Is Discounting The Right Approach?

Is Discounting The Right Approach

A week after the shopping frenzy that is Black Friday, which was then followed by Cyber Monday it has brought the question whether discounting your products or services is a good thing.  There are a lot of things to weigh up if you are going to knock money off whether it be for a specific event like Black Friday or just as a general promotion.  It does also depend on the industry and sector that you are operating in and where your company or products are positioned in the marketplace.

On the face of it, a promotion like Black Friday is great for a quick boost to your sales, perhaps getting rid of stock that you don’t want to hold on to or will soon be out of date or even an enticement to get customers through your door.  It works well for FMCG items, technology and fashion but what is the true value or cost of running a discount promotion like that?  It could well be that its a case of a short term gain but long term damage.

 term damage.First up is the impact on your brand.  There are two elements to this – what is under your control and what isn’t.  If you enter into the Black Friday mayhem then you are putting your brand into a certain position that you offer discounts and your offering can be bought for less, this is fine if you are actively trying to promote this.  However what is out of your control is the association and connections that people perceive with the behaviour of the people on Black Friday.  Some of the worst examples of shoppers were broadcast around the world and some brands were dragged into the story just by default.  A good example was ASDA where many scenes showed shoppers fighting over bargains in stores across the country, as a result ASDA became linked to all the negative perceptions and imagery of Black Friday.  Watch the video above for some scenes from Black Friday over the last couple of years – many are from ASDA stores.  Suffice to say, ASDA declined to offer any Black Friday deals last week.

Secondly, the customer’s view of your brand can also get skewed.  If you constantly offer discount prices then customers simply won’t buy your product at full price.  Think furniture supplier, DFS.  Has anybody ever paid full price for a sofa from that shop?  They have ‘never to be repeated’ sales which are always ending in a few days around every holiday season – Christmas, new year, Easter, summer.  The end result is that the view of the brand is one of ‘never pay full price’ and also one of lower quality because they can’t sell their sofas at full price so always have to put them in the sale.  Contrast this with a retailer like apple which never enters into sales or Black Friday events – the end result is that they are perceived to be quality items that cost a premium price but are worth it.

As a result of your brand perception, your position in your market will also change.  If you are happy to be seen at the lower end of the market then this won’t represent a problem but if you have aspirations of a premium brand then its something that has to be given serious consideration.

In the B2B sector its an even more precarious situation.  Given that Black Friday is more of a B2C operation, it can easily be perceived as a gimmick or a desperate attempt to piggy back on to the hype.  You also need to consider who you are selling to and while some companies might be looking for a bargain it may also again devalue your offering to the customer base.  There is also the danger of upsetting loyal and longstanding customers who haven’t been offered or aren’t able to take advantage of a discount because they have already purchased your product or service.

Its easy to dismiss sales and events like Black Friday as gimmicks or damaging to your brand but it can’t be denied that they do work and for the right brands and organisations they are an ideal way of selling products or services.  Before you dive straight in to any sales promotion it really does need careful consideration of the long term implications and if the short term gains are worth it.

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