No strong brand has ever been built on discounts. Strong brands became what they are because they understood that the key to success is the value they create in the eyes of their customer.
In classic retail, price promotions are tactical activities to solve short-term issues, having only fleeting effects. Promotions are used to offload excess stock; to put up a market-entry barrier for a potential competitor; to hit quarterly volume/revenue targets; to bring customers into your establishment and then sell them other stuff. But research studies worldwide have shown that classic retail and brands who offer steep or frequent discounts are on the wrong track: First and foremost, discounts always have a negative impact on profitability. In the long run, a devaluation of the product or service and loss of loyalty are the result. Price promotions educate customers to expect deals and discounts, only because they have had a price-off before. Having to woo people back once they have switched to another offer with another discount results in a downward spiral.
Enter: the strong brand that avoids price discounts like the Three Lions try to avoid penalty shoot outs against Germany. Strong brands pay off in terms of more revenue, bigger margins, higher customer loyalty, better talent acquisition and ultimately, greater shareholder value. Strong brands can command a price premium because they are able to build an emotional connection.
Investment in brand is a long term investment with a long term, sustainable pay-back. Price discounts and promotions are short-term tactics that may deliver short-term results, but have the potential to be harmful in the long run - buying short term sales gain is a costly business.
Let me help you review your marketing strategy to build a strong brand that doesn’t rely on short term promos. Contact me.
