The Role Of Sale Signs, Marketing Science
Sale signs increase demand. The apparent effectiveness of this simple strategy is surprising; sale signs are inexpensive to produce and stores generally make no commitment when using them. As a result, they can be placed on any products, and as many products, as stores prefer. If stores can place sale signs on any or all of their products, why are they effective? We offer an explanation for the effectiveness of sale signs by arguing that they inform customers about which products have relatively low prices, thus helping customers decide whether to purchase now, visit another store, or perhaps return to the same store in the future. This explanation raises two additional issues. First, why do stores prefer to place sale signs on products that are truly low priced stores could use sale signs to increase demand for any of their products? Second, how many sale signs should a store use - should they limit sale signs to just their relatively low priced products or should they also place them on some of their higher priced products? The paper addresses each of these questions and in doing so investigates how much information sale signs reveal.
Eric T. Anderson, Duncan Simester
Anderson, Eric T., and Duncan Simester. 1998. The Role Of Sale Signs. Marketing Science. 17(2): 139-156.