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Strikethrough/markdown pricing

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Strikethrough pricing or markdown pricing is a marketing strategy used to highlight how much customers can save on a product. The original price of the product is crossed out and replaced with the discounted price next to it.

What is markdown pricing?

Markdown pricing, also known as cross-out pricing, is a visual representation of the original price of a product and then the discounted price next to it. Today, we see markdown pricing in a lot of ecommerce sites and apps, especially for products that get heavily discounted regularly.

Markdown pricing works well for impulse purchases or time-sensitive purchases because it highlights what you're saving by buying now.

What is a good example of markdown pricing?

A good example of markdown pricing is Amazon's Lightning Deals page. This page shows products that are heavily discounted for a limited period of time. The product price is crossed out and you see the percentage discount below it (e.g., 60% off). We can infer that the current price won't last forever—it will be going back up after the sale ends!

What is the psychology behind markdown pricing?

Anchoring effect: Anchoring effect or anchoring bias refers to how people rely on an initial piece of information to make future judgments. The original price acts as an anchor that shoppers use when evaluating the discounted price. For example, if you’re offered a $50 product at a 20% discount, your immediate thought might be that it’s worth around $40 (or just under). If you were then offered another 20% discount, even though there was no change in the actual price or quality of the product, many shoppers would still see this as a good deal because it brings us closer to our original anchor ($40).
Price comparison: When the original price is set at a higher value, a reduction in the actual price can create a perception of a favorable deal. Conversely, if the original price is already low, lowering it further may be perceived as less appealing. Price comparison can also involve contrasting your prices with those of competitors, highlighting how you can deliver greater value to customers at lower price points.

When does markdown pricing work?

Markdown pricing is a marketing tactic that uses the visual similarity between strikethrough text and crossed-out text to draw attention to the price discount. It can be used in any industry but is most common in retail.

This pricing approach works well when the sale prices are low to medium-high, but if they're too low, it diminishes their credibility and may even turn off customers who see it as an attempt at manipulation. It's also less effective with consumers familiar with the product — and for luxury brands, it can be a complete no-no.

Who should I target with markdown pricing?

Ultimately, you have to understand your target audience and their habits when deciding whether or not to use cross-out pricing. For example, you might use it to appeal to impulse buyers or time-sensitive shoppers, but not when your product appeals more to bargain hunters who will compare prices anyway.

Key insights on markdown pricing

Markdown pricing is a good option if you're selling discounted products and want to highlight the original price while still conveying the sense of urgency that comes with a sale.

markdown pricing is effective for impulse buyers who don't want to spend too much time comparing prices or doing research before making their purchase decision.
By integrating pricing and promotion workflows into a single user-friendly interface, you can enhance conversion rates.
When formulating your markdown pricing strategy, it is strongly advised to take into account the EU Price Indication Directive. Under this regulation, retailers are required to display the lowest price of a product within the previous 30 days when applying a reduction.

Currently, many retailers face challenges in implementing straightforward on-site markdown pricing methods. Many retailers report these common pain points: existing workflows are cumbersome, fragmented, manual, and prone to errors, often relying on spreadsheet uploads across multiple platforms.

How does Talon.One support markdown pricing?

As a first step, you will need to synchronize your inventory with Talon.One using cart item catalogs. From there, to implement markdown pricing setup:

Select the products you want to target for your markdown campaigns in Talon.One
Your promotion manager adds a product to your inventory or changes a campaign inside Talon.One.
Talon.One evaluates targeted products and automatically generates and updates markdown prices.
Results are synced back to your system via API so you can decide when and how to display that information in your store.

Keen to know how to build a holistic approach to pricing and promotions? See our Ultimate guide to retail pricing and promotions.

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