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The Marketing Strategy Behind Stores That Always Go “Out of Business”

Written by Ryan Burch

On June 23, 2020
Ever notice the stores in your neighborhood that always seem like they’re going out of business? The worst offenders are the countless furniture stores with huge “going out of business” sales. Tragic. And yet, the cycle starts back at square one the following next weekend. How are they always going out of business, but never […]

Ever notice the stores in your neighborhood that always seem like they’re going out of business? The worst offenders are the countless furniture stores with huge “going out of business” sales. Tragic. And yet, the cycle starts back at square one the following next weekend. How are they always going out of business, but never seem to “go” anywhere? More importantly…why?

We have a furniture store in Tempe, AZ that has had “Going Out of Business / Store Closing” signs plastered on its windows, and a store closing sign spinner on the corner – for three years. 

I know it’s been “going out of business” for that long because this company has taken time, energy, and money to purchase a truck saying that the store is closing. If they were trying to liquidate their stock and truly going out of business, the last purchase I would expect is a truck…advertising the business’ impending doom. 

Why are the marketing directors of these stores trying to make it seem like they’re going away? The short answer… it works. But why?

Does It Work?

In the short term, yes. If you want to make sales and employ a discount, it works really well. Because again, you’re tapping into some of the deeply-rooted psychological aspects of selling.

Over time, though, you can hurt your brand, and hurt the trust created with a buyer. After a while, people will simply drive by your “going out of business” stores and roll their eyes. It only works for so long. 

The Psychology Behind It

There are a few ways that these furniture stores can get the same result without lying about going out of business.

Reciprocity vs. Scarcity

There are two psychological reasons why the “going out of business” tactic works in marketing and sales. In Robert Cialdini’s book “Influence,” he talks about both reciprocity and scarcity.

Reciprocity is the concept of giving some type of perceived value to someone, and they, on a psychological level, want to give something in return. In this scenario, the store is giving a discount, and the “everything must go” mentality is a perceived benefit passed from the store to the customer. Because of that benefit, the customer wants to open their wallet. The furniture is offering a discount, and a customer responds with this perceived gift by making a purchase.

The other element, more prominent in this example, is scarcity. When something is scarce, that means it’s going away. We have a human desire not to miss out on whatever that thing may be. 

So, when a store is going out of business, or there’s a sale that we perceive will expire, that fear of scarcity kicks in. Then, we believe we need to take action, otherwise, we’ll miss out. 

In many ways, scarcity is more powerful than the upside. People are more concerned with missing out on something than they are in gaining the upside. 

With reciprocity, all gifts trigger the same response. Think about a virtual store. If they gave a customer a plan for talking with a salesperson – that works, too. Both parties reap benefits. It’s as simple as a small gift that the salesperson passes along.

As far as scarcity goes, they’ve gone full speed ahead with the store closing aspect. But what if the store did that at a product level? Perhaps they could push certain stock items going out – sofas, mattresses, or something along those lines, and be very specific to a sale. 

So now, you don’t get the mass appeal from people looking for furniture in general. But you might find somebody looking for a mattress, or a coffee table, or something more specific. There are ways, as a marketer, to tap into these psychological triggers without having to go all-in, thus giving you the opportunity to extend the mirage of scarcity little by little.

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