After reading an article on eConsultancy blog, emphasizing on how brands must remain tactful when offering discounts, I fully agreed on the point that discounts are more often or not, taken as the nuclear option. I cannot fathom how brands would conveniently approach discounts as a quick solution for permanent sales acquisitions. You risk several outcomes depending on how aggressively you throw your discount buffets. To name a few,
“Why bother? It’s going to go on sale by end of the season. We will grab it then.”
Customers tend to take you for GRANTED once they realize discounts will be thrown so easily. For once, you might think discounts are a way to clear your exisiting stocks. While I believe planning an exit strategy is more likely to be your best solution as compared to giving away your products at cheaper pricing, I do admit it enables you to clear old stock. The truth however, is that customers are not as dumb as we think they are and would more likely ‘Camp’ for your discounts. So in this instance, you could revisit the idea of probably liasing with your supplier for a trade in deal. For example, for exisiting stocks that are not cleared, you could probably return them for newer stocks at a percentage of your intake of goods. That way, you clear the stocks for new ones without having to launch unnecessary sales.
“Why the increase in operational costs? And the decrease in profits?”
The truth is whenever there is an atrium sale, a bazaar sale or a warehouse sale, there are more labor costs incurred. There could also be increase in operational costs if staffs are needed to attend these site clearances and leaving the branches down on man power. Sales would reduce profits at the expense of set up costs for these sales and the lack for labor.
“Discounts attract crowds but once the sale is over, the crowds are gone.”
Discounts often built crowds who are curious and cautious spenders. Unless that is the strategy to attract people of this nature, it would be wise to encourage brand conversion through a more reliable and long term measure. Emotional attachment is a robust and reliable marketing strategy. It helps built brand loyalty. With great brand loyalty, the need for discounts would reduce greatly and only needed upon the most strategic instances.
“Discounts are also part of the consumer experience.”
You often hear me swearing by the importance of having a great consumer experience. Giving away discounts is also a significant part of the shopping experience. A great shopper marketing technique is to unleash discounts at the right time on the most appropriate occasion that would effectively garner you a customer conversion. If I have to sign up for your newsletter or membership services to be entitled to a limited edition toy, I would gladly do it. To be honest, people are very interested in things that generally rare or hard to get. One of the strategy of great experience is to allow a chance to obtain something through ‘hard work’. This could mean repeat purchases to get something rare. Discounts come in handy because in this case you probably allow giving a way two chances of redeeming the rare toy rather than one chance. You practically do not lose much but yet encourage more sales.
Price is always the most important issue pertaining to purchasing decisions. It is also vital to know the demographics of media usage and the nature of the product itself. Issuing discounts logically and tactically through the right media usage would leverage effective and possible consumer conversion.
The truth is I see discounts as the last very resort. Without giving away a significant margin, you maintain the value of your brand. If you tend to give discounts as much as you love, you might just be giving your brand away.