I’m observing some dangerous practices among desperate marketers these days—constant, deep discounts to the trade. While everyone is asking for great deals, there’s also danger in lax pricing. There’s a great risk that, unless a premium brand continues to communicate its brand value, the consumer who buys "on deal" all the time won’t be willing to pay a category-appropriate premium. Good marketing is not defined by price or trade deals alone.
It’s time that brands look beyond this quarter’s budget and realize that discounts alone can’t make consumers loyal. Consumers who only buy on deal are fickle, and the value of the brand is what will allow you the headroom to be more profitable down the road.
Absolutely. Lets apply this to recession-period discounts: One important property about loyal customers is that (fortunately) they don’t like change – otherwise they would be experimenting with competitor products. Loyal customers, in particular, become acclimated to the properties of a product, brand image, and price/value characteristics.
While we would not expect a loyal customer to complain about a price decrease, once they adjust their expectations of value to the new discounted prices, they may have a powerful reaction when they revert to necessary higher long run price points. And it may be enough to dislodge that loyal customer driving trial of other brands.
I would theorize that products with the highest frequency of purchase would anchor discounted price expectations more rapidly than products that are purchased/interacted with infrequently. What we might take-away: Promotional sales and discounts may drive lawnmower sales (purchased say once in five years), but it will probably not hurt sales later if special discounts are ended when the economy improves. Cookies, soup, lunchmeat, cigarettes – For these products, customer expectations may get more deeply embedded whereby sales may fall sharply when discounts end.
I agree. Many companies are taking the short-term view on profits rather than a long-term view. This trend may help management now, but it especially dangerous to future profits and sustainability of the brand equity that a product brings to the consumer. Under pricing your brands positioning for short term sales, only leads to immediate sales and a dilution of the brand equity that has been so diligently built over time.
Extreme care and consideration should be taken when considering discounting for any product, but this is especially true for the premium brand.