Whatever it takes

You know economic condition are challenging when demand for discretionary products evaporates to the point where conventional discounting is no longer sufficient to unlock consumer demand, and retailers resort to giving customers cash back to stimulate sales activity. That’s what Target did this week with 10 consumer electronics products featured in its circular, where it offered gift cards ranging in denominations from $5 to $75 when consumers purchase the already sharply priced items. A $5 gift card was offered with a $45 iPod shuffle, while those who purchase a $500 Nikon D40 digital camera could receive a $75 gift card. A $20 gift card in addition to a free Motorola phone was available to those who signed up for a two-year T-Mobile contract.

Pharmacy retailers will often offer customers a $10 or $20 gift card when they transfer a prescription, and that is a fairly reasonable cost to acquire a new customers who may go on to fill dozens of prescriptions and then spend thousands of additional dollars across other merchandise categories. Changing pharmacies represents more of a lifestyle and behavioral adjustment, whereas Target’s actions in consumer electronics are a one-off gimmick to buy sales from customer who are less likely to remain loyal after they have capitalized on the opportunistic promotion.