Over Discounting Can Kill Your Brand and Destroy Perceived Value

When business is slower than desire, many companies believe discounts will bring customers who will return for more, but that strategy rarely works.

It’s a common story of a common marketing mistake: Over discounting.

New businesses and startups often believe that the best way to generate initial sales and drive brand awareness is to offer frequent discounts. It’s an understandably easy trap to fall into. The problem is that doing so (sometimes on an ongoing basis), and not making a discount or sale “special”, can erode the perceived value of your product, service and brand among customers.

Since the Great Recession, and thanks to the “Groupon Effect” (truth be told Groupon wouldn’t be Groupon without the Great Recession) consumers are more aware that they don’t necessarily have to pay full price for the items they desire (Enter sites like Wayfair, Overstock, outlet malls and others).

It’s knowing and understanding this that should drive your approach to offering discounts. There are a few exceptions, but this is because the model is part of the company’s ethos.

Sales are slow. No one is coming into the store or onto the website.

Social media engagement has stalled. Panic sets in.

What. Do. You. Do?

The concept of sales always come to mind as a quick driver of sales, but you take a cut in margins earned. Is it worth it? Well, maybe if you do it every now and again, but once a week and people will stop seeing value in your boutique store or service business.

If you’re a company with a limited budget and a desire to reach as many people as possible, it is tempting to run long-term ads on social media with a special discount, or even the same discount over and over again. These companies “sell” but fail to boost their value proposition, the benefits, positive customer experiences or third-party reviews, which we know are the most effective types of social media posts to boost.

Not too mention that they’re spending money on ads and giving a discount. How can they possibly make any money?

There customers don’t care about their business. Only what they can save.

Discounts or sales are meant to be special occasions, for lack of a better term, for the consumer. They are the few times a year when a consumer can get the best deal or feel special — Nordstrom does a great job at this.

Really, though, they’re giving moi a chance once, or twice, a year to shop after hours, when no one else is there for first pick at new styles, and I get a discount. Brilliant. I feel really good about myself.

While that experience is rare, the thrill of a sale, no the savings, is invigorating.

Think about it, we’re all trained, by now, to anticipate President’s Day Sales, Columbus Day, you name the day and there’s a sale. For true deal seekers, they save up to shop on these special sale days; these specific sales days only. There is a reason that people walk out of Bath & Body Works with huge bags only a few times a year.

For others, the deal, or discount, is not as important as the quality and perceived value you offer with the pricing you’ve fixed. his is actually the customer you want long term, not the disloyal bargain seeker.

Many companies simply have a difficult time communicating the value that their product or service brings to the market — through copy and effective imagery to tell a compelling story; a story that connects with the customer and makes them feel part of the company.

But not every business, small to large get it right 100%. I’ve seen big brands have major flops of marketing campaigns. It seems like a good idea in the board room but fails with the audience.

It’s something I see often, and why companies typically bring someone like me in — to help them flush out a story that is compelling and creates an emotional attachment with customers.

Telling the right story, with the right message, through the right channels is key to both attracting the discount buyer and the value seeker. Value is not about being “inexpensive”. It’s about communicating to customers how you solve their problems for a great price; how you provide better quality than the competition and so much more. That’s the perceived value takeaway for consumers.

On the flip side, we clearly know when a brand is in decline, like Macy’s. A once powerful prestige brand has now joined the ranks of JcPenney and others trying to compete with Kohls. But they never will, because Kohls’ model has always been Kohls’ model.

Knowing that you can have both customers — the one who seeks quality over price and the one who price is the only thing that matters.

How to Discount Strategically and Responsibly:

Strategic discounting is a smart, thoughtful marketing tactic that when combined intelligently with other marketing tactics can grow your brand the way you desire.

Discounts through digital marketing seem like the most effective, affordable and efficient way to grow your customer base, communicate and generate sales, however, used incorrectly and without a strategic approach can leave you out thousands of dollars and little return on the investment.

Successful marketing — whether digital or traditional — is all about strategy and a GREAT story or reason that creates an emotional desire. If your marketing is missing the mark, then you need to make time to be smart and thoughtful about your approach, your story, and your return will soon be far worth the time, energy and expense.

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