Genius Marketing: DVD bargain buckets

Next time you walk into a supermarket and see a DVDs bargain bucket by the till, stand back and admire its amazing commercial genius.

It’s a seminal piece of differential pricing and that’s the holy grail of retail. It means you charge each customer a different price depending on how much they’re willing to pay – maximising all possible revenue.

An example …

Walking into Morrisons this week I perused one of these bargain buckets, which included the following DVD trio (I didn’t buy it). So out of interest I went to price the same DVDs at a DVD retailer, on the same day …

DVD Trio: one DVD three films. Total price £3.99

American Gigolo
An Officer and a Gentleman
Ghost

DVD separate HMV online prices. Total £18

American Gigolo £8
An Officer and a Gentleman £7
Ghost £3 (it was on sale)

This isn’t about the cost of HMV. Other DVD stores, including many online, are similar. The reason for the difference is about which type of customers are purchasing. I’ll call them ‘browse’ and ‘destination’ buyers.

• Bargain buckets are ‘browse’ impulse buys.

No one hits a supermarket to find what’s in the DVD bin. Three-films-in-ones are there to attract impulse custom; hopefully one of the trio will hit, so you grab it. They can’t price higher, because on impulse buys the demand shrinks radically with price.

• DVD shops are ‘destination’ buys.

If you’re in a DVD shop, you’re there to buy a DVD. That captive custom means prices can be higher. As the demand is focused, they can charge higher prices. It’s not I want ‘a DVD’, it’s I want that ‘American Gigolo’ DVD.

It’s no coincidence it’s DVDs (or CDs, books or video games) this works so well on. It’s because the actual physical disk and packaging you get is super cheap – the real cost is the film production. So even selling at £3.99, there’s a profit to be had.

Of course this doesn’t happen with new films, as there are more destination than impulse buyers and they would then run the risk of cannibalising their direct custom (the chance of that with old films is slim).

So, quite simply, the marketing here means you pay much more for the same thing because of why you want to buy!

Comment and Discuss

Also see Genius Marketing 1: Free credit on mobile phones