[OK Store] Tricks and Prospect Theory for Cash Payment 3/103 Discounts

Roughly speaking

1. A cheap supermarket and OK store that dominates the Kanto region.
2. The 3/103 discount is cash return only. Note that this is not a 3% discount. It's the same as point rewards at electronics retailers.
3. A system that thoroughly accepts cash and allows you to subscribe to OK cards using the Prospect theory.

OK Store leap

Everyone loves OK store.

It mainly operates on the roadside of the metropolitan area, establishing its position as a super cheap supermarket. It is a fast-growing company that has ranked number one in the supermarket category of customer satisfaction surveys for seven consecutive years.

The strength is that it's cheap. They offer overwhelmingly low prices that are no match for the name Everyday Low Price, and on weekends the parking lot is full, and if there is a line on the road, it's a McDonald's or an OK store.

OK Store has a membership-based company called OK Club, which offers 3/103% off on groceries, and as of March 2019, the number of members has exceeded 4.91 million. Considering the number of households in the metropolitan area, I think they have roughly 20-30% of the households.

In addition to the low prices, OK Club's mechanisms are also at play in the carefully selected competition at OK Store. First, let me explain the secret of the 3/103 discount.

3/103 discount Magic

Grocery will be discounted by 3/1030, but in fact, many people mistakenly think this is a 3% discount.

But this is by no means a 3% discount. A 3% discount means a 3/100 discount. The 3/103% discount is a 2.91% discount.

3/103 * 100 = 2.91262136%

When the Ministry of the Environment began charging for plastic bags, the contributions of plastic bags became a hot topic. The mechanism that creates the illusion of 0.09% while pretending to be 3% of the OK store is an important contribution to profit.

When you make a 10,000 yen purchase, the illusion amount of 0.09% is 9 yen. OK Store's sales for the fiscal year ending March 2020 were 434.7 billion yen, so the total illusion amount would be 391 million yen by simple calculation. Don't be fooled.

In reality, the 3/103rd discount is similar to point rewards at home appliance retailers. Electronics retailers apparently get a 10% discount by giving you a 10% point redemption, but in reality, points can be used at the next shopping trip, so the denominator increases for the free next purchase, resulting in a 10/110 discount. This is the same as a 9.09% discount from the initial amount.

If you think of using points worth 1,000 yen for the first time and 100 yen for the next time, you'll probably think you'll get a 10/110 discount.

100pt /(1,000 yen + 100 yen) * 100 = 9.09%

Electronics retailers often set the price around 10% higher than Amazon, and the points will be refunded, so consumers sometimes explain that the price is essentially the same as Amazon, but in reality, electronics retailers are around 1% higher than Amazon. sophistry.

However, there's a sense of security in supporting physical stores, so personally I tend to buy from electronics retailers.

The OK Store also includes the amounts around 3/103% off, and although it is explained in detail, it would honestly look like a 3% discount if it was 3%.

Just like the psychological effect that makes 99 yen seem cheaper than 100 yen, there are effects that make it seem cheaper.

How to get cash back and make cards

Cash refunds from OK Stores are not applicable unless you are an OK Club member. Taking into account the experiences that users had when they first shopped at the OK Store, there is actually a clever mechanism to become an OK Club member.

Consumers who shop for the first time are basically shown in red for the 3/103rd discount, which mistakenly mistakenly assume that they are able to shop for this price.

When I went to the register, I was a little higher than the price I saw, and it made me think, "What?" It makes the consumer feel like they're missing out. The salesperson then explains that "If you become an OK Club member, you will receive a 3/103 discount."

According to the well-known theory of psychology, prospect theory, humans tend to avert losses, and the shock of gaining losses is felt more than the utility obtained from gaining others. They are creatures who want to avoid losses.

Therefore, consumers who make their first purchase become OK Club members to avoid any losses in their next purchase. From then on, the appeal of the 3/103 discount will always be applied, so you will only shop at the OK store (in economics terms, it is called lock-in).

Tracing the user experience from the beginning makes it possible to say that OK Store's policies are incredibly clever.

Reference

A professor who I also took classes in college has published a book that includes basic marketing content, including prospect theory. It is "An incredible marketing taught by a professor at the University of Tokyo (Abe Makoto/KADOKAWA)".

I was just surprised that the book was filled with the essence of Professor Abe's extremely educational lessons, which was just so easy to learn. It's a very cost-effective book that's packed with half-year college content at an incredibly low price. But one thing to say is, it's a shame that this book itself fails in marketing lol. This is a book I want to know more about. Like "competitive strategy as a story."