Brian Feener

10% off… 20% off .. $30 off… where does it stop?

It doesn’t.

When a new company is trying to strengthen its brand, it is important that the customer begins to identify and qualify the company’s products in accordance with the company’s long-term brand strategy.  In regards to price, unless the long-term strategy is to always offer discounts (e.g. compete on price), a discount is detrimental to the overall brand.

Discounted prices can create a price-sensitive consumer that believes that waiting is the best way to optimize return-on-investment. When the customer knows that a discount is coming down the road, it becomes advantageous for them to hold off on purchasing and wait until the product gets hit with the discount.  What would force a discount?  Perhaps, slow sales?  When the customer knows the discount is coming when sales are slow, the customer can force the hand of the company to offer the discount by not purchasing the product.

Discounted prices create a different product. It takes a long time to research and develop that widget.  Between examining the market and putting the product into development and getting the appropriate approvals from the FCC or FDA or whatever, a lot of effort and time has been sunk into the product.  When you discount a product, you immediately allow your audience to re-calibrate their perception of the product.  Remember what I said about perception being reality for your consumer?  When there is only one price for your 128 GB iPod, there’s only one way your customer can perceive the product.

Full price allows companies to create relationships with their customers. I use the word “allow” because this aspect is not set in stone, nor is it feasible for everyone.  Selling directly to the consumer from the website or from a retail store gives the company an opportunity to interact and show some love to their customers.  It gives the company the opportunity to show how special each and every customer is.   It gives them the opportunity to say “thank you” right there and then; to offer a cup of coffee while browsing the store; to allow the sales associate to smile and be friendly to the customer; to get the return/exchange processed immediately and without a fuss.

CAVEATS

Low prices for valid reasons are not discounts. A lower price because it was purchased on-line (as opposed to through the catalog) is a valid reason for a lower price.  The customer has made the fulfillment process easier for the company and the company is passing the savings back to the customer.

Free shipping is not a discount. Free shipping is a way to encourage your customers to act on-line and to get the product to the consumer without going somewhere else.

There are expiration dates on technology. Creating products with updated features immediately makes your older versions hit their expiration date.  There’s no two ways around it.  The new iPhone made the old iPhone go out of date.  Discounts on the old iPhone are valid because it’s a different product in the eyes of the audience.

FOR THE COMMENTS: Why are discounts a valid and an important part in creating brand identity?  -or- What are more valid reasons why discounts are a bad strategy for brand identity?

I just got finished reading Chris Anderson’s book Long Tail so I’ll give you a review and a reaction.

1. The Review: Good.  Read it.

2. The Reaction: The exceptions have become the rule of online business but I think that you can also apply this same philosophy to life.

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