You Don’t Need to be a Marketer to Sell by Offering DISCOUNTS
Anybody can do that! Anybody can sell by offering discounts. However, there are retail products that sell at suggested retail prices. Why? Because of one thing. It’s called Brand Power and you charge premium for it. However, every brand is different, otherwise there would have been no perceptual mapping, business model etc. There is a concept called category drivers which varies category to category. If you are the market leader you can establish the driver, if not then follow suit.
What falls in Between Brands and Commodities?
There are Commodities and Brands and the products which fall in between these two categories. Take an example of marketing industrial machinery. Marketers do work on building brands. But when it comes down to make an actual deal. Near impossible to crack one without discounts. I will like adding here that discounts should be limited and more strategic. So their sale is awaited. Offering discount is a manipulation and it only benefits the brand in the short term. Someone who has paid less for a product will never pay the full amount. He will wait for the brand to have a sale or discount again.
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Trade marketing is an important concept. Ideally, though, there should be no Cost Price or Take Profit in selling. You might not get a toll on loyalty by offering discount but this has a presumption that price is the only factor that determines loyalty. We have created brand loyalty through product, positioning and customer service as well. Price play a very small role anyway, except for the expectations from the product in regards to it’s price, it doesn’t affect loyalty that much.
Now we discover various industries and implications of discount on proposed sales.
Clothing Mercantile and Luxury Lawn Brands
Discount does work for some industries. It all depends on your product type. And frankly this trend started by Lawn brands has the ruined the market for everyone. It has somehow become detrimental to the clothing industry. Whenever you go to Levi‘s you’ll always find a discount. It’s a discount all year strategy and almost every clothing brand does it.
Even luxury brands like Louis Vuitton offer discounts through affiliate marketing. Discount accounts for call to action and it’s stupid to think if a person gets value from a product, he wouldn’t pay a bit more after being introduced to it. Just own ChenOne. They’re on sale 24/7/365! Their business model is such. Which is stupid! Are they competing with Azam Cloth Market or Anarkali vendors or “premium” brands by being the former? This Brand has the opportunity to earn and charge premium being a pioneer if managed by people with brain.
Brands are losing in millions every year because of this sales culture, closing stores around the globe. It may not be sustainable for some. Local examples are Gul Ahmed Sapphire. Why you pay insane amount for Mk or LV bags but not for the Gul Ahmed and Sapphire Lawns and wait for their sales? Because Gul Ahmed and Sapphire are not set out to become MK or LV. They are offering upto 50% off all the time. It does generate profit for the company and is aligned with the company goal.
They may eye Zara, Mango or H&M. H&M, Mango all have sale offers which are occasional. Also, they have in store purchase promos such as discounts of a certain amount on a purchase of say 5000, they have coupons. Christmas is the season for discounts and sales. Forever 21 is also closing down. By the way, they are filing for bankruptcy. That’s why I said it should be more of a strategic and limited decision to offer discounts.
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Food and FMCG with Special Case of RedBull
Food delivery services nowadays need to realize it! When you have no other strategy. The only option you use is by continuously offering discounts. That’s what Foodpanda and Eatmubarak does. I mean things that are consumed more often like food products. FMCG brands like Pepsi, Coke, Lays; the market leaders have kept the price the same for so many years.
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Why you pay premium for REDBULL? It taste medicinal and it comes in a small value as compared to coke or Pepsi. Have you seen RED-BULL on discount at Trade? Red bull has a niche market, that product is not for everyone. It’s at a discount at Imtiaz just because of sales liquidation support. This is usually the marketing budget that is slashed off as a percentage discount on part of the commission or dealer discount and without really affecting the price positioning, dealers extend it to their customers. Red Bull entered Carrefour and Metro at a special introductory price.
Electronics and Case Study of Apple as Luxury Brand
Let’s consider Apple. How often you see a brand like Apple offering a discount on its products. I haven’t seen a single official sale by Apple till date. Please correct me if am wrong (except for once: Apple did offer discount last year because their sales were suffering). They have been charging a premium amount on every product and the profit margins are huge. The brand has successfully positioned itself as a brand that enhances your self-image. Apple doesn’t give discounts as it operates in a blue ocean (i.e. differentiated product). Unless you have a differentiated product, you are meant to give discounts due to competitive landscape. The marketers job is to build a psychological value and can charge more as compared to logos and products.
Now, let’s exclude Apple for a second. I don’t think everyone is trying to reach Apple in terms of never needing to give out discount. Never wanting to give out discounts or not is almost exclusively dependent which industry you’re entering into. It’s remotely impossible to position any product in any industry in a way that Apple did. Apple doesn’t offer discounts because nobody expect them to because they have positioned themselves in a way. You could pull this off in a luxury electronics industry but can you pull this off everywhere? Discounts are the oldest trick in the book and still is around, which says how effective it is. But most times, Apple doesn’t have to. That certainly doesn’t mean no one should, you have to realize that apple’s position cannot be imitated by just anyone in any industry.
Software Retail and E-commerce Exceptions
In software retail, we consider the discounted amount is already calculated to give the company profit. Affiliate Marketing (discount offered by companies through special codes given to publishers) is the reason why Amazon has become an irrefutable force in retail. But Amazon and Walmart are exceptions. They have built a connection with their customers based on discounts and low priced products. It is not marketing. This is what they are known for. This is what they do.
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Similarly, if you see the SaaS industry, (WordPress, Adobe, Google Suite) with monthly or year subscription they have a discount model. There are some websites where if you move your mouse towards the close button, a discount pop up will appear. It’s not easy coming up with a discount strategy that gives you the maximum profit yield. It’s an incentive for your audience to increase conversion rate. Even if it’s easy, then why does it matter? Why take a difficult route when an easier is the most effective? Discount policies that compliments the long term are the best strategy out there. People just like to hate on the popular ways of doing stuff.
Discount Frequency, Trials and Subscriptions
How many other brand have you seen taking their products to offices and other places doing multitudes of free trials? Trade marketing is a reality. When, what and where, it’s managed very tactfully. If it is misused then it hits the bottom line without any long term benefits. Offering discounts all the time may hurt a premium or luxury brand in the long run. All depends on your product and strategy; thus, discounts and their impact on sales are subjective from industry to industry.
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Isn’t price one of the 4 Ps of Marketing?
A lot of factors to be considered in price strategy. We can not rule out the effectiveness of discounts from the overall picture. If I offer a special discount on some festival it will rather create goodwill for a brand. And chances are that the revenue exceeds in comparison of sans discount. It depends on the demand of the product. Mobile cards will not be offered at discounts ever because they will eventually sell. However, products like home appliances etc will be offered at different price points at different retail setups depending upon the concepts of shoppers marketing thought behind that Sales Price.
Isn’t this what we all trying to do? Trying to reach the bar that has been set by these great organizations? I know price is a prime player for driving sales. I am just saying that it is the easiest way to do it. No brands do not always lose millions because of discount offers. It is a norm. I gave you an example of Industrial Plants. The product and company is visible; a brand. But they connect on price not emotion; a commodity. Making discount offer in such a manner that could attract customers with percentage discounts often referred to as rebates. In crux, offering discounts and promotions are not a good way to get loyal customers. It’s manipulation, not inspiration.
