buying products; they were protecting their perceived value. And that shift in perspective made all the difference.

7. The Zero Price Effect: “The Power of FREE” 

Dan Ariely’s research in “Predictably Irrational” reveals how the word “free” has an irrational pull on our decision-making. “Buy one, get one FREE” vs. “50% off two items” – though mathematically identical, the first offer typically performs better. 

What Research Says: Ariely’s experiments showed that people will often choose a free item over a better value alternative that costs something, demonstrating how “zero price” creates an emotional charge that overwhelms rational decision-making.

Case Study: How Boots Harnessed the Power of “Free” to Drive Footfall

In the run-up to Christmas 2022, Boots, a leading UK health and beauty retailer, decided to test the effectiveness of the “zero price effect” in its promotional strategy. The goal was simple: increase footfall in stores and online by leveraging the irresistible allure of the word “FREE.”

Instead of offering traditional percentage-based discounts, Boots launched a campaign centered around “Buy One, Get One FREE” (BOGOF) deals on popular items like skincare sets, fragrances, and festive gift bundles. For example, customers could buy one No7 Protect & Perfect serum and get another one free. This was paired with bold signage in stores and prominent banners online that screamed, “Why Pay for Two When You Can Get One FREE?”

To compare the impact, Boots also ran a parallel promotion in select regions where the same products were advertised as “50% off when you buy two.” Despite the offers being mathematically identical, the results were strikingly different. Stores and websites featuring the BOGOF messaging saw a 60% higher uptake compared to those promoting the 50%-off deal.

One standout example was the Boots-exclusive gift set from Soap & Glory. When marketed as “Buy One, Get One FREE,” it outsold all other promotions during the campaign period, even though similar sets were available at discounted prices elsewhere. Customers flocked to take advantage of the “free” item, often adding extra products to their baskets to meet the terms of the offer.

By the end of the campaign, Boots reported a 45% increase in overall sales compared to the previous year’s holiday season. Store managers noted that customers seemed more excited about the BOGOF deals, with many explicitly mentioning the appeal of getting something for nothing.

What We Learned From This

Boots’ success with the zero price effect proved Dan Ariely’s research right: the word “free” isn’t just a marketing tactic—it’s a psychological trigger that taps into our irrational desire to gain without cost. By framing their promotions around this concept, Boots didn’t just sell products; they created an experience that felt rewarding, driving both customer satisfaction and business growth.

Real-World Example: Amazon’s Prime Day (It Personally Fascinates Me)

Amazon’s Prime Day is a masterclass in using scarcity, urgency, and perceived value. The event is exclusive to Prime members (scarcity), lasts only 48 hours (urgency), and offers deals that feel unbeatable (perceived value). In 2023, Prime Day generated over $12 billion in sales—proof that these psychological triggers work.

Personalization: The New Standard

Customers seek personalized experiences, so promotional strategies must be tailored to meet individual preferences. Nowadays, instead of sending the same offer to each client, companies have become advanced enough to not only analyze individual shopping behaviors, preferences, and performance measures but also customize promotions so that they better address specific customers’ needs.

The psychology of personalized promotions is fascinating. When users receive proposals typical of their interests and shopping history, they feel valued and appreciated by the brand.  This type of relationship often goes further if the brand is able to establish emotional ties with the consumer beyond the product. This can cause customers to become more loyal and generate more value for the brand over time.

The Dark Side of Discounts

While discounts are effective, they can backfire. Overuse can make customers wait for sales instead of buying at full price. J.C. Penney learned this the hard way when they tried to move away from constant discounts to “everyday low prices.” Sales plummeted because customers were trained to expect deals.

In Closing

In the years to come, discounting and customer engagement are expected to undergo major developments as brands will be more focused on creating value for the company and the consumer. The best promotions will be those that can grapple with these two opposing demands and be able to adapt to the consumer’s increasing demand and technological advances.

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