[Pricing Nugget #056] If Friday turns black, your products may come back

Imagine you buy a product at a 20% discount. Everything feels fine.

A few days later, the same retailer offers the same product for 40% off.

That’s essentially a post-purchase discount of 20% (40%-20%).

You are still within the return window.

What do you do? Do you return the product?

Now imagine the discount jumps to 70%  the post-purchase discount equals 50%.

What then?

To answer these questions, researchers conducted a study on millions of transactional data points:

• 84 million orders
• 37 million returned items
• 500,000 unique products
• 350 product categories

What they found is invaluable for your promtional planning.

1. Higher at-purchase discounts reduce return probabilities — but only up to a point

The higher the discount at the time of purchase, the lower the probability that customers return the item.

2. Post-purchase discounts behave strangely: small ones reduce returns, large ones trigger them

Now here is the counterintuitive part:

When customers notice a small post-purchase discount, such as a 5-percentage-point difference, return rates actually decrease.

But, once the post-purchase discount exceeds a critical threshold, return probability increases sharply.

This spike is especially strong when:

(1) The customer has a high return history

(2) The original purchase was at full price, followed by a sizable discount later

3. Promotions build on each other — today’s discount becomes tomorrow’s reference point

When you run a promotion today, you automatically create a reference for future promotions.

This means, a Black Friday discount can induce returns from orders placed 30 days earler (within the return period window).

Hence, you need to optimally set at-purchase discounts and post-purchase discounts to manage sales uplift and product returns.

4. How to plan promotions when returns matter (4 actionable strategies)

1. Manage the first promotion before the second one happens

Target customer groups with low return behavior so that a second promo does not inadvertently trigger returns.

2. During peak season (e.g., Black Friday), target two segments

• Customers with low historical return rates
• Customers who have not purchased the products that are now discounted

3. Prioritize products that were already discounted in the last 30 days

Why? Lower risk of triggering fairness-driven returns.

4. Optimize the balance between at-purchase and post-purchase discounts

Discounts drive sales, but they simultaneously risk return-induced losses.

The key question is: “Where is the sweet spot between sales uplift and return costs?”

5. Bonus Nugget: The sales sweet spot is 45–55% discount

Researchers also analyzed the effect of different discount levels on sales.

The result:

• 45–55% discount → maximum sales uplift
• Beyond 55% → no additional incremental sales

What did we learn today?

If you plan a promotion:

1. You plan revenue AND return risk — always both.
2. Each discount becomes a reference point for future promotions.
3. Post-purchase discounts are dangerous once they exceed a fairness threshold.
4. 45–55% is the ideal range for large promotions.
5. Targeting by historical return behavior might be a powerful lever to improve your promotional ROI