It’s like a convergence of two forces in nature – the inevitable recession and the almost involuntary response to discount prices. Is this a behavior etched into business owners’ and marketers’ DNA, a knee-jerk reaction spurred by panic, or just a good business decision in a competitive market?
Pricing decisions should not be viewed as Band-Aid solutions for bleeding income statements, says Reed K. Holden, president and CEO of Strategic Pricing Group, and co-author of The Strategy and Tactics of Pricing. He believes that pricing should be part of a long-term strategy for fiscal fitness.
Most marketing experts concur that discounting can be a necessary strategy in troubled markets, but they caution that long-term risks do exist. Discounts may signal a diminished value of your product or service.
Consumers are a savvy bunch. They all want a deal, but they also know when they’re being handled. Buyers generally accept that in a down economy deals are to be found. But they become circumspect and suspicious of price reductions, wondering if they were gouged by a previously higher price, or if new product pricing signals diminished quality. In either case, your brand promise is being questioned. When the economy comes back, what will happen to your brand? Will it return to its previous luster, or will your brand image be transformed to something you don’t want?
Bottom line – if you are considering discounting during this recession, be sure to position it to customers appropriately. Let them know you know how tough it is right now and that any discounts you provide are unique opportunities. Don’t make discounting a regular enticement, unless it is part of a primary repositioning of your business or product.
Are you Chrysler or are you Mercedes? They both discount – but Mercedes clearly maintains its brand value.
If you’ve done your marketing right — built a solid, consistent image; and if you’ve done advertising that separates you from the pack – it will be a lot easier to get through these tough times. If consumers know who you are and what you stand for, you are positioned to weather the storm.
At Barnett Cox, that’s what we do and that’s why our clients are doing better than most in these crazy economic times.
We’d love to hear what you think at dcox@barnettcox.com.
Find more information on the psychology of discounting at:
www.marketingprofs.com/short-articles/107/be-careful-with-discount-pricing
marketing-bulletin.massey.ac.nz/V2/MB_V2_N1_Hoek.pdf
www.edmunds.com/insideline/do/Columns/articleId=106509/subsubtypeId=218
